Intapp Inc
For the period ended Sep 30, 2024. Filed Nov 7, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 7, 2024
INTA$43.73-0.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-09.
0000950170-24-056956
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-07.
0000950170-24-123292
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 140 previous paragraphs and 115 current paragraphs.
48 unchanged; 45 reworded; 21 added; 46 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 10 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (21)
Current report
Highlights for the three months ended September 30, 2024
Current report
During the three months ended September 30, 2024, we generated total revenues of $118.8 million with a gross margin of 73%. Our operating cash flow was $24.4 million. Total cash and cash equivalents as of September 30, 2024 were $253.8 million. Our remaining performance obligations, which represent all future revenue under contract yet to be recognized, were $549.4 million as of September 30, 2024.
Current report
Net Revenue Retention ("NRR")
Current report
Cloud NRR
Current report
Certain prior period amounts reported thereto have been reclassified to conform to the current year presentation. Effective July 1, 2024, we adjusted the classification of support services related to subscription license to be included within “license” on the unaudited condensed consolidated statements of operations. Prior to July 1, 2024, support services related to subscription license was included in a line item entitled “SaaS and Support.” The presentation of cost of revenues has been conformed to reflect the changes related to the presentation of revenues. Such reclassifications related to the presentation of revenues and cost of revenues effective as of July 1, 2024 and did not affect total revenues, operating income, or net income. There was no change to the revenue recognition policy, except for the change in classification noted herein.
Current report
SaaS
Current report
License
Current report
Cost of SaaS
Current report
Cost of License
Current report
Our cost of license revenues comprises the direct costs to support our license, including personnel costs, and allocated overhead costs for facilities and IT.
Current report
Income Tax Expense
Current report
License revenues increased by $0.4 million, or 2%, in the three months ended September 30, 2024 compared to the same period in the prior year.
Current report
Professional services revenues decreased by $1.2 million, or 8%, in the three months ended September 30, 2024 compared to the same period in the prior year. The decrease in professional services revenue was primarily due to change in mix of resource delivery to our third-party implementation partners.
Current report
Cost of SaaS
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Cost of License
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Cost of license revenues remained relatively flat for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.
Current report
Sales and marketing expenses increased by $3.3 million, or 10%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. Personnel-related costs increased by $2.5 million primarily due to annual salary increases and increased headcount. Sales commissions increased by $0.7 million primarily driven by increased sales. Stock-based compensation expense increased by $0.4 million, primarily due to an increase in stock awards granted.
Current report
Income Tax Expense
Current report
Sources and Uses of Liquidity
Current report
During the three months ended September 30, 2024, net cash provided by financing activities was $21.5 million, primarily comprised of $22.9 million of proceeds from stock option exercises offset by a $1.4 million payment for contingent consideration related to a prior acquisition.
Current report
Material Cash Commitments
Removed paragraphs (46)
Previous report
Net Revenue Retention
Previous report
SaaS and Support
Previous report
Subscription License
Previous report
Cost of SaaS and Support
Previous report
Lease Modification and Impairment
Previous report
Lease modification and impairment consists of charges related to the early exit of certain leased office space and amendments to the underlying lease agreement.
Previous report
Income Tax Benefit (Expense)
Previous report
Recurring Revenues
Previous report
Recurring revenues from the sale of our SaaS solutions, from subscriptions to our term software solutions, and from providing support for these solutions increased by $17.7 million, or 22%, and $54.3 million, or 25%, respectively, in the three and nine months ended March 31, 2024 compared to the same periods in the prior year.
Previous report
Subscription license revenues increased by $2.9 million, or 22%, and $7.8 million, or 21%, respectively, in the three and nine months ended March 31, 2024 compared to the same periods in the prior year, due to sustained annual renewals on multi-year contracts upon expiration of their initial term, CPI-based price increases on annual renewals, and new multi-year contracts.
Previous report
Professional Services
Previous report
Professional services revenues increased by $0.9 million, or 7%, and $5.6 million, or 16%, respectively, for the three and nine months ended March 31, 2024 compared to the same periods in the prior year. This reflects a continuation in demand for implementation, upgrade and migration services consistent with our revenue growth.
Previous report
Cost of SaaS and Support
Previous report
Cost of SaaS and support revenues increased by $5.2 million or 14%, for the nine months ended March 31, 2024 compared to the nine months ended March 31, 2023. The increase can be attributed primarily to increases in cloud hosting costs of $3.4 million, personnel-related costs of $1.2 million (which reflects a benefit of $4.1 million in the nine months ended March 31, 2024 resulting from an operational and organizational realignment that reclassified expenses from cost of SaaS and support to research and development), and royalty expense of $0.9 million relating to third-party products.
Previous report
Cost of professional services revenues increased by $7.1 million, or 17%, for the nine months ended March 31, 2024 compared to the nine months ended March 31, 2023, primarily due to an increase in personnel-related costs of $5.7 million resulting from annual salary increases and increased headcount, and sub-contractor costs of $1.4 million as we expanded our teams to provide implementation and migration services to our growing client base.
Previous report
Gross profit increased by $47.6 million, or 27%, for the nine months ended March 31, 2024 compared to the nine months ended March 31, 2023. Of this increase, $41.3 million was attributable to growth in SaaS and support revenues and a lower increase in SaaS and support costs as a percentage of related revenues resulting from the operational and organizational realignment of part of the development operations team to research and development. The improvement in gross profit was also attributable to the increase in subscription license revenue which contributed $7.8 million, offset by an increase of $1.5 million in losses on professional services.
