Q1 2022 Intapp Inc Earnings Call
Hello, Thank you for standing by and welcome to the in task first quarter of fiscal year 2022 earnings Conference call. At this time, all participants are them or listen only mode. After the speaker presentation there'll be a question and answer session to ask a question during the session you'll need to press star one on your telephone please be it.
Five that today's conference may be recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today very Hutton. Please go ahead.
Hello, everyone I am very had been managing director of the Blue shirt group.
Welcome to in caps first quarter of fiscal year 2022 earnings Conference call with me today are John Hall see the account and keep Robertson the company's Chief Financial Officer.
The course of this conference call. We may make forward looking statements regarding trends strategies any anticipated performance of our business.
These forward looking statements are based on management current views and expectation Intel certain assumptions made as of today's date and are subject to various risk and uncertainty described in our SEC filing and other publicly available documents, including those related to the impacts of COVID-19 on our business.
The financial services industry and global economic conditions.
And cast disclaims any obligation to update or revise any forward looking so.
Further on today's call. We will also discuss certain non-GAAP metrics, which we believe aid and the understanding of our financial results.
A reconciliation two comparable GAAP metrics can be found in today's earnings release, which is available on our website and as an exhibit to the form 8-K furnished with the S. P C. Prior to this call.
With that I'll hand, the conversation over to John.
Thanks, very much very.
Good afternoon, everybody. Thank you all for joining us today.
Shortly after our I P. O was completed we held our first public conference call with you.
Isn't that call I provided an overview of in text in taps you meet vertical industry cloud strategy.
Targeting the global professional and financial services industry.
We provided an overview of our market opportunity our client base, our technology solution. Our founder led team in a recurring revenue model and outlined our mission to enable professional in financial services firms to better connect to their people process. The data through our AI powered software solutions.
At that time, we reported solid results for our fiscal year, which ended in June.
Today, we will discuss our fiscal first quarter, which ended September 30th.
This quarter, we continued to see good demand from our target markets and we executed our business plan with consistency.
We had a strong start to our fiscal year and we made excellent progress along our path to better serve our clients.
Our cloud based offering is the foundation of a recurring revenue business model. So our key business metric is cloud a R R, which grew 56% to $125 million.
That no represents 55% of our total are are which grew by 27% to reach $229 million.
In Q1, we earn fast and support revenue of $43.5 million up 31% year over year, and total revenue of $62.2 million up 29% year over year.
And we know serve more than 1900 50 premier firms in more than 40 countries.
As we execute our go to market, it's clear that our cloud strategy is working.
On the whole firms that our target markets are now moving to cloud first strategies of their own preferring cloud based offerings as they acquire new technology.
They're doing so for many reasons, including the need to provide exceptional differentiated experiences for their clients.
In order to best serve their clients our clients require solutions that are purpose built for their very unique business model.
Today, I want to take a deeper dive into the clients that we serve and specifically why is half is uniquely positioned to meet their needs.
Firms in the professional and financial services industry share common needs that are different from the traditional corporation.
Our clients are organized and operate in the model of partnerships.
With multiple investment strategy teams or advisory practice areas, where service lines made up of expert practitioners.
Across many fields of expertise.
To be successful with modern cloud technology. These firms require very specific purpose built technology solutions <unk>.
Signed by a company with the understanding and the experience to match their partnership oriented business model.
Over our history as a bootstrap private company Internet focused specifically on this industry for 20 years.
Today as a newly emerging public company every layer of our portfolio.
From our industry graph data model to our knowledge oriented applied AI two are low code configurable user experience system has been designed to enable a set of specific you use cases that are unique to the way that partner led knowledge based firms do business.
Yeah.
This is totally different from traditional B B C. R. M N E. R. P software, which at its core was built and intended for products centric organizations.
But financial and professional services firms aren't making and selling widgets.
They're capitalizing on and selling their knowledge and expertise.
Their ability to win new business and serve their clients hinges on identifying and leveraging the network of professional relationships.
Their significant portfolio of expertise.
And their depth of previous experience both as individual professionals, but also as a collaborative firm of many experienced professionals working together in teams.
These firms differentiate by identifying and applying their unique expertise and experience as a team to each opportunity client ordeal.
Traditional CRM and ERP systems are not designed to address environments with this type of knowledge and experience oriented complexity across teams of professionals.
That gap in the traditional system has always resulted in relatively low professional user adoption for the firms that have tried to implement them.
In contrast, we built our platform by working with these firms for over 20 years to develop specific knowledge based use cases in each area of expertise.
Areas like fun formation Emma.
Mmk transactions corporate finance private credit restructuring deals.
Intellectual property protection in litigation and real estate.
As well as the very complex compliance and conflicts issues that arise for the global multi strategy firms who participate across these regulated areas of the financial and commercial economy.
Our solution captures analyzes and provides critical expert information, while the firms professionals work.
Using our applied AI, including a recent relationship intelligence release.
Cloud platform conserve up data and predictive information about relationships deals counterparties clients matters engagements and opportunities.
Accelerating the firm's ability to select an onboard new business in a compliant way.
And to deliver value throughout the relationship and project life cycles.
At the highest level, our cloud platform allows firms to institutionalize and leverage their specialized knowledge and their expertise and experience at the team to gain a greater competitive edge.
Okay, Let me turn to set examples of some of our clients who are gaining disadvantage with us.
Greenhill in company, a New York based independent investment Bank is an example of a firm who experienced the limitations of traditional technology solutions when attempting to apply them for their financial services business model.
Greenhill success relies on the way that it's bankers leverage they're transactional expertise across the many industries and geographies at the firm serves.
To that end it is spelled very collaborative culture centered around close coordination of expertise among professionals, regardless of geography your team.
Because it had a large dispersed workforce the firm struggled to share knowledge and information about deals in real time.
Greenhill does using a combination of spreadsheets and a traditional C. R N to try to track and manage deals but.
But neither solution allowed for the effective sharing of data across multiple teams and locations.
Firm leadership decided it was time for a purpose built cloudpick solution that could successfully enable its bankers to collaborate and gain better access to the data needed to pursue deals.
Greenhill selected our deal cloud solution earlier this year.
Do you think the old cloud the firm will replace multiple disparate data sources with a single source of truth.
The software provides a centralized repository to share institutional knowledge and to harness and share collective expertise across the firm.
Regulation and compliance are also key requirements for our market.
Solutions that embed compliance capabilities directly in the professional workflow are critical for our clients and for this industry as a whole.
Our professional in regulatory compliance capabilities are a great example of what it means for our platform to be truly purpose built for these industries.
One key area that drives compliance requirements is the way that these firms onboard new business.
In most cases, new business must go through a due diligence process.
Including screening for a host the potential conflicts and other risks.
Many professionals in the industry have become are clients. After they discovered the hard way that opportunities for lucrative new projects can be won or lost based frustratingly on the firm's ability or inability to get through conflicts and compliance clearance faster than the competition.
Unlike traditional CRM or E. R. P. In caps platform understands these risks in compliance requirements and has been purpose built from the ground up.
To ensure compliance while accelerating the firms in each professionals ability to win new business competitively.
Building on the same firm knowledge and experience grass data embedded in the Internet platform, we leverage applied AI to speed compliance analysis and clearance. So the firms can onboard new business quickly and with lower compliance risk.
And beat the competition to saying, yes to a new client.
A great example of the need for purpose built compliance capabilities comes from one of our clients are leading UK based law firm.
The firm's professionals are under constant pressure from the firm's leadership and their international growth ambitions.
As well as shifting client expectations rising transaction volumes and a stringent regulatory regime.
To help us professionals better compete in their sophisticated market the firm thoughts to improve its entire approach to project due diligence and screening new and existing business for compliance risk.
As we frequently see the firm's existing conflicts clearance and business acceptance process had developed slowly over many years.
It was labor intensive disjointed and highly manual.
It required several F T es working across a half dozen disparate systems just to move potential business through due diligence and the ethical and regulatory conflict checks and intake processes that the firm face.
The entire approach was inefficient error prone and impossible to scale as the firm grew and took on more and more new business.
The firm sort out of modern plowed first approach to adopting consistent an automated due diligence practices and risk management processes across the firm.
To meet this need they selected in tests, one place software to enable the full workflow associated with Onboarding briskin compliance.
Using our applied AI, including machine learning and predictive analytics the software comprehensively scans multiple internal firm experience databases and third party market data sources to significantly reduce the time it takes to conduct conflicts checks and accept new business.
Using one place the firm standardized conflicts checking within a single system, but not only modernize the process, but significantly improved the client experienced during the business accepted space.
