Q2 2025 Intapp Inc Earnings Call
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Speaker Change: Good day and thank you for standing by. Welcome to the NTAP Fiscal Second Quarter 2025 webcast. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded.
Speaker Change: After the speaker's presentation, there will be a question and answer session. To ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again.
Speaker Change: I would now like to hand the conference over to your speaker today, David Trone, Senior Vice President, Investor Relations.
Speaker Change: Thank you. Welcome to NTAP's fiscal second quarter 2025 financial results.
Speaker Change: On the call with me today are John Hall, Chairman and CEO of InTap, and David Morton, Chief Financial Officer.
Speaker Change: During the course of this conference call, we may make forward-looking statements regarding trends, strategies, and the anticipated performance of our business, including guidance provided for our fiscal third quarter and full year 2025.
Speaker Change: These forward-looking statements are based on management's current views and expectations.
Speaker Change: entail certain assumptions made as of today's date and are subject to various risks and uncertainties, including those described in our SEC filings and other publicly available documents, that are difficult to predict and could cause actual results to differ materially from those expressed or implied by such forward-looking statements.
Speaker Change: In TAP, this claims any obligation to update or revise any forward-looking statements except as required by law.
Speaker Change: Further on today's call, we will also discuss certain ONGAP metrics that we believe aid in the understanding of our financial results.
Speaker Change: including non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP diluted net income per share, and free cash flow.
and Total and Current Remaining Performance Obligations.
Speaker Change: Our GAAP financial results, along with reconciliations of GAAP to non-GAAP financial measures, can be found in today's earnings release and its supplemental financial tables.
Speaker Change: which is available on our website and as an exhibit to the Form 8-K furnished with the SEC prior to this call, or a supplemental financial presentation which is available on our website.
With that, I'll hand the conversation over to John.
Thank you, David. Good afternoon. Everyone.
John Hall: Thank you for joining us today as we share the results of our fiscal second quarter.
John Hall: I'm happy to share that once again, we've achieved strong quarterly results.
John Hall: supported by cloud ARR, new AI capabilities, new partnerships, new logos, expanded client accounts, and cloud migrations around the world.
I'll share details on these growth drivers on this call.
John Hall: In Q2, our cloud ARR grew to $331 million, up 29% year-over-year.
John Hall: Cloud now represents 76% of our total ARR of $437 million.
John Hall: In the quarter, we earned SAS revenue of $80 million, up 27% year-over-year, and total revenue of $121 million, up 17% year-over-year.
John Hall: Now I'd like to share some highlights from our fiscal second quarter.
John Hall: I'll start with our continued success in executing on our vertical AI roadmap.
John Hall: This quarter, we introduced a new AI-powered search feature within InTapAssist for DeoCloud, applying even more generative AI to the daily work of professionals.
John Hall: Using natural language query, professionals are now more easily able to bring together multiple types of deal cloud information.
to answer more sophisticated questions.
John Hall: This ability to discover and analyze client and deal intelligence across complex data sets is helping professionals apply broader firm wide intelligence to their work.
We also deepened DealCloud's integration with Microsoft Outlook.
John Hall: Helping professionals perform work even more seamlessly with DealCloud directly from their Outlook inboxes.
without needing to continually switch back and forth.
John Hall: We also created a new integration, which allows users to leverage DL Cloud's Relationship Intelligence functionality within Google Calendar and Gmail.
John Hall: Eliminating the need for manual data entry and app switching for that segment of our market.
John Hall: Finally, we expanded INTAP Walls for Copilot to include comprehensive risk assessment data.
John Hall: In addition to giving firms control over the data that Copilot is authorized to access and surface for each professional,
The solution now also identifies and alerts compliance teams.
John Hall: to previously unknown potential oversharing and security risks among the thousands of documents stored across the firm in OneDrive.
John Hall: It's another way that we're enabling the secure adoption of AI for our clients and continually strengthening our partnership with Microsoft.
John Hall: Speaking of partnerships, our alliances and partner ecosystem continues to be an important cornerstone of our company's strategy and our InTap Intelligent Cloud.
John Hall: Since launching our updated and expanded partner program at the beginning of last fiscal year, we've seen strong growth in the number of our partnerships.
John Hall: Which is now 20% higher than a year ago with 137 data technology and services partners.