Previous report
*Not meaningful
Previous report
Research and development expenses increased by $2.0 million, or 8%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. Personnel-related costs increased by $2.9 million due to annual salary increases and increased headcount ($1.4 million of which was due to the operational and organizational realignment of part of the development operations team to research and development). Contractor costs increased by $0.7 million as we increased contract resources to support on-going development of our cloud offerings. Cloud hosting costs and allocated overhead costs increased by $0.6 million. These increases were partially offset by a decrease of $2.1 million in stock-based compensation expense primarily due to forfeitures of unvested performance stock awards.
Previous report
Sales and marketing expenses increased by $0.3 million, or 1%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. Marketing expenses increased by $1.2 million largely due to increases in marketing events and travel related expenses. Personnel-related costs increased by $0.9 million primarily due to annual salary increases and increased headcount. These increases were partially offset by a decrease of $1.8 million in stock-based compensation expense primarily due to forfeitures of unvested performance stock awards and the graded vesting of certain prior year grants which resulted in higher expense in the same period in prior year.
Previous report
Sales and marketing expenses increased by $5.1 million, or 5%, for the nine months ended March 31, 2024 compared to the nine months ended March 31, 2023. Personnel-related costs increased by $5.2 million due to annual salary increases and increased headcount. Marketing expenses increased by $2.9 million largely due to increases in marketing events and travel related expenses. These increases were partially offset by a decrease of $3.7 million in stock-based compensation expense primarily due to forfeitures of unvested performance stock awards and the graded vesting of certain prior year grants which resulted in higher expense in the same period in prior year.
Previous report
General and administrative expenses increased by $4.3 million, or 7%, for the nine months ended March 31, 2024 compared to the nine months ended March 31, 2023. This was primarily driven by an increase of $5.1 million in personnel-related costs primarily due to annual salary increases and increased headcount, an increase of $3.6 million in third-party professional fees, an increase of $1.3 million in bad debt expense and an increase of $0.5 million in overhead costs. These increases were partially offset by a decrease of $3.7 million in stock-based compensation expense primarily due to forfeitures of unvested performance stock awards, a decrease of $0.9 million from change in fair value of contingent consideration related to prior acquisitions and an increase of $2.0 million in costs allocated to other functions due to increased headcount in other departments.
Previous report
Lease modification and impairment
Previous report
Lease modification and impairment net charge of $1.6 million during the nine months ended March 31, 2023 related to accelerated amortization expense associated with a right-of-use leased asset on the early exit of a leased office space, offset by a benefit arising from an amendment to an underlying lease agreement which resulted in a reduction in the related lease payment obligation.
Previous report
Income Tax Benefit (Expense)
Previous report
Sources of Liquidity
Previous report
During the nine months ended March 31, 2023, net cash used in financing activities was $10.3 million, primarily comprised of payments of $22.3 million which represented the final contingent consideration and cash holdback related to the acquisition of Repstor, Limited and deferred purchase consideration related to the acquisition of the Billstream business from Billstream LLC and $4.9 million of payments related to employee payroll tax withholding on vested equity awards, partially offset by $15.7 million of proceeds from stock option exercises and $1.2 million of proceeds from the employee stock purchase plan.
Previous report
Material Cash Requirements
Previous report
In February 2024, we entered into a lease agreement to lease an office space in New York, New York for a six-year term ending in February 2030. The total undiscounted base rent under this lease is approximately $7.3 million, and we will be responsible for the payment of additional rent for our proportionate share of certain operating expenses.
Previous report
Subsequent to March 31, 2024, in connection with the acquisition of delphai, we paid $13.3 million in cash at closing in April 2024 and are obligated to pay a cash holdback of $1.7 million by the second quarter of fiscal year 2026. Additionally, in connection with the acquisition of TDI, we paid $1.6 million in cash at closing in May 2024 and are obligated to make deferred payment and certain earn-out payment for an amount up to $3.3 million in the next three fiscal years.
Previous report
Non-GAAP Financial Measures
Previous report
We report our financial results in accordance with generally accepted accounting principles in the United States of America (“GAAP”), however, management believes evaluating our ongoing operating results may be enhanced if investors have additional non-GAAP financial measures. Specifically, management reviews non-GAAP gross profit, non-GAAP recurring gross profit, and non-GAAP operating profit, each of which is a non-GAAP financial measure, to manage our business, make planning decisions, evaluate our performance and allocate resources and, for the reasons described below, considers them to be useful indicators, for both management and investors, of our financial performance over time. These non-GAAP financial measures, which may be different than similarly-titled measures used by other companies, should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.
Previous report
Non-GAAP Gross Profit
Previous report
We define non-GAAP gross profit as GAAP gross profit less the portion related to cost of revenues of stock-based compensation expense and amortization of intangible assets. We believe non-GAAP gross profit provides investors and other users of our financial information consistency and comparability with our past financial performance and facilitates period-to-period comparisons of gross profit.
Previous report
The following table provides a reconciliation of gross profit to non-GAAP gross profit (in thousands):
Previous report
Non-GAAP Recurring Gross Profit
Previous report
We define non-GAAP recurring gross profit as GAAP total recurring revenues less GAAP total cost of recurring revenues adjusted for the portion of cost related to stock-based compensation expense and amortization of intangible assets. We believe non-GAAP recurring gross profit provides investors and other users of our financial information consistency and comparability with our past financial performance and facilitates period-to-period comparisons of recurring gross profit as management is focused on increasing sales associated with our recurring revenue stream.
Previous report
The following table provides a reconciliation of recurring gross profit to non-GAAP recurring gross profit (in thousands):
Previous report
Non-GAAP Operating Profit
Previous report
We define non-GAAP operating profit as GAAP operating loss excluding stock-based compensation expense, amortization of intangible assets, lease modification and impairment, change in fair value of contingent consideration, transaction costs related to acquisitions and certain non-capitalized offering-related expenses and restructuring and other costs. We believe non-GAAP operating profit provides investors and other users of our financial information consistency and comparability with our past financial performance and facilitates period-to-period comparisons of GAAP operating loss.