They reduced exposure to ethical and regulatory risk and increased staff efficiency, enabling the shifting of staff resources to other valuable business project.
And they improved the firm's competitiveness and ability to respond successfully and timely to lucrative new opportunities helping to accelerate the firm's market share gains.
These are just two examples but they illustrate just how specialized these markets are.
And also help to explain why these firms have been so historically underserved by traditional CRM and ERP technology that were never intended to support their differentiated professional partnership style operating models.
It's always been part of intact DNA, though right back to our founders were still leaving the organization today to build our platform from the ground up to meet these specific issues faced by these premier financial and professional services firms.
Our unique history understanding and experience with these firms is the core reason that we are so well positioned to continue growing and winning business and these highly attractive vertical markets as they're moved to the cloud accelerates.
In summary, we continue to see strong momentum and our overall business and particularly strong growth in cloud a R. R. As our markets continue to embrace digital transformation and move to the cloud.
We're making the investments needed in our products and our go to market to lead our clients through this transformation.
We believe the industries that we serve will be significantly aided in their business by the move to our purpose built cloud platform.
Finally, as our land and expand strategy rolls forward or solutions become more and more integral and integrated into our clients business operations, making in tap a critical increasingly strategic and long term partner.
We are building a sticky reliable revenue base differentiated market with a large growth opportunity for us as we execute our strategy.
I'll now turn it over to our CFO, Steve Robertson to provide you some more details about our quarters performance.
Steve over to you.
Thanks, John and thanks to everyone for joining us today.
Before I go through the numbers I'd like to quickly review a few fundamentals of our financial model.
As John discussed the professional and financial firms that we serve a rapidly adopting purpose built cloud solutions today, nearly all of our new customer wins for cloud solutions and recurring revenue makes up approximately 85% to 90% of our total revenue.
We believe cloud a R R and total air our metrics are good indicators of the consistent growth of our annual recurring software business for.
For the first quarter of fiscal 22 is John mentioned are cloud are arguing 56% year over year and our total Arab grew 27% year over year.
In terms of revenue recognition cloud error is recognized SaaS revenue ratably, following a new sale or renewal.
On premises <unk> is recognized in two parts, 50% as subscription license revenue recognized upfront at the time of the sale or renewal and 50% as support revenue recognized Ratably and included in our SaaS and support revenue line.
Because it is recognized Ratably SaaS and support revenue will generally be more predictable quarter to quarter.
In contrast subscription license revenue can vary quarter to quarter because it is recognized as revenue episodically when the subscription licenses are initially delivered or renewed.
Okay. Moving on Q1 was a strong quarter as follows total revenue was $62.2 million up 29% year over year, driven primarily by increased sales of our cloud solutions as well as by solid growth in professional services revenue.
Fast and support revenue was 43.5 million up 31% year over year, reflecting the ongoing trend of adopting cloud solutions in our marketplace and specifically the sale of the <unk> purpose built solutions for those professionals.
Subscription license revenue was $10.6 million as compared to $10 million in the prior year period, reflecting renewals of on premises subscription license business.
As noted earlier this revenue line item is expected to be somewhat variable on a quarterly basis.
Professional services revenue was $8.1 million as compared to $5 million in the prior year period, reflecting implementations of new software and a more normalised market as compared to the COVID-19 influenced prior year period.
Overall, we continue to execute our land and expand model as we ended the quarter with more than 1900, 50 clients 446 of which have <unk> have more than $100000.
And we Upsold our clients such that are trailing 12 months net revenue retention rate was above are expected range of one O eight 212%.
Before discussing gross margins expenses and profitability. Please note that I will be discussing non-GAAP results going forward.
As a reminder, or GAAP financial results, along with a reconciliation between gap and non-GAAP results can be found in our earnings press release, and it's supplemental financial tables.
For the first quarter gross margin was 68.4% down slightly from 68.9% in the prior year period riffs.
Reflecting a slight mix shift to lower margin professional services revenue in the current period.
Gross margin on a recurring revenue solutions was that modestly year over year.
Operating expenses were $43.4 million, a 13.8 million increase year over year as we invested in sales marketing and product development to support our growth and incurred expenses required to become a publicly traded company.
As a reminder expenses in the first quarter are in comparison to those of the first quarter of fiscal 21, which were constrained at the time to manage the uncertainty of the Covid pandemic.
Sales and marketing expense was 17.9 million 5.2 million increase year over year as a function of increased head count and commission investments to capture new business in a growing markets.
We invested a portion of our revenue performance for the quarter and sales and marketing to capture new business growing markets.
R&D expense was 12.6 million, a 1.7 million increase year over year as an increased head count and invested in our product roadmap.
G&A expense was 12.8 million $6 9 million increase year over year, primarily as a result of increased expenses related to becoming a public company.
Non-GAAP operating loss was zero point $9 million as compared to our first quarter of fiscal one operating profit of 3.6 million.
Primarily reflecting the year over year increase in operating expenses just discussed.
Non-GAAP net loss per share it was four cents in the first quarter of fiscal twenty-two as compared to a loss of 10 cents in the first quarter of fiscal 21, reflecting the impact of a year over year reduction in pre IPO expenses for interest and accrued cumulative preferred dividends as well as an increase in the weighted average share count.
Turning to the balance sheet, we ended the first quarter with $54.9 million in cash and cash equivalents, an increase of 17.3 million from the fourth quarter of fiscal 21.
Accounts receivable decreased by 16.9 million, reflecting both the seasonality of our buildings and particularly strong collections in the current quarter.
Or that was reduced to zero as we use the proceeds from her IPO to pay it off.
Turning now to our guidance.
Given our strong Q1 results, we are raising our FY twenty-two revenue guidance, while leaving our profitability guidance for FY twenty-two relatively unchanged as we see opportunities to invest in the continued growth of the business.
For the second quarter of fiscal 22, we expect SaaS and support revenue of between 43 and 44 million in total revenue in the range of 58 to 59 million.
We expect a non-GAAP operating loss in the range of $4 billion to $5 billion.
In a non-GAAP net loss per share in the range of seven cents to nine cents using a basic share count of approximately 61 million common shares outstanding.
For the full your physical 22, we expect SaaS and support revenue of between 177 and $181 million.
In total revenue in the range of 248 million to $252 million.
We also expect a non-GAAP operating loss in the range of 13 billion to 17 million.
And the non-GAAP net loss per share in the range of 29 cents to 33 cents using a basic sure count waited for fiscal year 22 of approximately 61 million common shares outstanding.
With that John and I look forward to taking your questions.
Thank you as a reminder to ask a question you will need to press star one on your telephone.
Question press, the pound key C standby with composite Q&A roster.
Our first question comes from Koji Akita with Bank of America. You May proceed with your questions.
Hey, guys. Thanks for taking my question really nice quarter, John John and Steve I wanted to really hit on this cloud revenue growth here, there's 56% year over year really really spectacular growth. There I was wondering if we could unpack that a little bit and could you talk about where it's coming from is it conversions.
Legacy is it a lot of new logos or maybe bigger new logos I mean, the net expansion was pretty good there so any sort of qualitative commentary on where that where that good growth from the clouds side is coming from.
Yeah, well, while Koji I think it was really across the board honestly, we had a pretty balanced contribution this quarter from both financial services and professional services fairly equal and and in addition, uhm pretty balanced contribution from both Upselling, our clients, who knew cloud capability and from new.
Logo sales crowd, only a little bit more upscale perhaps the new logo this quarter, but fairly balanced so really across the board nothing in particular, rather than I would say just reflecting the momentum we're seeing in the marketplace right now across the whole business.
Got it got it and then one follow up here if I may.
Four John or Steve the queue to staff and support guidance looking.
Looking for some help here it looks like it's about 43 and a half at the midpoint, which is essentially flat with Q1 can you help us understand that puts and takes there is there is there some sort of uniqueness of the armed Prem the latest support revenue for them to the modern model there that could be causing this or or any anything else, we should be aware of that would be causing a.
Kind of a flat at the mid point here on the queue to that thank you.
Well as we said before yes or on premises business is a little bit variable quarter to quarter.
Our guidance is up from before for SaaS and support here. We we've had some business we might've pulled in a little bit this task quarter versus the windward guarding too and support as a small portion of the fast and the port. So I I think that we're trying to give you a set of numbers that we feel good.
About going forward and and I don't have any more color on that honestly at this point.
Got it thanks, guys. Thanks for taking my question Congrats on a great quarter.
Thank you thanks crochet.
Thank you. Our next question comes from Kevin Mcvey with Credit Suisse. You May proceed with your question.
