Intapp, Inc. Common Stock 2027 Q1 Earnings Call

Welcome to Intapp's fiscal first quarter 2027 financial results. On the call with me today are John Hall, Chairman and CEO of Intapp, and David Morton, Chief Financial Officer. 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 second quarter and full year 2027. These forward-looking statements are based on management's current views and expectations, 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. Intapp disclaims any obligation to update or revise any forward-looking statements except as required by law.

Further on today's call, we will also discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results, including non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP operating margin, non-GAAP diluted net income per share, and free cash flow. 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, 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.

Thanks, David. Good afternoon, everyone, and thank you for joining us. Q1 was a defining quarter for Intapp. This was the quarter we made Intapp Celeste generally available. In the weeks since, we've seen Firm AI moving from launch to adoption, a leading AI ecosystem building around Celeste, and more clients moving to the cloud. There are three categories of AI in professional firms today. Horizontal AI speeds up everyday tasks for workers. Practice AI helps professionals with their individual work product, like a brief or a diligence memo. Both horizontal AI and practice AI live at the desk. Firm AI is AI for the business of the firm. That means winning clients, clearing Conflicts, screening deals, capturing Time, and managing engagement economics. That's where growth, market share, and operating margin are decided.

It depends on the firm's own data and compliance rules, which generic AI tools can't and shouldn't be allowed to reach. Horizontal AI and practice AI make individuals faster. Firm AI makes the firm bigger. Our job is to deliver Firm AI and to govern AI on behalf of the firm wherever the firm's people use it. Firm AI is resonating at the very top of the world's leading firms. Our Firm AI blueprint is circulating among managing partners and management committees, and the number of senior leaders we're meeting with now is unlike anything I've seen in the past. We're talking to firm owners and leaders because AI for the business of the firm is their priority, and it's a lane that is uniquely ours. On July 15, Celeste became generally available across all the industries we serve. Firm AI is an enterprise decision affecting the entire organization.

Firm leaders are starting with the governance question across the entire firm. With new stories every week about AI agents operating without controls, firms are choosing carefully, and governance is a key reason why they're choosing Intapp. Since GA, our Celeste pipeline has grown 2 to 3 times and has never been larger, with more firms moving from trials into deployment. What's working is consistent across the industries we serve. Firms start where Firm AI delivers value fastest in deal screening, intake and conflicts, and time capture, and then expand from there. We have already activated DealCloud with Celeste for more than 150 clients. On August 19, we made Celeste the core of two of our largest product families. Compliance with Celeste brings agentic workflows into Intapp Intake, Conflicts, and Terms. Time with Celeste does the same for Intapp Time. Firm AI generates revenue in three ways.

Existing clients upgrade through new entitlements on products they already run. New clients choose Celeste-powered products from day one. Firms pay to govern every third-party AI tool they connect. Confidentiality has been one of the largest barriers to AI adoption at law firms. A firm cannot put thousands of lawyers on an AI tool if its ethical walls stop at the edge of it. That's why Intapp Walls for AI is becoming the governance layer for AI in professional firms. More than 70 of the Am Law 100 rely on Intapp Walls, and Walls for AI extends those same policies automatically into the AI platforms their lawyers use. That now includes the two leading practice AI platforms in legal. Our Harvey integration became generally available this past quarter and is already seeing adoption.

At ILTACON in August, we announced a strategic partnership with Legora that brings Walls for AI and Intapp Time into Legora. Whichever platform a firm chooses, or if it chooses both, the governance is the same, and it's Intapp's. Also at ILTACON, we introduced the Intapp Profitability Network, which extends Intapp beyond systems of record into a connected profitability ecosystem. Its eight founding partners, Capacity, Engage AI Solutions, Legora, LexPipe, Narrative, Oddr, Zebraworks, and Zenvoice, help firms manage how they price, staff, capture, bill, and collect on every matter. Our ecosystem has become one of the clearest validations of our Firm AI strategy. When OpenAI launched Astra for Law, it selected Intapp to bring the business of the firm into ChatGPT. DealCloud with Celeste is part of the ChatGPT for Financial Services ecosystem. Celeste connectors are also available in Anthropic's Claude.