Previous report
The following table provides a reconciliation of GAAP operating loss to non-GAAP operating profit (in thousands):
Showing the first 40 of 46 passages. Open the source sections for the rest.
Reworded paragraphs (45)
Previous wording
The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements and related notes and other financial information included in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023 filed with the Securities and Exchange Commission (the “SEC”) on September 7, 2023. The following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K, particularly in the section titled “Risk Factors.” Our historical results are not necessarily indicative of the results that may be expected for any period in the future. Unless otherwise noted, any reference to a year preceded by the word “fiscal” refers to the fiscal year ended June 30 of that year.
Current wording
The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements and related notes and other financial information included in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024 filed with the Securities and Exchange Commission (the “SEC”) on August 26, 2024. The following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K, particularly in the section titled “Cautionary Note regarding Forward-Looking Statements" and "Risk Factors.” Our historical results are not necessarily indicative of the results that may be expected for any period in the future. Unless otherwise noted, any reference to a year preceded by the word “fiscal” refers to the fiscal year ended June 30 of that year.
Previous wording
Intapp is a leading global provider of AI-powered solutions for professionals at advisory, capital markets and legal firms. Intapp software helps professionals unlock their teams’ knowledge, relationships, and operational insights to increase value for their firms. Using the power of Applied AI, we make firm and market intelligence easy to find, understand, and use. With Intapp’s portfolio of vertical software as a service (“SaaS”) solutions, professionals can apply their collective expertise to make smarter decisions, manage risk, and increase competitive advantage. The world’s top firms — across accounting, consulting, investment banking, legal, private capital, and real assets — trust Intapp’s industry-specific platform and solutions to modernize and drive new growth.
Current wording
We are a leading global provider of AI-powered solutions for professionals at advisory, capital markets and legal firms. Our software helps professionals unlock their teams’ knowledge, relationships, and operational insights to increase value for their firms. Using the power of Applied AI, we make firm and market intelligence easy to find, understand, and use. With Intapp’s portfolio of vertical SaaS solutions, professionals can apply their collective expertise to make smarter decisions, manage risk, and increase competitive advantage. The world’s top firms — across accounting, consulting, investment banking, legal, private capital, and real assets — trust Intapp’s industry-specific platform and solutions to modernize and drive new growth.
Previous wording
We generate revenues primarily from software subscriptions, typically with one-year or multi-year contract terms. We sell our software through a direct enterprise sales model, which targets clients based on end market, geography, firm size, and business need. We invested in developing a multi-tenant cloud version of our platform and launched our initial SaaS solutions in 2017. We recognize revenues from SaaS subscriptions ratably over the term of the contract, while we recognize revenues from the license component of on-premise subscriptions upfront and the support component of such subscriptions ratably over the support term. We generally price our subscriptions based on the modules deployed as well as the number of users adopting our solution.
Current wording
We generate revenues primarily from software subscriptions, typically with one-year or multi-year contract terms. We sell our software through a direct sales model, which targets clients based on end market, geography, firm size, and business need. We recognize revenues from SaaS subscriptions ratably over the term of the contract, while we recognize revenues from the license component of on-premise subscriptions upfront and the support component of such subscriptions ratably over the support term. We generally price our subscriptions based on the number of users adopting our solution and the modules deployed.
Previous wording
We generate a majority of our non-recurring revenues from professional services. Our clients utilize these services to configure and implement one or more modules of the Intapp platform, integrate those modules with the existing platform and with other core systems in their IT environment, upgrade their existing deployment, and provide training for their employees. Other professional services include strategic consulting and advisory work, which are generally provided on a standalone basis.
Current wording
We generate service revenues primarily from professional services. Our clients utilize these services to configure and implement one or more modules of the Intapp Intelligent Cloud platform, integrate those modules with the existing platform and with other core systems in their IT environment, upgrade their existing deployment, and provide training for their employees. Other professional services include strategic consulting and advisory work, which are generally provided on a standalone basis.
Previous wording
Market Adoption of our Cloud Platform. Our future growth depends on our ability to win new professional and financial services clients and expand within our existing client base, primarily through the continued acceptance of our cloud business. Our cloud business has historically grown faster than our overall business, and represents an increasing proportion of our ARR. We must demonstrate to new and existing clients the benefits of selecting our cloud platform, and support those deployments once live with reliable and secure service. From a sales perspective, our ability to add new clients and expand within existing accounts depends upon a number of factors, including the quality and effectiveness of our sales personnel and marketing efforts, and our ability to convince key decision makers within professional and financial services firms to embrace the Intapp platform over point solutions, internally developed solutions, and horizontal solutions. If our clients do not continue to see the ability of our platform to generate return on investment relative to other software alternatives, net revenue retention could suffer and our operating results may be adversely affected.
Current wording
Market Adoption of our Cloud Platform. Our future growth depends on our ability to win new professional and financial services clients and expand within our existing client base, primarily through the continued acceptance of our cloud business. Our cloud business has historically grown faster than our overall business, and represents an increasing proportion of our ARR. We must demonstrate to new and existing clients the benefits of selecting our cloud platform, and support those deployments once live with reliable and secure service. From a sales perspective, our ability to add new clients and expand within existing accounts depends upon a number of factors, including the quality and effectiveness of our sales personnel and marketing efforts, and our ability to convince key decision makers within professional and financial services firms to embrace the Intapp Intelligent Cloud platform over point solutions, internally developed solutions, and horizontal solutions. If our clients do not continue to see the ability of our platform to generate return on investment relative to other software alternatives, net revenue retention could suffer and our operating results may be adversely affected.