John Hall: We formed several notable new integration partnerships last quarter, including PROMS.
a commercial real estate data management platform, and Pass-Thru.
a SaaS-based investor onboarding platform.
John Hall: Both of these new partners integrate within Tapdeal Cloud to add additional capabilities for fund managers and investors in real estate and private capital.
John Hall: Meanwhile, our Microsoft partnership continues to be a growth lever and differentiator for our business.
John Hall: In Q2, we helped several of our clients purchase InTap solutions through the Azure Marketplace.
For example, one of the world's largest investment banks,
John Hall: significantly expanded their adoption of InTap DealCloud as part of their contract renewal this quarter.
John Hall: The availability of InTap solutions on the Azure Marketplace allowed the client to use some of their pre-committed Microsoft spend to acquire our technology.
John Hall: This deal is a great example of the way our Microsoft partnership adds value for our clients.
John Hall: I'll turn now to Q2Wins, both new clients and expansions, as well as cloud migrations.
John Hall: First, I'm pleased to share that we're continuing to grow through the addition of new clients.
John Hall: In accounting and consulting, new firms are adopting solutions across our product offerings.
For example,
John Hall: Alvarez and Marcel, a global consulting firm, selected InTap DealCloud to help its expanding corporate finance practice group manage origination, sales pipeline, and deal workflows.
John Hall: Next, Armanino, a top 20 accounting firm in the U.S., chose Intact Conflicts as its centralized solution to more quickly and accurately identify and resolve conflicts of interest.
We're seeing a similar trend in the legal industry.
John Hall: With new law firm clients also choosing InTap solutions across our solution set.
I'll share a few highlights.
Got it.
John Hall: Shows INTAP compliance solutions to support and enhance its robust new business intake processes.
John Hall: By leveraging this advanced technology, Skadden aims to maintain its leading position in delivering a seamless and efficient experience to clients during the intake process.
John Hall: while also establishing more efficient workflows to enhance partner productivity and risk management.
John Hall: Next, Colin Biggers and Paisley chose cloud-based intact time to modernize its timekeeping practices enable more efficient work processes for its professionals.
Thank you.
Additionally, new financial services firms.
continued to move away from their legacy horizontal CRM solutions
John Hall: and on to intact deal cloud to centralize information, improve utilization, and reduce manual processes.
John Hall: Wednesday's quarter includes the investment banking arm of one of the largest banks in America.
Asset management firm Cartesia
and a growing European private equity firm.
John Hall: We see this trend as a significant growth area for InTap.
This quarter, cross-selling and up-selling success in our existing accounts.
continue to drive strong cloud net revenue retention.
I'll share some notable examples.
John Hall: Law firms continue to add DealCloud to their InTap solution stack, including three clients in the AmLaw 100.
John Hall: Troutman Pepper-Locke chose DealCloud as its single consolidated system for its ERM, CRM, event management, and business development needs.
John Hall: Next, a Global 50 law firm moved off its legacy CRM and onto DealCloud with InTap Assist for improved CRM access functionality and AI capabilities.
John Hall: Next, Blank Rome, longtime users of InTap time and compliance solutions, added DealCloud and Billstream as part of a strategic initiative to modernize its marketing, business development, and pre-billing technology.
John Hall: The firm is also migrating its existing Intap portfolio to the cloud to enhance data integration and maximize the synergies across the Intap platform.
Large accounting and consulting firms also continue to add solutions.
I'll share a few.
John Hall: APRIO added intact conflicts to streamline operations, reduce manual reporting, and improve tracking of gifts and entertainment compliance.
Next, one of the big three consulting firms.
John Hall: replaced its legacy compliance software with Intap Employee Compliance to increase automation and scalability.
John Hall: Next, a large global consulting firm added InTap Walls and InTap Collaboration to facilitate the compliant use of Microsoft Teams and transform the firm's Microsoft 365 platform into a compliant engagement-centric collaboration solution.
John Hall: Additionally, a Big Four client firm expanded Intep DealCloud further, now adding professionals in its Ireland firm to enable more efficient deal-making and global collaboration.
John Hall: And we're seeing success with legal clients choosing to migrate their InTap solutions to the cloud this quarter.
I'll share two more notable examples.
John Hall: An AMLAW 50 firm is migrating InTap time to the cloud, as well as adding InTap DealCloud to centralize lawyer and key client plans.