Great. Thanks, so much and let me add my congratulations as well Hey, I Wonder if you could give us a sense of.
E E E B on the Clinton transition you know the stepped up investment in terms of some of the Overperformance, where some of that growth is coming from.
On the expense side and could you maybe desegregate broadly how much would be R&D versus G&A versus sales and marketing because obviously it seems like there's an amazing amount of incremental revenue to be had and just where some of those incremental investment are going.
So I think one of the key areas that we're focused on is sales and marketing, obviously and see if you could talk a little bit about how we did that this quarter, we see a lot of opportunity.
In front of us the demand and the market was proving to be pretty strong and we want to make sure that what position to take advantage of that that's one of the things that we've been talking about some kind of times. We've gone through this public process, Steve you want to add any color there.
Yeah, I think primarily I think we'd highlight sales and marketing investment we are adding head count and expense in sales and marketing to capture the momentum we see and in fact, we've hired a fair amount of the people that already that we were going to hire for the year. So we sort of front loaded a bit.
Some of that here in Q1, because we've seen opportunities to do so in the marketplace.
And that's part of the spend you know, it's a little bit more expensive to hire people and it started the year then towards the middle or back end of the year.
And we expect the productivity of those folks as they ramp up in and become fully productive to be quite good going forward. So we took opportunities during the first quarter, there primarily in sales and marketing.
To make a lot of sense and then it seems like you picked up 50 quarter sequentially, obviously almost.
Over 500 since 2020.
Any sense of where the client dynamics coming from and you know the client makes it more down market as opposed to mid and just is it pretty balanced between kind of legal and professional because obviously a nice job there in terms of the incremental client editions as well as the overall growth.
We've had some good results up and down the chain. Obviously there are more firms that are smaller. So you can get some more of those in a quarter, but we've been doing a good job at all firm size and so far.
See what other things you've got to add to that.
Yeah, No I think we do tend to add on balance more new clients in financial services.
Then in professional services, where there's more a little bit more of a new logo sales internet services, and a little bit more upscale and the professional services firms we've done business with for many many years fairly balanced across I mean, we tend to do some small medium and large deals and every quarter and there's more revenue opera.
Charity, you know often at the larger firms, but it's it's reasonably balanced.
Congratulations again.
Thank you.
Kim.
Thank you. Our next question comes from Brian Peterson was Raymond James You May proceed with your question.
Thanks for taking my question gentlemen, congrats with her underwear withdrawal quarter here. So you've lost so much with the real estate investment management market, maybe helpless that potential opportunity and what are you currently replacing when you go in and <unk> It really when it customer that mark.
So we think this is an important segment within the private capital.
Universe, a lot of firms are in.
Multi strategy models, where they include.
Real estate as one of the several investment strategies that they are overseeing across several funds, but there are also obviously real estate specialists that we're selling too.
We're replacing the classic.
Three categories that we've talked about so a lot of in house solutions. Some legacy on premises solutions that have been relatively under capitalized companies that have not necessarily made it to the cloud generation capabilities from time to time will compete with some of the very large horizontal players like.
Salesforce to try to provide solutions for these folks, but our platform is purpose built for this style of business and we've done some important.
Advances this period.
In more of the features and capabilities that the real estate segment needs. In particular for example, bringing in more geographic data to help the firms do more real estate oriented analysis of potential deal opportunities. If they could go to fill it out their portfolio and those types.
<unk> capabilities went embedded in our larger platform, whether the affirmative <unk> multi strategy for them or a single strategy firm are quite differentiated from what you might get from a traditional CRM.
What are you excited about this without the spaces.
Okay.
Give me just a quick follow up just trying to get our our obviously they came in above the expectations of Wanna wait when 12. It sounds like you guys have a lot of investments Yumpsville motion is going really well, there's the bogey on that move up like a reset maybe a recurring your narrative that we could hear about you outperforming that target or should we still think about that one oh wait 112 break.
Sure four thanks, guys, you're talking about the yeah. The net revenue attention. Yeah look right did do do we were better this quarter and it's possible that that is something we could come back to down. The line I don't think we want to do that on on a quarter's performance here to be to be honest, but we're going to watch that very carefully there's there's good momentum and if.
If we see a pattern that feels pretty sustainable there, we we might well revisit that.
Good ear nice job getting yeah.
Thanks, Brian.
Thank you. Our next question comes from Terry Tilman with two of security. So you May proceed with your question.
Hey, guys. This is conner faster I'll on for Terry Thanks for taking my questions and congrats on the corner start just curious where some of the benefits you've seen too Brandon awareness. That's that's <unk> that you've seen since the IPL and what type of graduating with customers and both professional and financial services.
We actually have had a very good response to our transition to a public company.
Position that.
The clients have more visibility into us as an organization that can appreciate our scale. They can contrast or scale with some of the private companies that are smaller and more on premises that they might have as an alternative option. They also have been able to get into our.
Community a little bit more we've seen more of the referral network working as our visibility has come up a little bit. So I think there's a there's a lot of benefits already to folks starting to talk about what we're doing.
Think.
One of the important things that people are also excited about is our access to the capital markets and our stability as a company of the scale that is <unk>.
Cash flow positive and they feel secure investing at us as a long term partner for them and we have a independent path as an organization, which gives them a lot of confidence that we're gonna be there for them. So I'm very excited about what the IPO has done for us so far and you know obviously, there's a longer.
Road ahead to continue to grow the company, but I think it's been a very positive move so.
See if you want to add anything.
No I think that's right I think we're seeing on the margin.
Real interest is developed because of the awareness that people add now for the business.
Perfect Yeah that definitely makes makes all the sense and then just as a quick follow up so across the different segments of the business law firms banks consulting firms and he said that demand has been pretty balanced I'm. Just curious if you've seen any emerging trends coming from any particular sectors and maybe that could affect demand coming forward or maybe a call to shift thanks guys.
Well one of the things that we've talked about is how strong the.
Private capital markets.
<unk>.
Has been doing as an industry. It's a growth area. The professional firms. The advisory firms are riding along with that providing a growing amount of services to that industry, but we're very well positioned to benefit from a secular growth trend in that segment. So we're excited about that and the pool effect that has on our whole advisory.
Business. So it's it's an exciting time, given what's happening in the wider world.
Great. Thank you.
Thank you. Our next question comes from Brian shorts with Oppenheimer. You May proceed with your question.
Yeah, Hi, Thanks for taking my questions real nice start to the year here, John and Steve.
Just wanted to dive into a little bad of the bookings momentum, maybe what's behind hind yet.
John is how much of it is coming from the top of the funnel is just filling up faster you are getting more at bats out. They are first as say the cycles I the cycles compressing as they're walking.
Moving their way through the final whether it's you know the.
Cloud computing Digitization wave permeates throughout your on markets.
Yeah, I would say both.
There's definitely and you know we're looking back into the Covid here I went a lot of these firms did pause when when Covid first hit.
So there's definitely an acceleration relative to that I think more generally the industries are doing better. Many of these firms are having fantastic years of their own and are investing forward to take advantage of that team to improve their own operations in the digital transformation trend the cloud trend and putting in systems.
[noise] like hours to create a better environment for their people to for them to compete in the marketplace and collaborate together more effectively as a big theme a lot of the firms coming out of Covid.
Has shifted some of their priority spending from the traditional real estate.
City centers to a more I T oriented approach that allows for more work flexibility and some hybrid or or work from home portion where technology is a really important part of enabling that whole revise work culture and I think we're benefiting from that and there's a there's a broader.
Set of forces at work that are pulling us along so we're excited about what's happening there is some opportunity that we're seeing for some parts of the market to buy a shorter sales cycles are excited about that we're also seeing good strengthen the funnel to answer your question.
Thank you and kind of leads me into the next question about the current quarter here. The December quarter on do you end markets have buying seasonality I know with enterprise software or.
And the enterprise market typically Q4 is big buying quarter for them.
You know is that similar with with your end markets do they have a similar seasonality was four two.
Well I think.
There are different populations inside our target market that might have some seasonality and might have some different seasonality.
We do.
30% or so of our business outside the United States. So financial year ends are different in several countries. Some of the firms that we felt to operate on a cash basis themselves and so December is important but there's other parts of our market that have different.
Your ends often in June or.
March or April so you could argue that there's two seasonality, but you could also argue across the target markets that were serving it's pretty well distributed.
Yeah, how did anything there.
No I think I think that's right I think conditionally in the professional services there's been.
Some more seasonality than we've seen in financial services right now, but I think that's that's right.