Previous wording
Continued Investment in Innovation and Growth. We have made substantial investments in research and development and sales and marketing to achieve a leadership position in our market and grow our revenues and client base. We intend to continue to invest in research and development to build new capabilities and maintain the core technology underpinning our differentiated platform. In addition, we expect to invest in sales and marketing to broaden our reach with new clients in the United States and abroad and deepen our penetration with existing clients. With our revenue growth objectives, we expect to continue to make such investments for the foreseeable future. We are continuing to gradually increase our general and administrative spending to support our growing operational needs.
Current wording
Continued Investment in Innovation and Growth. We have made substantial investments in research and development and sales and marketing to achieve a leadership position in our market and grow our revenues and client base. We intend to continue to invest in research and development to build new capabilities and maintain the core technology underpinning our differentiated platform. In addition, we expect to invest in sales and marketing to broaden our reach with new clients in the U.S. and abroad and deepen our penetration with existing clients. With our revenue growth objectives, we expect to continue to make such investments for the foreseeable future. We intend to continue to gradually increase our general and administrative spending to support our growing operational needs.
Previous wording
We review a number of operating and financial metrics, including the following key metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions.
Current wording
We review a number of operating and financial metrics, including the following key metrics to help us evaluate our business, measure our performance and the effectiveness of our sales and marketing efforts, identify trends affecting our business, formulate business plans and budgets, and make strategic decisions.
Previous wording
ARR represents the annualized recurring value of all active SaaS and on-premise subscription license contracts at the end of a reporting period. Contracts with a term other than one year are annualized by taking the committed contract value for the current period divided by number of days in that period then multiplying by 365. As a metric, ARR mitigates fluctuations in revenue recognition due to certain factors, including contract term and the sales mix of SaaS contracts and subscription licenses. ARR does not have any standardized meaning and may not be comparable to similarly titled measures presented by other companies. ARR should be viewed independently of revenues and deferred revenues and is not intended to be combined with or to replace either of those elements of our financial statements. ARR is not a forecast and the active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our clients.
Current wording
ARR represents the annualized recurring value of all active SaaS and on-premise license contracts at the end of a reporting period. Contracts with a term other than one year are annualized by taking the committed contract value for the current period divided by number of days in that period then multiplying by 365. As a metric, ARR mitigates fluctuations in revenue recognition due to certain factors, including contract term and the sales mix of SaaS contracts and licenses. ARR does not have any standardized meaning and may not be comparable to similarly titled measures presented by other companies. ARR should be viewed independently of revenues and deferred revenues and is not intended to be combined with or to replace either of those elements of our financial statements. ARR is not a forecast and the active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our clients.
Previous wording
ARR was $382.7 million and $315.6 million as of March 31, 2024 and 2023, respectively, an increase of 21%.
Current wording
ARR was $417.2 million and $350.1 million as of September 30, 2024 and 2023, respectively, an increase of 19%.
Previous wording
Cloud ARR was $274.2 million and $206.3 million as of March 31, 2024 and 2023, respectively, an increase of 33%, and represented 72% and 65% of ARR as of March 31, 2024 and 2023, respectively.
Current wording
Cloud ARR was $309.1 million and $242.5 million as of September 30, 2024 and 2023, respectively, an increase of 27%, and represented 74% and 69% of ARR as of September 30, 2024 and 2023, respectively.
Previous wording
We measure our ability to grow and retain ARR from existing clients using a metric we refer to as net revenue retention. We calculate this by starting with the ARR from the cohort of all clients as of the twelve months prior to the applicable fiscal period, or prior period ARR. We then calculate the ARR from these same clients as of the current fiscal period, or current period ARR. We then divide the current period ARR by the prior period ARR to calculate the net revenue retention.
Current wording
We measure our ability to grow and retain ARR from existing clients using a metric we refer to as NRR. We calculate this by starting with the ARR from the cohort of all clients as of the twelve months prior to the applicable fiscal period, or prior period ARR. We then calculate the ARR from these same clients as of the current fiscal period, or current period ARR. We then divide the current period ARR by the prior period ARR to calculate the NRR.
Previous wording
This metric accounts for changes in our recurring revenue base from cross-sell (additional solution capabilities sold), upsell (additional seats sold), price changes, and client attrition (including contraction of solution capabilities, contraction of seats and client churn). We upsold additional seats and cross-sold new solutions to our existing clients such that our trailing twelve months’ net revenue retention rate as of March 31, 2024 was 115%, which is within our expected range of 113% to 117%.
Current wording
This metric accounts for changes in our recurring revenue base from cross-sell (additional solution capabilities sold), upsell (additional seats sold), price changes, and client attrition (including contraction of solution capabilities, contraction of seats and client churn). We upsold additional seats and cross-sold new solutions to our existing clients such that our trailing twelve months’ NRR as of September 30, 2024 was 114%, which is within our expected range of 113% to 117%.
Previous wording
We believe our ability to increase the number of clients on our platform is a key indicator of the growth of our business and our future business opportunities. We define a client at the end of any reporting period as an entity with at least one active subscription as of the measurement date. As of March 31, 2024, we had over 2,450 clients. No single client represented more than 10% of total revenues for either of the three and nine months ended March 31, 2024 and 2023.
Current wording
We believe our ability to increase the number of clients on our platform is a key indicator of the growth of our business and our future business opportunities. We define a client at the end of any reporting period as an entity with at least one active subscription as of the measurement date. As of September 30, 2024, we had over 2,600 clients. No single client represented more than 10% of total revenues for either of the three months ended September 30, 2024 and 2023.