John Hall: And finally, Benesch is migrating both intact time and intact build stream to the cloud to further streamline processes.
John Hall: In conclusion, we're proud of our strong second quarter performance and we continue to be optimistic about the growth opportunities.
John Hall: As our Q2 performance has shown, we are growing by adding new capabilities and increasing our global enterprise go-to-market reach.
John Hall: We see continued opportunity both to add new clients across a broad TAM.
John Hall: and to deliver greater value by expanding within our existing client base.
John Hall: We're serving a durable end market with our subscription revenue model.
industry-specific cloud platform, and applied AI and compliance capabilities.
John Hall: We have a great growth opportunity to drive AI, cloud adoption, and modernization across all the industries we serve.
John Hall: As always, I'd like to thank our clients, our partners, our investors, our board, and our global Intap team for their teamwork and dedication. Thank you all very much.
Okay, David, over to you.
David: Thanks John and thank you everyone for joining us today. I'm pleased to report a strong second quarter performance driven by robust cloud adoption across NTAP's vertical specific offerings and expanding enterprise client base and continued improvements in operational efficiency.
David: As we enter the second half of fiscal 2025, we are well positioned to capitalize on multiple growth levers and drive sustained profitability at scale.
Let's begin with the fiscal Q2 results.
David: SAS revenue was $80 million, up 27% year-over-year, driven by new client acquisitions, contract expansions, and the migration of on-premise products to the cloud. As of December 31st, 92% of our clients had adopted at least one cloud module.
David: License revenue, which represents the combined on-prem revenue, was $28 million in fiscal Q2, approximately flat year-over-year.
David: While price increases and contract expansions contributed positively, these were offset by client migrations to the cloud reflecting the ongoing transition to our SaaS offerings.
David: Professional services revenue totaled $13.2 million, up 4% year-over-year. Our strategic decision to outsource more activities to partners has allowed us to place greater emphasis on enhancing client satisfaction and driving co-sell pipeline generation, supporting our long-term growth objectives.
David: Total revenue was $121.2 million, up 17% year-over-year, driven primarily by sales of our cloud solution.
David: Revenue from our international operations accounted for almost a third of our total revenue this quarter and continues to provide growth opportunities. International revenue grew 24% year-over-year in Q2.
David: As highlighted in recent quarters, we continue to invest in and expand our alliances and partner ecosystem around NTAP.
David: Our network now includes 137 data, technology, and service partners, reflecting our significant growth.
David: Notably, our co-sell partners, which grew 30% year-over-year in Q2, are playing an increasingly pivotal role in client acquisition and retention through their implementation and expertise in value-added integrations.
David: Our Enhanced Partner Program bolsters capabilities in deal generation, technology, data, and implementation, and we remain optimistic about their ongoing impact on our growth strategy.
David: As we continue to emphasize our product-led growth strategy, our new vertical SaaS AI offerings include InTap Assist, now featuring our TermSkew, and InTap Walls for Copilot. Continue to make contributions in a quarter.
David: While we are still in the early stages of product rollout, pipeline development, and client provisioning, we remain excited about the growth prospects ahead.
David: Q2 non-gap gross margin was 76.7% up from 73.4% in the prior year period reflecting progress toward break-even professional services gross margins and optimizing the relative top-line contribution from that business.
David: Non-GAAP operating expenses total $74.1 million, compared to $68.6 million in the prior year period, reflecting our continued investment and our product-led growth.
David: As we continue to focus on our operational efficiency, non-GAAP operating income was $18.99, as compared to $7.6 million in the prior year period.
David: Non-GAAP diluted EPS was $0.21 in the second quarter of fiscal 2025 as compared to $0.11 in the prior year period.
David: Pre-cash flow, which is defined as our cash flow from operations, less capital expenditures, was $25.2 million for the second quarter, or 21% of total revenue.
David: We exited the quarter with 285.6 million of cash and cash equivalents.
David: Turning to our key metrics, cloud ARR was up 29% year-over-year, while total ARR was up 20% year-over-year.
Total remaining performance obligations were $615.3 million, up 37% year-over-year.
David: Our go-to-market sales strategy remains focused on landing new logos, and we've ended the quarter with over 2,650 clients. Of these, 728 had an annual recurring revenue of at least $100,000, up from $649,000 in the previous year.
David: Our 119% cloud net revenue retention rate in Q2 highlights our ability to retain and steadily grow business with existing cloud clients.