Okay last question for me and then I'll hop back into the queue you announced in the press release that you have a new analytics capability that the relationship intelligence functionality throughout the platform.
Just trying to understand is there a monetization path with that capabilities or should we think about it it's more strain thing the value proposition and hopefully improving your when rates as we move forward. Thanks for taking my questions.
Well, it's certainly the ladder as we.
Go and meet new clients, and we bring more and more of the applied AI capabilities into.
The sales process people are saying well this is more and more of a purpose built system that really understands the way that our organization works I think we also have an opportunity with our installed base. We do several releases a year and we have a land and expand.
Model for many of them.
Lots of opportunity ahead, I think we talked.
As far back with you that's one about the fact that just with our top 100 clients. We have $1 billion of upset that we could achieve if we sold through our whole platform and one thing on the roadmap. So we're excited about relationship intelligence and a roadmap of capabilities that take advantage of applauded as a platform grows and becomes more and more capable.
A lot of the areas that the firms have been coaching us over the years, they really need help and we see it as a huge opportunity for us to to deploy the apply their system in relationships intelligence is great.
New capability that looks at the whole organizations.
Relationship footprint and helps individual professionals take advantage of the firm's overall relationship strategically if they're pursuing the deals and helping them to understand areas, where they can do better client development and better client care actually.
So we're excited about that one and we're seeing some good interest across the market, both the new and existing clients.
Thank you very much.
Thanks.
Thank you. Our next question comes from Tom Roderick with equal you May proceed with your question.
Yeah, Great Hi, John Hi, Steve Thanks for taking my questions. Congrats on the on the nice results. So you know I'm looking at a few of these metrics and I think it was I think I might've been Brian earlier to highlight the the the net revenue retention above the traditional range I'm looking at the customers with over.
$100000 AOR bump it up another 26, and it's it's a highlighted point that.
Not only your customers getting bigger it seems like they're they're they're buying more solutions, which brings me back to the point of the question customer success Uhm, you're you're clearly doing doing more with the customers you have in getting new customers onboarded in a successful manner, what I'd love to hear is how your partner community is helping you do that from from the press.
Active as they're building around you and then from your own perspective of hiring a professional services and implementation teams talk a little bit about that assessment that you were that you've made and how that's coming off.
Yeah. Thank you Tom so the.
Partner.
Ecosystem that in Texas cultivated over the years has grown up with US a lot of people, who may have history, working within tap itself or working with many of our client firms and struck out on their own to build some of these partner firms have been very successful in an important part of our strategy we.
Have a mixed strategy, we have our own client services and client success teams that engaged with our clients and make sure that they are successful with our platform and we also work with a partner ecosystem and our clients have choice and options about how they approach that we.
We.
Have done a lot over the past two or three years as we've grown to invest in our clients success organization, there's always more to do but I think we've got a very strong reputation and strong success record across the board as we've grown the business and a lot of our growth is coming from existing clear.
Since you were happy and also from the referrals that are existing clients or providing and then because we have a strong ecosystem of partners who are working with US there also success.
Successfully supporting our clients and also referring us in to clients that are interested in improving their environment. So there's a lot of opportunity for us for internal hiring you asked about I've been very excited about the reaction that the.
The.
Potential recruit recruiting population.
Has had to us going public we've raised our visibility and a lot of people who have incredible skills and knowledge about this market in particular have reached out to US and said you guys are a public company, you're you're growing quickly we want to be part of the team and something about the IPO has helped.
To start to bring on some very significant talent that I think is a really good sign for reinforcing the companies deep industry expertise that I think it's one of the pillars that sets us apart, it's true with the technology level, but it's also very true at the team level and so from our partners from our clients from the ecosystem itself.
Bringing a lot of that expertise to help us continue to differentiate going forward and I think it bodes well for us.
Fantastic Great to hear on that front second question for me I, just wanted to touch on international and a little bit more detail I know UK has always been a very strong market for Ya I think APAC in particular has been kind of a rising in emerging sector.
As the world opens up some pockets more slowly than others. It would love to hear how the reopening is going for you in those regions and how the the end demand as looking in those regions is reopening has been a little slower and parts of Europe for instance, but APAC demand across software seemingly has been pretty strong lately. So I'd love.
To hear maybe the dichotomy across those two regions, what you're seeing there.
Yeah, So our international.
Growth has been in line, where their overall growth. We're excited about the ads about 30, 31%.
We've seen.
To your question good demand from both Europe, and Asia Pacific also parts of the Middle East, where winning business in the middle East as well as in various parts of Europe.
In Singapore, and Japan, and other parts of Asia Pacific.
So I don't know that I would point too.
The work from home or the opening up issue is something that has had a huge negative or positive impact on that so I think we've gotten a lot of.
Uhm business because firms have been looking to better enable themselves to work in a more hybrid.
Format.
As they've learned the lessons from from Covid and how to enable people and we've actually done well through the entire work from home period, we're starting to give folks the option to work from the office and open up ourselves.
But the but the demand side, we haven't really seen a lot of effective that negatively.
In any particular area I would say.
Great detail. Thank you nice job I appreciate it.
<unk>.
Thank you and our last question comes from Jackson Nadir with J P. Morgan you May proceed with your question.
Great. Thanks, guys. Thanks for taking my question.
If we think about some of the catalyst for people to actually.
Pull the trigger.
And and make the jump to to your platform does it vary depending on either the end market or the size of the customer for reasons people are ready to switch off of there probably horizontal platform.
So the question is are there catalyst based on.
The catalyst vary depending on the size or the end Marquez for people correct shifts.
So I think.
On the size front.
There's an interesting far end of the sites, where we're actually doing some good business with people who are starting new firms who has been using our platform now at some of the larger organizations and know that it's the right answer for this style of firm. So we have a <unk>.
Small growing part of our business that is do firms where people just say this is the system that we need to get our firm off the ground. We're excited about that because those firms grow and raped me funds are starting to services and it's a sign of the brand and the reputation that we have in the trust that people have in the platform. So that's sort of at one end.
As a catalyst it's not so much their switching off with something that they're starting with it at the other end the large organizations I've actually been.
Excited to see some of the firms at the very highest end of the market the most prestigious firms who a year ago.
A very strict.
Strict policy to say, we're still gonna be on premises for a long time, we have these questions about the cloud and just through Covid in the past 12 months some of the top firms in the World has made 180 degrees switch and said that they're going to cloud first cloud only.
Reasonable period of time so.
There have been serious catalysts I think from the Covid periods that have converted some of the last pulled up so at the very top of the market. So I'm optimistic that this digital transformation trend the cloud trend in the capabilities of platforms like ours to really meet the security and compliance in public.
He needs when the firms neither are there and they're they're ready to go now and the same logic that drove the cloud transformation through some of the other industry. If that didn't have some of these specialized impediments are are melting away and the firms are actually making the switch so that's size and as far as market goes.
You know.
I don't think it's.
Mysterious the most conservative firms, where folks like the law firms, who had a lot of responsibility around compliance a lot of rules from the banks themselves about what how they had to manage their client information.
And that has really changed I mean, there's been a lot more interest.
In the past two or three years with firms have said you know what.
This technology capabilities are there we're ready to make the switch. So I think some of the industry's are cloud first already and then that's probably the one that has.
Historically had a little bit of a ways to go but I think it's it's flipping over now.
That is great. Thank you for the color stable quick follow up on professional services.
When we look at both.
Both revenue and maybe cost of professional services and that negative gross margin.
How should we think about that level is we may be moved through the rest of the year.
Well I think services is back this is a normalized quarter last quarter year over year was kind of a COVID-19 quarter. So that's a good part of.
The difference in those numbers and this business will grow going forward services. I think look we are we are growing into an infrastructure that we build for our services business is probably close to twice the size. We have so we feel are on track pretty well as we grow into that and should should should generate some better margins over time it it it it.
Does continue to be part of our support of our SaaS software business truly the services effort. So that's part of the equation two for us, but we're happy with where we are unexpected get better over time here.
Alright, alright, thanks for squeeze me I guess.
Yep.
Thanks, Jeff Thank you and I'm not showing any further questions. At this time I would now like to turn the call back over to John Hall for any closing remarks.
Okay, well thanks, everyone. We appreciate your attention of questions I'd like to thank the <unk> for the great quarter and all the work that continues to go into supporting all of our clients.
We have a great Q1 behind us to kick off the year and we're excited about the continued momentum.
You all for your time today, and we're looking forward to talking to your next quarter.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
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Hello, Thank you for standing by and welcome to the <unk> first quarter fiscal year 2022 earnings conference call. At this time all participants are in a listen only mode. After the speaker presentation there'll be a question and answer session SaaS.