Previous wording
Our client base includes some of the largest and most reputable professional and financial services firms globally. These clients have the financial and operating resources needed to purchase, deploy, and successfully use the full capabilities of our software platform, and as such, we believe the number of our clients with contracts greater than $100,000 of ARR is an important metric for highlighting our progress on the path to full adoption of our platform by our professional and financial services clients. As of March 31, 2024 and 2023, we had 673 and 572 clients, respectively, with contracts greater than $100,000 of ARR.
Current wording
Our client base includes some of the largest and most reputable professional and financial services firms globally. These clients have the financial and operating resources needed to purchase, deploy, and successfully use the full capabilities of our software platform, and as such, we believe the number of our clients with contracts greater than $100,000 of ARR is an important metric for highlighting our progress on the path to full adoption of our platform by our professional and financial services clients. As of September 30, 2024 and 2023, we had 707 and 626 clients, respectively, with contracts greater than $100,000 of ARR.
Previous wording
We generate recurring revenues from the sale of our SaaS solutions, subscriptions to our term software applications, and from providing support for those applications. We generate non-recurring revenues primarily by delivering professional services for the configuration, implementation and upgrade of our solutions. Our recurring revenues accounted for 87% and 86% of our total revenues during the nine months ended March 31, 2024 and 2023, respectively.
Current wording
We generate revenues from the sale of our SaaS solutions and premium support services related to SaaS, and subscriptions to our term software applications and support services related to licenses. We generate professional services revenues primarily by delivering professional services for the configuration, implementation and upgrade of our solutions.
Previous wording
We recognize revenues from our SaaS solutions ratably over the term of the contract beginning once the SaaS environment is provisioned and made available to clients. The initial term of our SaaS contracts is generally one to three years in duration.
Current wording
SaaS revenues include subscription fees from clients accessing our SaaS solutions, premium support services related to SaaS, and updates, if any, to the subscribed service during the subscription term. We recognize SaaS revenues ratably over the contract term beginning on the commencement date of each contract, which is the date when the service is provisioned and made available to our clients. The initial term of our SaaS contracts is generally one to three years in duration.
Previous wording
Support revenues consist of non-cancelable support which is included with our subscription licenses and entitles clients to receive technical support and software updates, on a when and if available basis. We recognize revenues for support ratably over the term of the support contract which corresponds to the underlying subscription license agreement. We expect to continue to generate a relatively consistent stream of revenues from support services we provide to our existing subscription license clients. However, over time as we focus on new sales of our SaaS solutions and encourage existing subscription license clients to migrate to SaaS solutions, we expect revenues from support to decrease as a percentage of total revenues.
Current wording
License revenues include subscription fees from providing clients with the right to functional intellectual property where clients can benefit from the subscription licenses on their own and support services related to the licenses, which entitles clients to receive technical support and software updates, on a when and if available basis. We recognize license revenues related to subscription fees at a point in time when control of our term software application is transferred to the client, which generally occurs at the time of delivery or upon commencement of the renewal term. License fees are generally payable in advance on an annual basis over the term of the license arrangement, which is typically non-cancelable. We recognize License revenues related to support ratably over the term of the support contract which corresponds to the underlying license agreement. We expect to continue to generate a relatively consistent stream of license revenues from our existing license clients. However, over time as we focus on new sales of our SaaS solutions and encourage existing license clients to migrate to SaaS solutions, we expect revenues from license to decrease as a percentage of total revenues.
Previous wording
Our professional services primarily consist of implementation, configuration and upgrade services provided to clients. These engagements are billed to clients either on a time and materials or milestone basis; revenues are recognized as invoiced or in proportion to the work performed, respectively. We expect the demand for our professional services to increase due to client growth and the need for implementation, upgrade, and migration services for new and existing clients. This demand will be affected by the mix of professional services that are provided by us versus provided by our third-party implementation partners. Our professional services are currently loss making (after allocated overhead costs for facilities and IT) and accounted for 13% and 14% of our total revenues during the nine months ended March 31, 2024 and 2023, respectively.
Current wording
Our professional services primarily consist of implementation, configuration and upgrade services provided to clients and others. These engagements are billed to clients either on a time and materials or milestone basis; revenues are recognized as invoiced or in proportion to the work performed, respectively. We expect the demand for our professional services to increase due to client growth and the need for implementation, upgrade, and migration services for new and existing clients. This demand will be affected by the mix of professional services that are provided by us versus provided by our third-party implementation partners, reflecting our strategy to de-emphasize professional services revenue.
Previous wording
Our cost of revenues consists primarily of expenses related to providing SaaS subscription, support and professional services to our clients, including personnel costs (salaries, bonuses, benefits and stock-based compensation) and related expenses for client support and services personnel, as well as cloud infrastructure costs, third-party expenses, amortization of capitalized internal-use software costs and acquired intangible assets, and allocated overhead costs. We do not have any cost of revenues related to our subscription licenses. We expect our cost of revenues to increase in absolute dollars as we expand our SaaS client base over time as this will result in increased cloud infrastructure costs and increased costs for additional personnel to provide technical support services to our growing client base.
Current wording
Our cost of revenues consists primarily of expenses related to providing SaaS solutions, premium support services related to SaaS, support services related to license and professional services to our clients, including personnel costs (salaries, bonuses, benefits and stock-based compensation) and related expenses for client support and services personnel, as well as cloud infrastructure costs, third-party expenses, amortization of capitalized internal-use software costs and acquired intangible assets, and allocated overhead costs. We expect our cost of revenues to increase in absolute dollars as we expand our SaaS client base over time as this will result in increased cloud infrastructure costs and increased costs for additional personnel to provide technical support services to our growing client base.