David: Now turning to our outlook, for the third quarter of fiscal 25, we expect fast revenue of between $84 and $85 million.
David: As these are newly provided revenue outlet metrics, we'll also be providing the implied year-over-year growth outlook of between 27 and 28 percent.
Total revenue in the range of $128.3 and $129.39.
David: non-GAAP operating income in the range of $18.5 and $19.5 million.
David: And non-GAAP EPS results of $0.21 to $0.23 using a diluted share count weighted for the quarter of approximately 84 million common shares outstanding.
David: For the full fiscal 25, we expect SAS revenue of between $328.8 and $332.8 million.
David: And as these are newly provided revenue outlook metrics, we're also providing the implied year-over-year growth outlook of between 27 and 28 percent.
Total revenue in the range of $498.5 and $502.5 million.
David: We also expect non-GAAP offering income in the range of $70.2 and $74.2 million.
David: and non-GAAP EPS in the range of 83 cents to 87 cents using a diluted share count weighted for the fiscal year 25 of approximately 84 million common shares outstanding.
David: Thank you, and I'll now turn the call back to the operator.
David: Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. One moment for questions.
Speaker Change: Our first question comes from Alexei Gogolov with JP Morgan. You may proceed.
Hello, everyone, and congratulations on great results.
Speaker Change: John, I was wondering if there's been any change to your guidance philosophy. Do you feel that you now have more visibility and can guide more accurately because it seems like in the past there were.
more significant beef.
Speaker Change: And in terms of the demand environment, I seem to recall that on the last earnings call,
Speaker Change: You suggested that demand is very strong and the pipeline is the strongest you've seen in history Is that still the case and if you could provide maybe some more color on top of you what you said during your prepared remarks?
Speaker Change: Sure. Thanks, Alexi. I'll take the beginning and then, Dave, you can address some of the guidance questions. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay.
The quarter was very strong.
Dave: The pipeline is strong, and we actually brought in quite a few large deals.
Dave: We did go through the organizational change that we talked about in the last quarter. And what we saw was a little bit of a back-end loading of deals. So we had a lot of deals in December this quarter.
Dave: But overall, demand is very good. The AI is being taken up very well. We talked about some new
Dave: capabilities with InTapAssist that have been adopted rapidly by the client base.
The Deal Cloud with Outlook integration is very strong.
Dave: And we announced some Walls for Co-Pilot capabilities to extend to OneDrive and some other areas, which were all very well received. So I'm optimistic about where we stand.
David, do you want to talk about the philosophy?
David: Yeah, thanks, John. Yeah, I would just echo the same thing and then with respect to the guide itself.
David: We continue to provide a very prudent guide that we have a lot of visibility in. We came into the quarter with a lot of pipe to convert. Very impressed with the teams of being able to enable that and convert that.
We also have to remember that, specifically with SAS,
David: At times, if it's so back-end loaded, the revenue yield on that is slim to none.
David: And in many cases, you may be only getting a day or two of revenue in that instance.
David: or there could have been some deals that were signed that actually have a 1-1 of 25 start date.
David: And you kind of see that when you start triangulating the different metrics as a public SaaS company.
You can step back and look at our RPOs.
David: our current RPOs, our billings, our deferred revenue, on and on and on, and it all correlates to the same attribute of having a very strong quarter that the team executed very well against.
Speaker Change: Thank you, David. And a quick follow-up on your gross margins. Seems like another very strong quarter, improving sequentially.
Speaker Change: It appears that service gross margins were improving as well. I was wondering if you have any midterm trajectory that you can share with us because you now have three quarters sequentially of...
profitable service gross margins.
Where do you see them in the midfield?
But we haven't updated our formal
Speaker Change: metrics on that semi from to just get to break even. I will acknowledge the team has been over performing on that and has yielded profitability to below the line.
Speaker Change: And so, again, our first and foremost has always been about serving our clients.
Speaker Change: More from a customer satisfaction versus a top-line growth or even profitability center, but it has it how it's been lined up and the economics applied. We've gotten some leverage from that. So very, very pleased.
Thank you very much.
Thank you.
Speaker Change: Our next question comes from Parker Lane with Stifel. You may proceed.
Speaker Change: Yeah, guys, thanks for taking the question. John, you know, you've been working on the enterprise account go-to-market motion over the last couple years, and that was a big emphasis on the last quarter's call.