A question during the session you will need to press star one on your telephone. Please be advised that today's conference maybe recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your Speaker today Barry Hutton. Please go ahead.
Hello, everyone I am Barry Hutton, managing director of the Blue shirt group welcomed.
Welcome to <unk> first quarter fiscal year 2022 earnings Conference call with me today are John Hall, CEO of in House, and Steve Robertson, The company's Chief Financial Officer during.
During the course of this conference call. We may make forward looking statements regarding trends strategies and anticipated performance of our business.
These forward looking statements are based on management's current views and expectations Intel certain assumptions made as of today's date and are subject to various risks and uncertainties described in our SEC filings and other publicly available documents.
<unk> those related to the impacts of COVID-19 on our business the financial services industry and global economic conditions.
<unk> disclaims any obligation to update or revise any forward looking statement.
Further on today's call. We will also discuss certain non-GAAP metrics, which we believe aid in the understanding of our financial results.
A reconciliation to comparable GAAP metrics can be found in today's earnings release, which is available on our website and as an exhibit to the form 8-K furnished with the SEC prior to this call.
With that I'll hand, the conversation over to John.
Thanks, very much Gary.
Good afternoon, everybody. Thank you all for joining us today.
Shortly after our IPO was completed we held our first public conference call with you.
That call I provided an overview of intact in taps unique vertical industry cloud strategy.
Targeting the global professional and financial services industry.
We provided an overview of our market opportunity our client base, our technology solution. Our founder led team in a recurring revenue model and outlined our mission to enable professional and financial services firms to better connect their people processes and data through our AI powered software solutions at.
At that time, we reported solid results for our fiscal year, which ended in June.
Today, we will discuss our fiscal first quarter, which ended September 30th.
This quarter, we continued to see good demand from our target markets and we executed our business plan with consistency.
We had a strong start to our fiscal year and we made excellent progress along our path to better serve our clients.
Our cloud based offering is the foundation of our recurring revenue business model. So our key business metric is cloud a R. R.
<unk>, which grew 56% to $125 million.
That now represents 55% of our total <unk>, which grew by 27% to reach $229 million.
In Q1, we earned SaaS and support revenue.
$43 $5 million up 31% year over year, and total revenue of $62.2 million up 29% year over year.
And we now serve more than 90 to 150 premier firms in more than 40 countries.
As we execute our go to market, it's clear that our cloud strategy is working.
On the whole firms in our target markets are now moving to cloud first strategies of their own preferring cloud based offerings as they acquire new technology.
They are doing so for many reasons, including the need to provide exceptional differentiated experiences for their clients.
In order to best serve their clients.
Our clients require solutions that are purpose built for their very unique business model.
Today, I want to take a deeper dive into the clients that we serve and specifically why in tap is uniquely positioned to meet their needs.
First in the professional and financial services industry share common needs that are different from the traditional corporation.
Our clients are organized and operate in the model of partnerships.
With multiple investment strategy teams or advisory practice areas, where service lines made up of expert practitioners.
Across many fields of expertise.
To be successful with modern cloud technology. These firms require very specific purpose built technology solutions.
Signed by a company with the understanding and the experience to match their partnership oriented business model.
Over our history as a bootstrap private company intact focused specifically on this industry for 20 years.
Today as a newly emerging public company every layer of our portfolio.
From our industry graph data model to our knowledge oriented applied AI to our low code Configurable user experience system has been designed to enable a set of specific use cases that are unique to the way that partner led knowledge based firms do business.
Yes.
This is totally different from traditional b to B, CRM and ERP software, which at its core was built and intended for product centric organization.
But financial and professional services firms aren't making and selling widgets.
They're capitalizing on and selling their knowledge and expertise.
Their ability to win new business and serve their clients hinges on identifying and leveraging the network of professional relationships there.
Their significant portfolio of expertise.
And their depth of previous experience both as individual professionals, but also as a collaborative firm of many experienced professionals working together in teams.
These firms differentiate by identifying and applying their unique expertise and experience as a team to each opportunity client or deal.
Traditional CRM and ERP systems are not designed to address environments with this type of knowledge and experience oriented complexity across teams of professionals.
That gap in the traditional systems has always resulted in relatively low professional user adoption for the firms that have tried to implement them.
In contrast, we built our platform by working with these firms for over 20 years to develop specific knowledge based use cases in each area of expertise.
Areas like fund formation.
M&A transactions corporate finance private credit restructuring deals.
Intellectual property protection and litigation and real estate.
As well as the very complex compliance and conflict issues that arise for the global multi strategy firms who participate across these regulated areas of the financial and commercial economy.
Our solution captures analyzes and provides critical expert information, while the firms professionals work.
Using our applied AI, including a recent relationship intelligence release.
Our cloud platform conserve up data and predictive information about relationships deals counterparties clients matters engagements and opportunities.
Accelerating the firm's ability to select and onboard new business in a compliant way and.
To deliver value throughout the relationship and project life cycles.
At the highest level, our cloud platform allows firms to institutionalize and leverage their specialized knowledge and their expertise and experience as a team to gain a greater competitive edge.
Okay, Let me turn to some examples of some of our clients who are gaining this advantage with us.
Greenhill and company, a New York based independent investment Bank is an example of a firm who experienced the limitations of traditional technology solutions when attempting to apply them for their financial services business model.
Greenhill success relies on the way that its bankers leverage their transactional expertise across the many industries and geographies at the firm service to them.
And it has built a very collaborative culture centered around close coordination of expertise among professionals, regardless of geography or team.
Because it had a large dispersed workforce the firms struggled to share knowledge and information about deals in real time.
Greenhill, just using a combination of spreadsheets and a traditional CRM to try to track and manage deals.
But neither solution allowed for the effective sharing of data across multiple teams and locations.
Firm leadership decided it was time for a purpose built cloud based solution that could successfully enable its bankers to collaborate and gain better access to the data needed to pursue deals.
Greenhill selected our deal cloud solution earlier this year.
Using field cloud the firm will replace multiple disparate data sources with a single source of truth.
The software provides a centralized repository to share institutional knowledge and to harnessing share collective expertise across the firm.
Regulation and compliance are also key requirements for our market.
Solutions that embed compliance capabilities directly in the professional workflow are critical for our clients and for this industry as a whole.
Our professional and regulatory compliance capabilities are a great example of what it means for our platform to be truly purpose built for these industries.
One key area that drives compliance requirements is the way that these firms onboard new business.
In most cases, new business must go through a due diligence process <unk>.
Including screening for a host of potential conflicts and other risks.
Many professionals in the industry have become our clients after they discover the hard way that opportunities for lucrative new projects can be won or lost based frustratingly on the firm's ability or inability to get through conflicts and compliance clearance faster than the competition.
Unlike traditional CRM or ERP in caps platform understands these risks and compliance requirements and has been purpose built from the ground up to.
To ensure compliance while accelerating the firms and each professionals ability to win new business competitively.
Building on the same firm knowledge and experience graph data embedded in the <unk> platform, we leverage applied AI to speed compliance analysis and clearance. So the firms can onboard new business quickly and with lower compliance risk.
And beat the competition to saying, yes to a new client.
A great example of the need for purpose built compliance capabilities comes from one of our clients a leading UK based law firm.
The firm's professionals are under constant pressure from the firms leadership and their international growth ambitions.
As well as shifting client expectations rising transaction volumes and a stringent regulatory regime.
To help us professionals better compete in their sophisticated market. The firm's sought to improve its entire approach to project due diligence and screening new and existing business for compliance risk.
As we frequently see the firm's existing conflicts clearance and business acceptance process had developed slowly over many years.
It was labor intensive disjointed and highly manual.
It required several ftes working across a half dozen disparate it systems just to move potential business through due diligence and the ethical and regulatory conflicts checks and intake processes that the firm faced.
The entire approach was inefficient error prone and impossible to scale as the firm grew and took on more and more new business.
The firm's sought out a modern cloud first approach to adopting consistent and automated due diligence practices and risk management processes across the firm.
To meet this need they selected Intest, one place software to enable the full workflow associated with Onboarding risk and compliance.
Using our applied AI, including machine learning and predictive analytics the software comprehensively scans multiple internal firm experience databases and third party market data sources to significantly reduce the time it takes to conduct conflicts checks and accept new business.
Using one place the firm's standardized conflicts checking within a single system that not only modernize the process, but significantly improved the client experience during the business acceptance phase.
They reduced exposure to ethical and regulatory risk and increased staff efficiency, enabling the shifting of staff resources to other valuable business project.