Previous wording
Our cost of SaaS and support revenues comprises the direct costs to deliver and support our products, including personnel costs, allocated overhead costs for facilities and IT, third-party hosting fees related to cloud services, amortization of capitalized internal-use software costs and amortization of acquired intangible assets.
Current wording
Our cost of SaaS revenues comprises the direct costs to deliver and support our SaaS solutions and premium support services related to SaaS, including personnel costs, allocated overhead costs for facilities and IT, third-party hosting fees related to cloud services, amortization of capitalized internal-use software costs and amortization of acquired intangible assets.
Previous wording
Our sales and marketing expenses consist primarily of costs incurred for personnel-related costs for our sales and marketing employees as well as commission payments to our sales employees, costs of marketing events and online advertising, allocations of various overhead and facilities costs and travel and entertainment expenses. We capitalize client acquisition costs (principally commissions paid to sales personnel) and subsequently amortize these costs over the expected period of benefit. In the medium-term, we expect to see an increase in sales and marketing expense as we continue to expand our direct sales force to take advantage of opportunities for growth and increase in in-person meetings, conferences, and attendance at trade shows.
Current wording
Our sales and marketing expenses consist primarily of costs incurred for personnel-related costs for our sales and marketing employees as well as sales commissions and benefits, costs of marketing events and online advertising, allocations of various overhead and facilities costs and travel and entertainment expenses. We capitalize client acquisition costs (principally commissions paid to sales personnel) and subsequently amortize these costs over the expected period of benefit. In the medium-term, we expect to see an increase in sales and marketing expense as we continue to expand our direct sales force to take advantage of opportunities for growth and increase in in-person meetings, conferences, and attendance at trade shows.
Previous wording
Interest and other income (expense), net consists primarily of interest income from our cash and cash equivalents, non-cash interest expense related to the amortization of deferred financing costs, realized and unrealized foreign exchange gains and losses resulting from fluctuations in foreign currency exchange rates on monetary assets and liabilities denominated in currencies other than the United States (“U.S.”) dollar.
Current wording
Interest and other income (expense), net consists primarily of interest income from our cash and cash equivalents, non-cash interest expense related to the amortization of deferred financing costs, and gains and losses from foreign currency transactions.
Previous wording
Our income tax benefit (expense) consists of an estimate of federal, state, and foreign income taxes based on enacted federal, state, and foreign tax rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in the valuation of our deferred tax assets and liabilities, and changes in tax laws. We maintain a full valuation allowance on our federal and state deferred tax assets as we have concluded that it is more likely than not that the deferred tax assets will not be realized.
Current wording
Our income tax expense consists of an estimate of federal, state, and foreign income taxes based on enacted federal, state, and foreign tax rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in the valuation of our deferred tax assets and liabilities, and changes in tax laws. We maintain a full valuation allowance on our federal and state deferred tax assets as we have concluded that it is more likely than not that the deferred tax assets will not be realized.
Previous wording
Comparison of the Three and Nine Months Ended March 31, 2024 and 2023
Current wording
Comparison of the Three Months Ended September 30, 2024 and 2023
Previous wording
Our SaaS and support revenues grew $14.8 million, or 22%, and $46.5 million, or 25%, respectively, in the three and nine months ended March 31, 2024 compared to the same periods in the prior year, due to sales to new clients and expansion of existing clients from both cross-selling and upselling sales motions. The continuation of clients migrating from using our on-premise solutions to our cloud solutions also contributed to the growth.
Current wording
SaaS revenues increased by $18.0 million, or 30%, in the three months ended September 30, 2024 compared to the same period in the prior year, due to sales to new clients and expansion of existing clients from both cross-selling and upselling sales motions. The continuation of clients migrating from using our on-premise license solutions to our cloud solutions also contributed to the growth.
Previous wording
Cost of SaaS and support revenues increased by $1.3 million, or 9%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase can be attributed primarily to an increase in cloud hosting costs of $0.9 million.
Current wording
Cost of SaaS revenues increased by $2.6 million, or 21%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase can be attributed to increases in amortization of acquired intangible assets of $0.6 million, allocated overhead costs of $0.5 million, royalty expenses of $0.5 million, cloud hosting costs of $0.4 million and personnel-related costs of $0.4 million as a result of increased headcount.
Previous wording
Cost of professional services revenues increased by $0.8 million, or 6%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily due to an increase in personnel-related costs of $1.1 million resulting from annual salary increases and increased headcount, offset by a decrease of $0.4 million in travel related expenses.
Current wording
Cost of professional services revenues decreased by $2.3 million, or 13%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to decreases in personnel-related costs of $1.6 million as a result of decreased headcount, allocated overhead costs of $0.3 million and $0.2 million in travel related expenses.
Previous wording
Gross profit increased by $16.5 million, or 26%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. Of this increase, $13.5 million was attributable to growth in SaaS and support revenues and a lower increase in SaaS and support costs as a percentage of related revenues resulting from the operational and organizational realignment of part of the development operations team to research and development. The improvement in gross profit was also attributable to the increase in subscription license revenue which contributed $2.9 million.
Current wording
Gross profit increased by $16.9 million, or 24%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. Of this increase, $15.4 million was attributable to growth in SaaS revenues and a decrease in SaaS costs as a percentage of related revenues and $1.1 million was attributable to a decrease in professional services costs as a percentage of related revenues.
Previous wording
Research and development expenses increased by $15.4 million, or 23%, for the nine months ended March 31, 2024 compared to the nine months ended March 31, 2023. Personnel-related costs increased by $9.8 million due to annual salary increases and increased headcount ($4.1 million of which was due to the operational and organizational realignment of part of the development operations team to research and development). Contractor costs increased by $3.0 million as we increased contract resources to support on-going development of our cloud offerings. Cloud hosting costs increased by $1.1 million due to increased usage in support of development activities. Allocated overhead costs increased by $1.0 million due to increased headcount.