Speaker Change: Just wondering if there's any update on how those additional resources are assisting there and whether or not there's been any incremental hiring or it's mostly been sort of shifting folks around and getting them really centered in on those large deal opportunities.
Speaker Change: Thanks Parker. I'm very pleased with the way that the group went through that.
update to the
Speaker Change: organization, we wanted to emphasize more coverage in the large enterprise accounts because there's so much TAM there for us to continue to go pursue both landing new accounts and expanding within existing clients.
among those firms.
Speaker Change: And we did successfully make that change in Q1. In Q2, there were some...
Speaker Change: account transitions that were still going on, but by the middle of the quarter everything was done and we saw some very good results.
from the team there.
In December, people working together. We have continued to
Speaker Change: Invest in the sales and marketing organization. We have a lot of growth ahead of us. And so we're going to be conscious about doing that. But we're also seeing very good results from the folks that we have on the field. And I'm very grateful to the hard work that people Put in and some of the really significant successes that we had there in December. So I'm very proud of the group.
Speaker Change: Thanks John. David, I think it was last year at the Analyst Day you talked about three to five hundred basis points of margin expansion being sort of the guiding principle here. Looks like you're set to run a little above that even at the midpoint of this guide. Can you just talk about some of the puts and takes there that have you delivering ahead of expectations this year and what we should expect going forward?
Speaker Change: function a lot sooner than had originally intended, and then obviously with services coming on top of that with the break-in event, a slight positive has yielded.
Speaker Change: that opportunity set where we will continue to invest. And, you know, just a reminder to everybody, we continue to be a product-led growth organization. And so, you know, we will continue to invest in our product and engineering, as well as our go-to-market functions, where we see opportunities.
Speaker Change: and since we see a lot of opportunities, we'll continue to drop X amount of dollars in those set of functions as we continue to scale towards that billion dollars in that long-term model that we articulated back on February 22nd when it was.
Thanks, David. Appreciate the color.
Thank you.
Speaker Change: Our next question comes from Koji Aikido with Bank of America. You may proceed.
Speaker Change: Hey, this is Natalie Howe. I'm for Cogia. Thanks for taking my question. So it's good to hear that there's healthy traction in your partnerships, especially with Microsoft. So I wanted to ask, how do you see those partnerships evolving from here? And how does your AI strategy come into play? I know you mentioned that there were some AI products that are also on the marketplace there. So will it potentially accelerate momentum in that?
Thanks, Natalie.
Speaker Change: Yes, the partners ecosystem, the alliances ecosystem that we have been investing to develop over the past few years is a core part of the strategy. So much of our
Speaker Change: opportunity in the market can be positively influenced by great relationships with many of the expertise partners that we have in each of the verticals.
Speaker Change: Microsoft obviously is the largest relationship that we have and extremely strategic to us. We've been doing a lot of work with them on AI. In this market, in particular, how do we apply all of the
technology that's increasingly available.
Speaker Change: to specific business problems in these firms. And so the partner system is helping bring us opportunities. It's also helping us deploy our software with particular solutions as we roll them out. It could be in tap assist.
Speaker Change: for Deal Cloud or for Terms or Walls for Copilot or additional in-tap assist capabilities that we have coming up.
Speaker Change: And Microsoft is actually working directly with us in their engineering team because of the closeness of the relationship and the importance of this market to make sure that we can bring not only co-pilot but all of our technology.
Speaker Change: into those firms in very specific applied applications that create value for the clients. And we've had a very positive reaction from the CIOs and the users.
Speaker Change: and the executives in our client firms to the strength of our relationship. We will co-sell with them, co-demonstrate with them and then deploy together and it gives the clients a lot of confidence.
Speaker Change: that we have an enterprise grade solution that is really unavailable anywhere else in the marketplace. So we're very excited about that ecosystem strategy.
Got it, thank you, appreciate that.
Thank you.
Speaker Change: Our next question comes from Terry Tillman with Truist Securities. He may proceed.
Speaker Change: kind of the strongest quarter. And related to that first question, is there anything kind of baked in on some of your larger kind of on-prem customers maybe converting by the fourth quarter and then a follow-up?
Hey Terry, it's Dave. Let me take the
Speaker Change: Let me take the initial and then John can add some comments there. Yeah, we are seeing a seasonality form specifically in and around December and June quarters with our respective clients. And so, you know, coming off of.