The leading horizontal AI platforms are coming to Intapp because we sit where industry workflows, trusted data, and AI meet. That ecosystem is also becoming a growth engine for Celeste. Our data, AI, platform, and services partners extend what Celeste can do and help firms adopt and expand it. in Q1, partner involved co-sell grew 34% year-over-year, and co-sell with Microsoft grew 26%. Our partners bring AI to the individual. We bring AI to the firm. Let me share a few highlights from the quarter. Cloud ARR grew 28% year-over-year and now accounts for 85% of our total ARR. We have more than 1,400 clients with more than $50,000 of ARR, including 908 with more than $100,000. Cloud net revenue retention was consistent at 123%. Following a record Q4, cloud migrations remained above historical levels in Q1.

Celeste's general availability is a big part of that demand. As we transitioned clients from the on-premises version of Intake, Conflicts, and Terms, demand for Compliance with Celeste helped bring firms to the cloud. Walls for AI is also adding to that momentum. On average, on-premises clients ultimately spend significantly more with Intapp once they move to the cloud. Every migration is an opportunity to grow, and we are seeing firms choose Intapp to do more. Let's take a look at some client wins this quarter. Starting with legal, we saw a mix of existing clients expand and new clients join. A top 10 global law firm and an Intapp client for more than a decade is moving its compliance suite to the Intapp Cloud and adding Celeste. They chose to reaffirm their commitment to Intapp in one of the largest deals in our history.

Walls for AI drove several wins in legal. Bryan Cave Leighton Paisner, a global law firm, added Walls for Harvey and Walls for Legora, and is migrating Walls to the cloud so its ethical screens follow client content into both platforms. A leading intellectual property law firm chose Walls for AI to secure its Harvey deployment. Troutman Pepper Locke, an Am Law 100 firm, is migrating to the cloud with Walls for AI. Celeste is winning across our legal portfolio. A leading Wall Street law firm chose Intapp Time, Billstream, and Celeste after a competitive evaluation against the industry's other time providers. Baker Donelson, a leading national law firm, chose DealCloud with Celeste to modernize business development. A leading U.K. law firm chose DealCloud with Celeste and Compliance with Celeste to build a single governed view of their clients.

Shoosmiths, a leading U.K. law firm, added Time with Celeste through a competitive RFP after choosing Intapp's compliance platform last year. Next, accounting and consulting. A multi-billion dollar global management consulting firm expanded Intapp Compliance with Celeste from a single department to the entire firm, bringing agentic workflows to new engagement intake and approvals. BDO Capital, the investment banking arm of BDO USA, selected DealCloud with Celeste as the deal management platform for its capital advisory and investment banking teams. DealCloud now supports corporate finance teams at six of the top eight accounting firms. Epiq, a global legal AI services and software provider, chose DealCloud with Celeste and Time with Celeste to deepen its relationship intelligence. In financial services, the Firm AI conversation is reaching some of the largest financial institutions in the world.

Firms want Celeste to work across their entire technology landscape, making the release of integrations with our other products important drivers. A leading credit investment firm is a new client that chose DealCloud with Celeste to modernize its direct lending business. In Asia Pacific, the investment banking arm of a leading Japanese financial group chose DealCloud for its deal level permissions, keeping information secure across client engagements. A Singapore-based investment firm moves to DealCloud with Celeste, giving its team AI that meets its own data governance standards. As examples of existing clients, a global investment firm client and a global private equity firm client each added DealCloud with Celeste to grow with us. In real assets, one of the world's largest real estate investment firms renewed and significantly expanded their partnership with Intapp.

The firm is deploying Celeste across the firm to enhance DealCloud, its system of record for every real asset it owns, with Intapp firm deployed engineers working alongside its teams. A multi-family real estate investment firm chose DealCloud with Celeste to strengthen investor relationships and fundraising. A New York real estate developer and investor replaced its legacy deal management platform with DealCloud with Celeste, so its development and fund teams can work from one shared view of every deal. This is the most important year in Intapp's history. Last year, we defined Firm AI as a category. A few weeks into this quarter, we launched Celeste into general availability, and our pipeline has expanded meaningfully. This year, we're delivering it. Celeste is already in production at firms in every industry we serve.