Current wording
Research and development expenses increased by $3.9 million, or 14%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. Personnel-related costs increased by $2.5 million due to annual salary increases and increased headcount. Contractor costs increased by $0.6 million as we increased contractor resources to support on-going development of our cloud offerings. Allocated overhead costs increased by $0.6 million due to increased headcount.
Previous wording
General and administrative expenses increased by $3.4 million, or 16%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This was primarily driven by an increase of $1.9 million in personnel-related costs primarily due to annual salary increases and increased headcount, an increase of $1.1 million from change in fair value of contingent consideration related to prior acquisitions, an increase of $1.0 million in third-party professional fees and an increase of $0.7 million in bad debt expense. These increases were partially offset by a decrease of $1.3 million in stock-based compensation expense primarily due to forfeitures of unvested performance stock awards.
Current wording
General and administrative expenses increased by $2.9 million, or 14%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. This was primarily driven by an increase of $2.2 million in personnel-related costs primarily due to annual salary increases and increased headcount. Stock-based compensation expense increased by $0.5 million, primarily due to an increase in stock awards granted.
Previous wording
The change in interest and other income (expense), net, was primarily due to interest income on our cash held in money market funds, offset by the impact of fluctuations in foreign currency rates on our monetary asset and liability balances denominated in currencies other than the U.S. dollar, primarily British pounds.
Current wording
The change in interest and other income (expense), net, was primarily due to gains from foreign currency transactions and an increase in interest income as we increased our cash held in money market funds.
Previous wording
Income tax expense was $0.2 million and $0.8 million for the three and nine months ended March 31, 2024, respectively, compared to an income tax benefit of $0.4 million and an income tax expense of $0.3 million for the three and nine months ended March 31, 2023, respectively. Our income tax expense during the three and nine months ended March 31, 2024 and the nine months ended March 31, 2023 was primarily attributable to income tax expense in a number of U.S. state jurisdictions and foreign jurisdictions. Our income tax benefit during the three months ended March 31, 2023 was primarily attributable to income tax benefits from net losses in our foreign jurisdictions.
Current wording
Income tax expense was $0.7 million for the three months ended September 30, 2024, compared to an income tax expense of $0.4 million for the three months ended September 30, 2023. Our income tax expense during the three months ended September 30, 2024 and 2023 was primarily attributable to income tax expense in a number of U.S. state jurisdictions and foreign jurisdictions.
Previous wording
As of March 31, 2024, we had cash, cash equivalents and restricted cash of $187.6 million. We finance our liquidity needs primarily through collections from clients and the issuance of equity securities. We generally bill and collect from our clients annually in advance. Our billings are subject to seasonality with billings in the fourth quarter higher than in the other quarters.
Current wording
As of September 30, 2024, we had cash and cash equivalents of $253.8 million. We finance our liquidity needs primarily through collections from clients and the issuance of equity securities. We generally bill and collect from our clients annually in advance. Our billings are subject to seasonality with billings in the fourth quarter higher than in the other quarters.
Previous wording
Operating losses could continue in the future as we continue to invest in the growth of our business. We believe our existing cash, cash equivalents and restricted cash as of March 31, 2024, along with our JPMorgan Credit Facility described below, will be sufficient to meet our working capital and capital expenditure needs for at least the next twelve months.
Current wording
Operating losses could continue in the future as we continue to invest in the growth of our business. We believe our existing cash and cash equivalents as of September 30, 2024, along with our JPMorgan Credit Facility described below, will be sufficient to meet our working capital and capital expenditure needs for the next twelve months and beyond.
Previous wording
On October 5, 2021, we entered into a Credit Agreement, as amended on June 6, 2022 and further amended on November 17, 2022, with a group of lenders led by JPMorgan. The Credit Agreement provides for a five-year, senior secured revolving credit facility of $100.0 million with a sub-facility for letters of credit in the aggregate amount of up to $10.0 million. As of March 31, 2024, no amounts have been borrowed under the JPMorgan Credit Facility. See Note 9 to our unaudited condensed consolidated financial statements for additional information.
Current wording
On October 5, 2021, we entered into a Credit Agreement, as amended on June 6, 2022 and further amended on November 17, 2022, with a group of lenders led by JPMorgan. The Credit Agreement provides for a five-year, senior secured revolving credit facility of $100.0 million with a sub-facility for letters of credit in the aggregate amount of up to $10.0 million. As of September 30, 2024, no amounts have been borrowed under the JPMorgan Credit Facility. See Note 10, Debt, to our unaudited condensed consolidated financial statements for additional information.
Previous wording
Our future capital requirements will depend on many factors, including, but not limited to, our ability to grow our revenues and the timing and extent of investment across our organization necessary to support growth in our business. In addition, we may in the future enter into arrangements to acquire or invest in complementary businesses or technologies. We may need to seek additional equity or debt financing in order to meet these future capital requirements. If we are unable to raise additional capital when desired, or on terms that are acceptable to us, our business, financial condition and results of operations could be adversely affected.
Current wording
Our primary uses of cash include personnel-related expenses, third-party cloud infrastructure expenses, research and development, sales and marketing expenses, overhead costs and acquisitions we may make from time to time. Our future capital requirements will depend on many factors, including, but not limited to, our ability to grow our revenues and the timing and extent of investment across our organization necessary to support growth in our business. In addition, we may in the future enter into arrangements to acquire or invest in complementary businesses or technologies. We may need to seek additional equity or debt financing in order to meet these future capital requirements. If we are unable to raise additional capital when desired, or on terms that are acceptable to us, our business, financial condition and results of operations could be adversely affected.