Speaker Change: A year ago, we feel very successful of where we've been able to do. And even if you look at our first half,
Speaker Change: This fiscal year, we are actually ahead of our first half last fiscal year. And so even though we didn't get off to the best start for this fiscal year, we feel that we've overcome that and then some and we'll continue to
Speaker Change: see what portends for us in the in the back half of our fiscal 2025. You know, with respect
Speaker Change: to the on-prem to cloud transition. As I've indicated previously, we had a couple in flight this past quarter that we started the initiation. That work will time out in the next six to nine months, and then you'll see the full ratability.
Speaker Change: up in the cloud ARR as well as in the SAS revenue line. And so we'll continue to keep you updated as we continue to progress, but more and more of those deals and transitions are happening that will impact favorably to the back half of fiscal 2025.
Speaker Change: That's great. And then maybe the follow-up question. Thank you for that, Dave. John, you know, you talked about a variety of deal cloud wins in legal, and then, you know, obviously some customers moving to cloud. I think you mentioned a time example, and I'm totally short-shrifting in terms of all the other stuff you talked about. But what I'm curious about is sometimes in the past I'll have investors say, you know, is the legal part of the business the slower growth, kind of more abundant part of their business? I'm curious if there's an inflection point or kind of an improving growth trend line in the legal side of your business, whether it's because either shift to cloud, AI.
Speaker Change: DealCloud, etc. Just maybe you could share a little bit more on the vitality on growth on the legal side. Thank you.
Speaker Change: Thank you for picking up on that, Terry. It was a very strong quarter across the board.
Speaker Change: but we wanted to highlight some really exciting trends in legal and accounting consulting for just this reason, because there have been questions about this.
Speaker Change: The underlying industries that we are serving are doing very well.
Speaker Change: a few years per tense for the activity that will drive their business. And they're looking to invest in technology to support their growth as firms. And we're perfectly positioned.
Speaker Change: to bring modern cloud AI to these firms in an industry-specific way. And we've established now a reputation over many years as the trusted partner.
Speaker Change: of them and of important players like Microsoft to be able to bring the modern systems to them in an industry-specific solution. So I do think there are important things happening in many of these end markets because of the uptick in optimism more generally.
And I think that plays through for us.
Thank you.
Thank you.
Speaker Change: Our next question comes from Sakae Tilia with Barclays. He may proceed.
Okay, great. Hey guys, thanks for taking my questions here.
Speaker Change: John maybe for you just maybe hitting on that on that that point around around conversions
Speaker Change: You know, this was one of the bigger sort of declines that we've seen in on-premise AR.
Speaker Change: which is great, right? Because it sounds like there's healthy conversion activity, or there was healthy conversion activity here in Q2. Can you just maybe talk about any changes that InTap is making to drive that? And how you think about sort of the journey for that on-premise space going forward.
Saket: Thanks, Saket. Yes, obviously this is a smaller and smaller part of our business as we continue to sell only cloud and grow the cloud business, but moving these important clients to the cloud is an important part of our operating plan.
Saket: We talked in February at Investor Day about our intention to put an official program in place.
Saket: This fiscal year and we've done that we have an executive leading this with a group that's focused on helping the law firms to make the migration
You know.
Saket: They want to go. One of the things that we try to emphasize as well is how many of our clients have cloud already. So that number was in the 92 in this quarter, but we're excited about how receptive they are. It's more of a practical program. How do they prioritize this project among their various IT projects to move? And the more of...
Saket: various activities inside their own firm, the more attractive it is on the business side for them to move in addition to just the IT project of consolidation. So I think that's really helping us and the Microsoft partnership is part of that too because now people can.
Saket: use the Mac agreements with Microsoft to move. And many of our firms, an increasing number of our firms have those. So it's all part of a general trend that we're optimistic is gonna help us move these people and help them become even more successful with the more modern solution that we have in the cloud.
Saket: Got it. Got it. That makes sense. Dave, maybe for my follow-up for you on that same topic.
Dave: Can you just talk a little bit about just the high-level economics of a conversion? I mean, should we think about, you know, a conversion sort of being one-for-one from on-premise to SaaS? Or is there additional value that you're able to deliver in those conversions?
Dave: Yes, I think we've started commenting over the last 90 days that there is additional value, either through contract compliance,
Thank you.