And they improved the firms competitiveness and ability to respond successfully and timely to lucrative new opportunities, helping to accelerate the firm's market share gains.
These are just two examples but they illustrate just how specialized these markets are.
And also helps to explain why these firms have been so historically underserved by traditional CRM and ERP technology that were never intended to support their differentiated professional partnership style operating models.
It's always been part of <unk>, DNA, though right back to our founders who are still leading the organization today to build our platform from the ground up to meet these specific issues faced by these premier financial and professional services firms.
Our unique history understanding and experience with these firms is the core reason that we're so well positioned to continue growing and winning business in these highly attractive vertical markets as their move to the cloud accelerates.
In summary, we continue to see strong momentum in our overall business and particularly strong growth in cloud.
As our markets continue to embrace digital transformation and move to the cloud.
We are making the investments needed in our products and our go to market to lead our clients through this transformation.
We believe the industries that we serve will be significantly aided in their business by the move to a purpose built cloud platform.
Finally, as our land and expand strategy rolls forward, our solutions become more and more integral and integrated into our clients' business operations, making in tap a critical increasingly strategic and long term partner.
We are building a sticky reliable revenue base in a differentiated market with a large growth opportunity for us as we execute our strategy.
I'll now turn it over to our CFO, Steve Robertson to provide you some more details about our quarter's performance.
Steve over to you.
Thanks, John and thanks, everyone for joining us today.
Before I go through the numbers I'd like to quickly review a few fundamentals of our financial model as John discussed the professional and financial firms that we serve are rapidly adopting purpose built cloud solutions today, nearly all of our new customer wins are for our cloud solutions and recurring revenue makes up approximately 85% to 90%.
<unk> of our total revenue.
We believe cloud <unk> and total <unk> metrics are good indicators of the consistent growth of our annual recurring software business.
For the first quarter of fiscal 'twenty, two as John mentioned, our cloud <unk> grew 56% year over year, and our total <unk> grew 27% year over year.
In terms of revenue recognition cloud era is recognized SaaS revenue ratably, following a new sale or renewal.
On premises <unk>.
<unk> two parts.
50% is subscription license revenue recognized upfront at the time of the sale or renewal and 50% as support revenue recognized Ratably and included in our SaaS and support revenue line.
Because it is recognized Ratably SaaS and support revenue will generally be more predictable quarter to quarter.
In contrast subscription license revenue can vary quarter to quarter because it is recognized as revenue episodically when the subscription licenses are initially delivered or renewed.
Okay moving on.
Q1 was a strong quarter as follows total revenue was $62 2 million up 29% year over year, driven primarily by increased sales of our cloud solutions as well as by solid growth in professional services revenue.
SaaS and support revenue was $43 5 million up 31% year over year, reflecting the ongoing trend of adopting cloud solutions and our marketplace and specifically the sale of <unk> purpose built solutions for those professionals.
Subscription license revenue was $10 6 million as compared to $10 million in the prior year period, reflecting renewals of on premises subscription license business.
As noted earlier this revenue line item is expected to be somewhat variable on a quarterly basis.
Professional services revenue was $8 1 million as compared to $5 million in the prior year period, reflecting implementations of new software in a more normalized market as compared to the COVID-19 influenced prior year period.
Overall, we continued to execute our land and expand model as we ended the quarter with more than 1900, 50 clients 446 of which have <unk> of more than $100000 and.
And we up sold our clients such that our trailing 12 months net revenue retention rate was above our expected range of 108% to 112%.
Before discussing gross margins expenses and profitability. Please note that I will be discussing non-GAAP results going forward.
As a reminder, our GAAP financial results along with a reconciliation between GAAP and non-GAAP results can be found in our earnings press release and supplemental financial tables.
For the first quarter gross margin was 68, 4% down slightly from 68, 9% in the prior year period.
Setting a slight mix shift to lower margin professional services revenue in the current period.
Gross margin on our recurring revenue solutions was up modestly year over year.
Operating expenses were $43 4 million, a $13 8 million increase year over year as we invested in sales marketing and product development to support our growth and incurred expenses required to become a publicly traded company.
As a reminder expenses in the first quarter are in comparison to those of the first quarter of fiscal 'twenty, one which were constrained at the time to manage the uncertainty of the Covid pandemic.
Sales and marketing expense was $17 9 million or $5 2 million increase year over year as a function of increased head count and commission investments to capture new business in our growing markets.
We invested a portion of our revenue performance for the quarter and sales and marketing to capture new business in our growing markets.
R&D expense was $12 6 million or $1 7 million increase year over year, as we increased head count and invested in our product roadmap.
G&A expense was $12 8 million $6 9 million increase year over year, primarily as a result of increased expenses related to becoming a public company.
Non-GAAP operating loss was <unk> 9 million as compared to our first quarter of fiscal one operating profit of $3 6 million.
Primarily reflecting the year over year increase in operating expenses just discussed.
Non-GAAP net loss per share was <unk> <unk> in the first quarter of fiscal 'twenty, two as compared to a loss of <unk> 10 in the first quarter of fiscal 'twenty one.
Reflecting the impact of a year over year reduction in pre IPO expenses for interest.
Cumulative preferred dividends as well as an increase in the weighted average share count.
Turning to the balance sheet, we ended the first quarter with $54 9 million in cash and cash equivalents, an increase of $17 3 million from the fourth quarter of fiscal 'twenty one.
Accounts receivable decreased by $16 9 million, reflecting both the seasonality of our billings and particularly strong collections in the current quarter.
Our debt was reduced to zero as we use the proceeds from our IPO to pay it off.
Okay.
Turning now to our guidance.
Given our strong Q1 results, we are raising our FY 'twenty two revenue guidance, while leaving our profitability guidance for FY 'twenty two relatively unchanged as we see opportunities to invest in the continued growth of the business.
For the second quarter of fiscal 'twenty, two we expect SaaS and support revenue of between 43 and $44 million in total revenue in the range of $58 million to $59 million.
We expect a non-GAAP operating loss in the range of $4 billion to $5 billion.
And our non-GAAP net loss per share in the range of seven to nine.
Using a basic share count of approximately 61 million common shares outstanding.
For the full year fiscal 'twenty, two we expect SaaS and support revenue of between 177 and $181 million.
And total revenue in the range of $248 million to $252 million.
We also expect our non-GAAP operating loss in the range of $13 billion to $17 billion.
And the non-GAAP net loss per share in the range of 29.
To 30, <unk> using a basic share count weighted for fiscal year 'twenty two of approximately 61 million common shares outstanding.
With that John and I look forward to taking your questions.
Okay.
Thank you as a reminder to ask a question you will need to press star one on your telephone.
Your question press the pound key.
And while we compile the Q&A roster.
Our first question comes from Koji Ikeda with Bank of America. You May proceed with your question.
Hey, guys. Thanks for taking my question really nice quarter, John and John and Steve I wanted to really hit on the cloud revenue growth here this 56% year over year really really spectacular growth there.
Was wondering if we can unpack that a little bit and could you talk about where it's coming from is it conversions of legacy is it a lot of new logos or maybe bigger new logos I mean, the net expansion was pretty good there so any sort of qualitative commentary on where that where that good growth from the cloud side is coming from.
Yes.
<unk> I think it was really across the board honestly, we had a pretty balanced contribution this quarter from both financial services and professional services, it's fairly equal and in addition.
Pretty balanced contribution from both Upselling, our clients, new cloud capability and from new logo sales cloud only a little bit more upsell, perhaps the new logo this quarter, but fairly balanced so really across the board.
In particular other than I would say just reflecting the momentum we're seeing in the marketplace right now across the whole business.
Got it got it and then one follow up here if I may.
For John or Steve the Q2, SaaS and support guidance.
Looking for some help here it looks like it's about 43 and a half at the midpoint, which is essentially flat with Q1.
Can you help us understand the puts and takes there is there is there some sort of uniqueness of the on Prem the latest support revenue flowing through the model that model there that could be causing this or any anything else. We should be aware of that would be causing a kind of a flat at the mid point here on the Q2 guide. Thank you.
Well as we've said before yes, our on premises business is a little bit variable quarter to quarter.
Our guidance is up from before for SaaS and support here.
We've had some business we might have pulled in a little bit this past quarter versus the when we're guiding to and support is a small portion of the SaaS and support so I think that we're trying to.
Give you a set of numbers that we feel good about going forward and and I don't have any more color on that honestly at this point.
Got it thanks, guys. Thanks for taking my questions Congrats on a great quarter.
Thank you thank you toshi.