Previous wording
During the nine months ended March 31, 2023, net cash provided by operating activities was $16.8 million, as our operating loss of $58.0 million was reduced by $74.8 million of adjustments. These adjustments consisted of $71.5 million of non-cash charges (principally comprising stock-based compensation expense, depreciation and amortization, amortization of operating lease right-of-use assets, lease modification and impairment and provision of doubtful accounts), and net cash inflow of $3.3 million from net changes in operating assets and liabilities. The net cash inflow from changes in operating assets and liabilities was primarily driven by an increase in deferred revenue of $22.3 million due to our revenue growth and an increase in other liabilities of $1.2 million due to the timing of payments. These changes were partially offset by an increase in unbilled receivables of $5.9 million due to the timing of invoicing to our clients, a decrease in accounts payable and accrued liabilities of $5.5 million primarily due to payments for annual bonuses, a decrease in operating lease liabilities of $4.6 million due to lease payments, an increase in accounts receivable of $2.4 million due to the timing of billing and collections on our outstanding receivables and an increase in deferred commissions of $2.1 million due to increased sales.
Current wording
During the three months ended September 30, 2024, net cash provided by operating activities was $24.4 million, as our operating loss of $4.5 million was reduced by $29.0 million of adjustments. These adjustments consisted of $25.3 million of non-cash charges (principally comprising of stock-based compensation, depreciation and amortization and amortization of operating lease right-of-use assets) and net cash inflow of $3.7 million from net changes in operating assets and liabilities. The net cash inflow from changes in operating assets and liabilities was primarily driven by a decrease in accounts receivable of $30.2 million due to the timing of billing and collections on our outstanding receivables and a decrease in unbilled receivables of $0.5 million, offset by a decrease in deferred revenue of $17.3 million due to the timing of invoicing to our clients, a decrease in accounts payable and accrued liabilities of $8.1 million primarily due to timing of payments and a decrease in operating lease liabilities of $1.3 million due to lease payments.
Previous wording
During the nine months ended March 31, 2024, net cash provided by operating activities was $40.2 million, as our operating loss of $31.4 million was reduced by $71.6 million of adjustments. These adjustments consisted of $65.7 million of non-cash charges (principally comprising of stock-based compensation and depreciation and amortization), and net cash inflow of $5.9 million from net changes in operating assets and liabilities. The net cash inflow from changes in operating assets and liabilities was primarily driven by a decrease in accounts receivable of $10.1 million due to the timing of billing and collections on our outstanding receivables, an increase in accounts payable and accrued liabilities of $6.3 million primarily due to timing of payments and an increase in deferred revenue of $4.9 million due to the timing of invoicing to our clients, offset by an increase in unbilled receivables of $5.8 million, an increase in prepaid expenses and other assets of $4.1 million, a decrease in operating lease liabilities of $3.5 million due to lease payments, an increase in deferred commissions of $1.8 million due to increased sales.
Current wording
During the three months ended September 30, 2023, net cash provided by operating activities was $11.6 million, as our operating loss of $15.3 million was reduced by $26.9 million of adjustments. These adjustments consisted of $22.8 million of non-cash charges (principally comprising stock-based compensation expense and depreciation and amortization), and net cash inflow of $4.1 million from net changes in operating assets and liabilities. The net cash inflow from changes in operating assets and liabilities was primarily driven by a decrease in accounts receivable of $23.5 million due to the timing of billing and collections on our outstanding receivables, offset by a decrease in accounts payable and accrued liabilities of $11.3 million primarily due to payments for annual bonuses, an increase in unbilled receivables of $3.9 million due to the timing of invoicing to our clients, a decrease in other liabilities of $1.6 million due to the timing of payments, a decrease in operating lease liabilities of $1.6 million due to lease payments, and an increase of $1.3 million in prepaid expenses and other assets due to the timing of payments.
Previous wording
Net cash used in investing activities primarily consists of purchases of property and equipment and capitalized internal-use software costs.
Current wording
Net cash used in investing activities consists of purchases of property and equipment, leasehold improvements, and capitalized internal-use software costs.
Previous wording
During the nine months ended March 31, 2023, net cash used in investing activities was $6.4 million, consisting of capitalized internal-use software costs of $3.9 million, capital expenditures of $2.0 million on property and equipment largely of computer equipment and leasehold improvements to our London office in the U.K., and investment in note receivable of $0.5 million.
Current wording
During the three months ended September 30, 2024, net cash used in investing activities was $2.8 million, consisting of capitalized internal-use software costs of $1.5 million, $0.9 million working capital adjustment related to a prior acquisition and capital expenditures of $0.4 million on property and equipment largely of computer equipment.
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Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Cloud NRR is the portion of our NRR which represents the net revenue retention of our SaaS contracts. We calculate Cloud NRR by starting with the Cloud ARR from the cohort of all clients as of the twelve months prior to the applicable fiscal period, or prior period Cloud ARR. We then calculate the Cloud ARR from these same clients as of the current fiscal period, or current period Cloud ARR. We then divide the current period Cloud ARR by the prior period Cloud ARR to calculate the Cloud NRR. Our trailing twelve months’ Cloud NRR as of September 30, 2024 was 119%.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Our subscription licenses provide the client with the right to functional intellectual property and are distinct performance obligations as the client can benefit from the subscription licenses on their own. The transaction price allocated to subscription license arrangements is recognized as revenues at a point in time when control is transferred to the client, which generally occurs at the time of delivery for a new contract or commencement of the renewal term for renewals. Subscription license fees are generally payable in advance on an annual basis over the term of the license arrangement, which is typically non-cancelable.