Dave: either through upsell and then obviously through the opportunity of cross-sell. And what we've experienced thus far is a nominal 20% upside that we've been seeing at this point in time.
Very helpful. Thanks, guys.
Thank you.
Speaker Change: Our next question comes from Steve Enders with Citi. You may proceed.
Steve Enders: Okay, great. Thanks for taking the questions here. I guess to start, I want to follow up on some of the prior commentary on the go-to-market changes and the impact that's having
Steve Enders: I guess, are we at this point kind of like broadly through the changes in the account structure? And I guess secondarily, is there maybe any, you know, any flow through or still kind of like any catch up spend that, you know, could potentially come in here in the next couple of quarters as some of those changes kind of still come into effect?
Thanks, Steve. No, we are through.
Steve Enders: It took us a quarter, a quarter and a half, and the team did a great job of making that change, and we saw some really positive results from the accounts that folks were working with in December.
Steve Enders: We are going to continue to invest in sales and marketing generally, and David can talk about that, but for this particular transformation, we're done.
Okay, got it. Makes sense.
David: Yeah, sorry Steve. I was just going to add on. We, as normal course of business, we're going to continue to...
David: invest in our sales and marketing, you know, obviously through whether it be some nominal increase marketing or PyGen to adding more feet on the ground and ensuring productivity as we start scaling and thinking about FY26.
Okay, perfect. That's helpful context.
No, we had a very straightforward.
David: quarter, if you will. The FX impact for NTAP is very immaterial. Most of our
David: nominal contracts are done in U.S. dollar. We do have some in various local currencies, but again, it's immaterial. You know, with respect to getting into
David: A broader theme would just be thinking about December being a strong quarter, you're starting to see some evolving seasonality, and then as I kind of intimated at the very beginning,
David: To Alex's question is, you know, we had a broad-based success across a lot of our KPIs that are more forward-looking just outside of just pure SAS revenue.
so when you start putting in contacts.
the Deferred Revenue
calculated billings, the current RPO.
David: You know, there was some strength there that would also indicate, you know, we had some deals that were signed not only back half of this of this calendar year in this quarter, but also a couple that were signed to go one one of twenty five.
Speaker Change: Okay, perfect. No, I appreciate the extra context there. So thanks for taking the questions and I'll turn it back into the queue.
Thank you.
All right. Thank you.
Speaker Change: Dave or John, on the strong cloud NRR expansion this quarter, any change between the buckets of cross-sell, up-sell, pricing, retention in second quarter or year-to-date? And then, John, specifically on cross-sell, you added that slide at the Investor Day showing how underpenetrated you were on deal cloud and some of those services and legal base. Really nice quarter this quarter on that. How big of an opportunity is that deal cloud cross-sell within kind of that late-stage pipeline?
Speaker Change: Well, Alex, I'll answer the first part. There was no material change from.
Speaker Change: kind of how we view the cross-sell, up-sell opportunities that make up that overall cohort. I'll tell you, you know, we like the success across all. You know, churn continues to be very low for us and absolute GRR dollars, if you will, so that motion, that enterprise motion
John Hall: continues to work very very well for us. And then John.
Thank you. Thank you.
Thank you.
Yeah, thanks, Alex.
Message at Investor Day with Absolutely.
John Hall: The scale of cross-sell upsell opportunity that we have across all of our markets. We have a land and expand model
as we've talked about.
John Hall: for legal specifically and DeoCloud in legal or DeoCloud in professional services more broadly. It's a huge opportunity. The firms there have built a lot of in-house software or they have tried to use the horizontal.
John Hall: Classic CRM systems for a business model that is entirely different.
John Hall: than a sales force selling widgets from a price list, which is an excellent design if that's your business model, but for these professionals who sell their expertise and advisory services and each relationship is unique and each deal that they do, each engagement that they do is custom negotiated with a custom engagement letter and what they're going to deliver is unique.
John Hall: There's a totally different model that you need at the data level, at the process level, at the user perspective.
John Hall: Go to market system that supports growth for these firms, which is what they're facing now now with an AI
John Hall: set of capabilities that should enable these professionals to network among themselves and bring the expertise of their partners the full weight of the firm's
John Hall: knowledge and expertise to each engagement. So each client gets the full benefit of the firm's collective knowledge. That is not what a classic.