Thank you. Our next question comes from Kevin Mcveigh with Credit Suisse. You May proceed with your question.
Great. Thanks, so much and let me add my congratulations as well.
I Wonder if you could give us a sense of.
Beyond the cloud transition.
This stepped up investment in terms of some of the over performance, where some of that growth is coming from.
On the expense side and could you maybe disaggregate.
Broadly how much would be R&D versus G&A versus sales and marketing because obviously it seems like there was an amazing amount of incremental revenue to be had and just where some of those incremental investments are going.
So I think one of the key areas that we're focused on is sales and marketing, obviously and Steve If you could talk a little bit about how we did that this quarter, we see a lot of opportunity in.
In front of us the demand in the market is proving to be pretty strong and we want to make sure that we're positioned to take advantage of that that's one of the things that we've been talking about from time to time as we've gone through this public process, Steve do you want to add any color there.
Yes, I think primarily I think we'd highlight sales and marketing investment, we are adding headcount and expense in sales and marketing to capture the momentum we see and in fact, we've hired a fair amount of the people that already that we were going to hire for the year. So we sort of front loaded a bit.
Some of that here in Q1, because we've seen opportunities to do so in the marketplace.
And that's part of the spend you know, it's a little bit more expensive to hire people and they started the year then towards the middle or back end of the year.
And we expect the productivity of those folks as they ramp up.
And become fully productive to be quite good going forward. So we took opportunities here in the first quarter. They were primarily in sales and marketing.
That makes a lot of sense and then it seems like you picked up 50 quarters sequentially and obviously almost.
Over 500 since 2020.
Any sense of where the client dynamics coming from and you know the client mix is it more.
Market as opposed to mid and just is it pretty balanced between kind of legal and professional because obviously a nice job there in terms of the incremental client additions as well as you know the overall growth.
Growth.
We've had some good results up and down the chain. Obviously there are more firms that are smaller so you could get some more of those in the quarter, but we've been doing a good job at all firms sizes. So far.
Steve or the things you would add to that.
Yes.
Yes, no I think we do tend to add on balance more new clients in financial services.
Then in professional services.
There is more a little bit more of a new logo sales and financial services and a little bit more upsell in the professional services firms, we've done business with for many many years.
Fairly balanced across I mean, we tend to do some small medium and large deals in every quarter and theres more revenue opportunity.
And at the larger firms.
But it's reasonably balanced.
Congratulations again.
Thank you Kim.
Jim.
Thank you. Our next question comes from Brian Peterson with Raymond James You May proceed with your question.
Alright, Thanks for taking my question gentlemen, congrats on the really strong quarter here. So.
You lost some but.
The real estate investment management market, maybe help us size that potential opportunity and what are you currently replacing when you go in it.
When a customer in that market.
So we think this is an important segment within the private capital.
Universe, a lot of firms are in.
Multi strategy models, where they include.
Real estate is one of the several investment strategies that they are overseeing across several funds, but there are also obviously real estate specialists that we're selling to.
We're replacing the classic.
Three categories that we've talked about so a lot of in house solutions.
Some legacy on premises solutions that have been relatively undercapitalized companies that have not necessarily made it to the cloud generation with AI capabilities from time to time, we will compete with some of the very large horizontal players like salesforce to try to provide solutions for these folks, but our platform is purpose built for this.
Style of business and we've done some important.
Advances this period.
In more of the features and capabilities that the real estate segment needs. In particular for example, bringing in more geographic data to help the firms do more real estate oriented analysis of potential deal opportunities as they could go to build out their portfolio and those types of.
<unk> capabilities when embedded in our larger platform, where the firm is a multi strategy firm or a single strategy firm are quite differentiated from what you might get from a traditional CRM.
Okay.
Understood.
The spacing.
Okay.
Maybe just a quick follow up.
<unk>, obviously they came in above your expectations of 112. It sounds like you guys have a lot of investments the upsell motion is going really well the bogey on that move up like you said, maybe a recurring negative that we could hear about you outperforming that target or should we still think about that one away at 112 range going forward. Thanks, guys you're talking about.
The net revenue retention, yes look right did you.
Were better this quarter and it's possible that that is something we could come back to down the line I don't think we want to do that on on our quarter's performance here to be to be honest, but we're going to watch that very carefully. There is there's good momentum and if if we see a pattern that feels pretty sustainable there, we we might well revisit that.
Good to hear nice job gentlemen.
Yes.
Thanks, Brian.
Thank you. Our next question comes from Terry Tillman with two of Securities. You May proceed with your question.
Hey, guys. This is conor basketball on for Terry Thanks for taking my questions and congrats on the quarter I'll start just curious where some of the benefits you've seen two brand and awareness.
You've seen since the IPO and what kind of is resonating with customers in both professional and financial services.
We actually have had a very good response to our transition to a public company.
Physicians.
Our clients have more visibility into us as an organization that can appreciate our scale. They can contrast, our scale with some of the private companies that are smaller and more on premises that they might have as an alternative option. They also.
Has been able to get into our.
Community a little bit more we've seen more of the referral network working as our visibility has come up a little bit.
I think theres, a theres a lot of benefit already to folks starting to talk about what we're doing.
Thank you.
One of the important things that people are also excited about is our access to the capital markets and our stability as a company of this scale that is cash flow positive and they feel secure investing in us as a long term <unk>.
<unk> for them and we have an independent path as an organization, which gives them a lot of confidence that we're going to be there for them. So I'm very excited about what the IPO has done for us so far and obviously, there's a long road ahead to continue to grow the company, but I think it's been a very positive move.
Steve do you want to add anything.
No I think that's right I think we're seeing on the margin.
Real interest has developed because of the awareness that people have now for the business.
Perfect Yeah that definitely makes it makes a lot of sense and then just as a quick follow up so across the different segments of the business law firms banks consulting firms and you said that demand has been pretty balanced I'm. Just curious if you've seen any emerging trends coming from any particular sectors and maybe if that can affect demand going forward and maybe cause a shift thanks guys.
Well one of the things that we've talked about is how strong the <unk>.
Private capital markets.
<unk>.
Has been doing as an industry. It's a growth area professional firms advisory firms are riding along with that providing a growing amount of services to that industry, but we're very well positioned to benefit from a secular growth trend in that segment. So we're excited about that and the pull effect that that has on our whole advisory.
Business. So it's an exciting time, given what's happening in the wider world.
Great. Thank you.
Thank you. Our next question comes from Brian Schwartz with Oppenheimer. You May proceed with your question.
Yeah, Hi, Thanks for taking my questions real nice start to the year here, John and Steve.
Just wanted to dive into a little bit of the bookings momentum maybe whats behind that.
John is how about Covid is coming from the top of the funnel is just filling up faster youre getting more at bats out they are versus say the cycles the cycles compressing as they're walking.
Moving their way through the funnel whether its.
Cloud computing and Digitization wave permeates throughout your end markets.
Yes, I would say both.
There is definitely.
We're looking back into the Covid era, when a lot of these firms did.
When when Covid first hit.
So theres definitely an acceleration relative to that I think more generally the industries are doing better. Many of these firms are having fantastic years of their own and are investing forward to take advantage of that to improve their own operations and the digital transformation trend the cloud trend and putting in systems.
Like ours to create a better environment.
<unk> for their people to for them to compete in the marketplace and collaborate together more effectively it's a big theme a lot of the firms coming out of Covid have shifted some of their priority spending from the traditional real estate.
City centers to a more <unk> oriented approach allows for more work flexibility and some hybrid or work from home portion where technology is a really important part of enabling that whole revised work culture and I think we're benefiting from that and there is a broader.
Set of forces at work that are pulling us along so we're excited about what's happening there is some opportunity.
That we're seeing for some parts of the market to buy and shorter sales cycles. We're excited about that we're also seeing good strength in the funnel to answer your question.
Thank you and kind of leads me into the next question about the current quarter here the December quarter on.
So your end markets have buying seasonality now with enterprise software are up in the enterprise market typically Q4 is a big buying.
Quarter for them.
Is that similar web.
With your end markets do they have a similar seasonality with <unk>.
Well I think.
There are different populations inside our target market that might have some seasonality and might have some different seasonality we.
We do.
30% or so of our business outside the United States.
Financial year ends are different in several countries. Some of the firms that we sell to operate on a cash basis themselves and so December is important but there's other parts of our market that have different.
Year ends often in June or.
March or April so you could argue that there is some seasonality, but you could also argue across the target markets that we're serving its pretty well distributed.
Yes, how did anything there.
No I think that I think thats right I think traditionally in the professional services there's been.
Some more seasonality.
And then we've seen in financial services right now, but I think that's right John.
Okay last question for me and then I'll hop back into the queue you announced in the press release that you have a new analytics capability that the relationship intelligence functionality throughout the platform.
Just trying to understand is there a monetization path with that capabilities or should we think about it as more of strengthening the value proposition and hopefully improving your win rates as we move forward. Thanks for taking my questions.
Well it certainly the ladder as we.
Go and meet new clients, and we bring more and more of the applied AI capabilities into.
The sales process people are saying well this is more and more of a purpose built system that really understands the way that our organization works I think we also have an opportunity with our installed base. We do several releases a year and we have a land and expand.
Model for many of them.
Lots of opportunity ahead, I think we talked.
<unk>, that's one about the fact that just with our top 100 clients, we have $1 billion of upsell that we could achieve if we sold through our whole platform and one thing on the roadmap. So we're excited about relationship intelligence and our roadmap of capabilities that take advantage of applied AI as our platform grows and becomes more and more capable.
A lot of the areas that the firms have been coaching us over the years, they really need help and we see it as a huge opportunity for us to deploy the applied AI system and relationship intelligence is a great.
New capability that looks at the whole organization.
Relationship footprint and helps individuals professionals take advantage of the firm's overall relationship strategically if they're pursuing new deals and helping them to understand areas, where they can do better client development and better client care actually.
So we're excited about that one and we're seeing some good interest across the market both in new and existing clients.
Thank you very much.
Thanks.
Thank you. Our next question comes from Tom Roderick with Stifel. You May proceed with your question.
Yes, Great Hi, John Hi, Steve Thanks for taking my questions. Congrats on the nice results. So I'm looking at a few of these metrics and I think it was a I think it might've been Brian earlier to highlight the net revenue retention above the traditional range I'm looking at the customers with over $100000 a bump it up another 26 in it it's a highlighted.
Point that.
Not only your customers getting bigger it seems like they're buying more solutions, which brings me back to the point of the question customer success.
Youre clearly doing doing more with the customers you have in getting new customers onboard in a successful manner, what I'd love to hear is how your partner community is helping you do that from from the practices. They are building around you and then from your own perspective of hiring professional services and implementation teams talk a little bit about that investment.
That you've made and how thats coming off.
Yes, Thank you Tom so the <unk>.
Partner.
Ecosystem.
Has cultivated over the years has grown up with US a lot of people, who may have history, working with <unk> itself or working with many of our client firms and struck out on their own to build some of these partner firms have been very successful and important part of our strategy, we have a mixed strategy.
We have our own client services and client success teams that are engaged with our.
Clients and make sure that they are successful with our platform and we also work with a partner ecosystem and our clients have choice and options about how they approach that.
We.
Have done a lot over the past two years or three years as we've grown to invest in our client success organization. There is always more to do but I think we've got a very strong reputation and strong success record across the board as we've grown the business in a lot of our growth is coming from existing.
Clients, who are happy and also from the referrals that are existing clients are providing and then because we have a strong ecosystem of partners who are working with us there also.
Successfully supporting our clients and also referring us in to clients that are interested in improving their environment. So there's a lot of opportunity for us for internal hiring you asked about I've been very excited about the reaction that the.
The.
Potential recruit recruiting population.
Has had to us going public we have raised our visibility and a lot of people who have incredible skills and knowledge about this market in particular have reached out to US and said you guys are a public company or you're growing quickly we want to be part of the team and something about the IPO has helped us.
To start to bring on some very significant talent that I think is a really good sign for reinforcing the company's deep industry expertise that I think is one of the pillars that sets us apart it's true at the technology level, but it's also very true at the team level and so from our partners from our clients from the ecosystem itself.
Bringing in a lot of that expertise to help us continue to differentiate going forward I think it bodes well for us fans.
Fantastic great to hear on that front.
Second question for me I, just wanted to touch on international and a little bit more detail I know U K has always been a very strong market for you I think APAC in particular has been kind of a rising in emerging sector.
As the world opens up some pockets more slowly than others.
Love to hear how the reopening is going for you in those regions and how the the end demand is looking in those regions is reopening has been a little slower in parts of Europe for instance, but APAC demand across software seemingly has been pretty strong lately. So I'd love to hear maybe the dichotomy across those two regions, what you're seeing there.
Yes, so our international.
Growth has been in line with our overall growth we're excited about that's about 30% 31%.
We've seen.
To your question good demand from both Europe, and Asia Pacific also parts of the Middle East, we are winning business in the middle East as well as in various parts of Europe.
In Singapore in Japan.
Other parts of Asia Pacific.
So I don't know that I would point to.
The work from home or the opening up issue as something that has had a huge negative or positive impact on us. So I think we've gotten a lot of.
Business because firms have been looking to better enable themselves to work in a more hybrid.
Format.
They've learned the lessons from from Covid, and how to enable people and we've actually done well through the entire work from home period, we're starting to give folks the option to work from the office and open up ourselves.
But the but the demand side, we haven't really seen.
A lot of effect of that negatively.
In any particular area I would say.
Great detail. Thank you nice job I appreciate it.
Thank you.
Thank you and our last question comes from Jackson Ader with Jpmorgan. You May proceed with your question.
Great. Thanks, guys. Thanks for taking my questions.
If we think about some of the catalysts for people to actually pull.
Pull the trigger.
And make the jump to.
To your platform does it vary depending on either the end market or the size of the customer for reasons people are ready to sweat chocolate, they're probably a horizontal platform.
So the question is are there catalysts based on.
The catalyst vary depending on the size or the end market for people correct choice.
So I think.
On the size front.
There is an interesting far end of the sites, where we're actually doing some good business with people who are starting new firms who have been using our platform now if some of the larger organizations and know that it's the right answer for that style of firm. So we have a <unk>.
Small growing part of our business that is new firms where people just say this is the system that we need to get our firm off the ground. We're excited about that because those firms grow and raising funds are starting to services.
It's a sign of the brand and the reputation that we have and the trust that people have in the platform. So that's sort of at one end.
As a catalyst that's not so much they're switching off of something as they are starting with it at the other end the larger organizations I've actually been.
Excited to see some of the firms at the very highest end of the market. The most prestigious firms who a year ago had a very <unk>.
Strict policy to say, we're still going to be on premises for a long time, we have these questions about the cloud and just through Covid in the past 12 months some of the top firms in the World has made 180 degree switch and said that they're going to cloud first cloud only.
Usable period of time so.
There have been serious catalysts I think from the Covid period that have converted some of the last pulled out so at the very top of the market. So I'm optimistic that this digital transformation trend the cloud trend and the capabilities of platforms like ours to really meet the security and compliance and publish out.
He needs when the firm's neither are there and they're ready to go now and at the same logic that drove the cloud transformation through some of the other industry. If it didn't have some of these specialized impediments are melting away and the firms are actually making the switch so that's size and as far as market goes.
You know.
I don't think it's <unk>.
With serious the most conservative firms, where folks like the law firms, who had a lot of responsibility around compliance a lot of rules from the banks themselves about what how they had to manage their client information.
And that has really changed I mean, theres been a lot more interest.
In the past two years or three years with firms, who said you know what.
This technology capabilities are there we're ready to make the switch. So I think some of the industries are cloud first already and then that's probably the one that has.
Historically, you had a little bit of ways to go but I think it's it's flipping over now.
That is great. Thank you for the color Steve.
Steve a quick follow up on professional services.
When we look at either both revenue and maybe cost of professional services in that negative gross margin.
How should we think about that level as we maybe move through the rest of the year.
Well I think services is back this is a normalized quarter last two quarters year over year was kind of a COVID-19 quarter. So.
That's a good part of the.
The difference in those numbers and this business will grow going forward services. I think look we are we are growing into an infrastructure that we built for our services business is probably close to twice the size. We have so we feel we're on track pretty well as we grow into that and should.
It should generate some better margins over time.
It does continue to be part of our supportive of our SaaS software business truly the services efforts. So that's part of the equation for us, but we're happy with where we are and expect to get better over time here.
Alright, alright, thanks for squeezing me in guys.
Yes.
Thanks, Jeff Thank you and I'm not showing any further questions. At this time I would now like to turn the call back over to John Hall for any closing remarks.
Okay, well thanks, everyone. We appreciate your attention and questions I'd like to thank the <unk> team for a great quarter and all the work that continues to go into supporting all of our clients.
We have a great Q1 behind us to kick off the year and we're excited about the continued momentum.
Thank you all for your time today, and we're looking forward to talking to you next quarter.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.