John Hall: Horizontal CRM is designed to do, and it is exactly what DealCloud is designed to do. So we're very excited. It took us a little while to get the early adopters and get the references and get the AI in and get everybody understanding what the transformation opportunity was, but it's really starting to pick up. And so we were very excited to be able to list those names on the call.
Speaker Change: Okay, great color. And then just a follow up to kind of Steve's question before, but on the improved bookings exiting December.
Speaker Change: Is the comment you were trying to make that you're seeing productivity back at levels before the change is in place, or is there still some expectation that you can get productivity even higher from some of the changes around territories and more enterprise reps broadly as we kind of think about third quarter and fourth quarter? Thanks.
I think...
Speaker Change: One point is that we're through the transformation, so we had that conversation. Another is that we did very well after that played through and actually paid off, so we're excited about that. I think we're setting up here.
for strong performance in 25 and 26 because
Speaker Change: We have such opportunity that we just talked about in the large accounts. We wanted to make sure that we were covering those. So productivity is good. Can we do more? I think as we continue to grow into those large accounts, the size of deals that you can do are very significant.
Speaker Change: And so that by itself should help us with productivity. I will say I'm very proud of the team's performance. They really.
Speaker Change: did a ton of work here to bring in a very large pipeline and land a bunch of deals this quarter that we were excited to see. At the same time, there's a very good outlook here. So we've got a lot of optimism about where we're headed.
Okay, great. Thank you both.
Thank you.
Speaker Change: In terms of linearity per quarter, Dave, do you want to talk about the quarters and what
How are we describing them?
Dave: Yeah, so if it's, Brian, if it's within the quarter, yeah, I mean, we're off to a good start.
And so...
Dave: You know, we're very confident in the prudent guide that we've given.
Thank you.
Dave: level, no, we shouldn't be as back-end loaded in our March quarter versus where we were at last December.
Dave: You know, as we as we land some of the large accounts.
that will drag up your average calculation.
quarters that the larger accounts are.
Dave: harder to predict which quarter they're going to land in. So there's some inherent lumpiness. And as we shift the business more and more towards the large TAM opportunity in the large end of the market, or at least proportionally so, you're going to see
Dave: some variability from quarter to quarter in large deals landing. But yes, on average, if you step back and look over a year or so or more, you should see numbers tick up, because that's where we're investing to put more
Dave: people and deals and that's where the TAM is really significant.
Thank you.
Speaker Change: Last question for me, John, maybe just very high level here on just what you're what you're seeing from hearing from customers in terms of the macro outlook is it your sense that you know people are more optimistic and
Speaker Change: Does the macro feel better to you today than it did last time that we spoke three months ago? Thanks again for taking my questions.
Thanks, Brian.
Well, I think the underlying...
Speaker Change: trend for us is still digitalization for this underserved industry. These farms historically have not been successful with the classic horizontal systems, and yet they have the same need
Speaker Change: for enterprise software and cloud solutions and AI, as all the other businesses in the world. And they see it out there and they want it for themselves versus building in-house, but they needed somebody built for them. So I think the general growth trend for us.
is that we're selling into a digitalizing.
but the people there are extremely.
highly compensated, highly valuable workers who are doing very important
Speaker Change: deal advisory legal work for the large corporate clients around the world, and they
Speaker Change: benefit significantly when their work is better supported, better automated through technology.
Speaker Change: That being said, there are some secular trends in each of the...
Speaker Change: and Mark. It's that have supported us private capital in particular being just a growth industry as more of the world's investment dollars shift to alternatives. That's really helping that whole market for us as a business and then the advisory services that we sell to.
Speaker Change: significant corporate clients, they want to have a larger global footprint. So there's a natural incentive for these firms to form larger and larger enterprise class.
Speaker Change: for software to enable those firms and those partners to collaborate around the world. So there's a lot of reasons structurally. And then I think this more recent thing with optimism is also true. I mean, we've heard it from our own clients and they're translating that from their clients flowing through to their business. So I think we're in a good spot here.
Thank you.
Speaker Change: Thank you. I would now like to turn the call back over to John Hall for any closing remarks.
John Hall: Okay, well thanks everyone. We appreciate your attention and your questions. We have a great Q2 behind us and we're excited about our continued momentum in fiscal 25. Thanks again for your time today and we look forward to talking to you next quarter.
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