Intapp Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 8, 2023

Key Takeaways

  • Intapp’s cloud ARR rose 40% year-over-year to $206 million, now representing 65% of total ARR of $316 million, while total ARR grew 24%.
  • SaaS and support revenue increased 33% to $66.1 million and total revenue was up 32% to $92 million, driving a non-GAAP operating profit of $2.9 million versus a $2.2 million loss last year.
  • The company expanded its applied AI and productivity suite with multi-language email parsing, enhanced relationship intelligence, and native Office 365/Teams integration to streamline data entry and collaboration.
  • Intapp deepened its Microsoft partnership—hosting a legal CIO summit, advancing Azure deployments—and acquired Paragon Data Labs to bolster its employee compliance offerings.
  • Demand remains resilient across more than 2,250 premier professional services firms, with a 12-month net revenue retention rate of 113–117% and no material slowdown despite macroeconomic uncertainty.
AI Generated. May Contain Errors.
Earnings Conference Call
Intapp Q3 2023
00:00 / 00:00

There are 11 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the Intap Fiscal Third Quarter 2023 Webcast. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. And I would now like to hand the conference over to your speaker today, is to David Trone, Senior Vice President, Investor Relations.

Operator

Sir, please go ahead.

Speaker 1

Thank you. Welcome to Intap's fiscal Q3 2023 financial results. On the call with me today are John Hall, Chairman and CEO of Intap and Steve Robertson, 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 Q4 and full year 2023. 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.

Speaker 1

Intap 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. 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 ks furnished with the SEC prior to this call. With that, I'll hand the conversation over to John.

Speaker 2

Good afternoon, everyone. Thank you for joining us today as we share the results of our 3rd fiscal quarter. I'm pleased to share that once again We've achieved strong quarterly results, supported by cloud ARR growth, fast and support revenue growth, New logos and expansion of our existing client accounts. For those of you who may be new to our story, Intap targets a very large yet overlooked and underserved $3,000,000,000,000 industry of Professional and Financial Services Firms. Our target industry includes the world's private capital, Investment Banking, Legal, Accounting and Consulting Firms.

Speaker 2

Most of our target firms are or were originally set up as Within these firms, We target a very valuable but deeply underserved user audience, the professional investors and advisors in the partnership Who begin their career as analysts or associates and develop through their careers to become highly skilled specialists and knowledgeable experts eventually becoming partners and directors of their firms. These professionals work every day in cross Specialty teams that support the global industry of deals, disputes and compliance. And the professionals and their firms as a whole have to operate successfully as a highly regulated industry, Monitoring and managing consistently with the wide unique range of statutory, Professional ethics and client compliance obligations that they must navigate every day. Intev's Industry Cloud has been designed specifically to support the unique operating and compliance needs of these firms. We are highly differentiated from traditional CRM and ERP systems, which were built for companies Selling a tangible product.

Speaker 2

In contrast, our clients' business is based on leveraging their collective specialized knowledge, Expertise, experience and relationships to win business and deliver value for their clients and investors. Our cloud solutions help our clients increase their revenues and returns, operate more efficiently and profitably, Manage risk and compliance more effectively and leverage their collective knowledge for competitive advantage. Our applied AI technology activates the power and potential of the firm's data and experience to help drive their important work for their clients. Intap is leading cloud transformation in this global deal making legal and advisory industry and our strong Q3 results continue to validate our strategy. Specifically, our cloud ARR grew 40% to $206,000,000 Cloud now represents 65 percent of our total ARR of 316,000,000 which is up 24% year over year.

Speaker 2

We earned SaaS and support revenue of $66,000,000 up 33% year over year and total revenue of $92,000,000 up 32% year over year. And we ended the quarter serving more than 2,250 Premier Firms across our target verticals. Today, I want to highlight 3 key factors That contributed to our strong quarter. First, I'll review a product update focused on deal cloud adoption Increasing across all the verticals we serve. Then I'll turn to innovation and our applied AI strategy and discuss enhanced relationship intelligence capabilities to meet the specific needs of our target firms.

Speaker 2

And finally, I'll discuss new developments in our partnership with Microsoft. Okay. On product. In Q3, we saw continued adoption of our DealCloud solution. We brought deal cloud originally to the private capital and investment banking verticals and now DealCloud adoption is increasing within the legal, accounting and consulting markets.

Speaker 2

Based on more than 1,000 successful implementations, Clients are selecting deal cloud for the embedded best practices that we deliver as industry blueprints. Using deal cloud, our clients can manage their complex web of relationships and leverage collective firm knowledge to better execute their firm's growth strategies. Here are a few examples of DealCloud's progress across the verticals we serve. Vinesh, an Amlog 200 firm and longtime Intap client that began with our compliance and time management solutions chose BealCloud to replace its previous CRM. Scott Golan, Chief Strategy and Operating Officer at Banesha told us that the firm shows deal cloud to reduce the administrative burden that comes with managing complex relationships, letting the firm's professionals Focus on delivering stellar client service.

Speaker 2

A second example is one of the world's largest accounting firms and a current Intap client who selected DealCloud to modernize the M and A process within its corporate development team. The firm will use deal cloud to drive overall business growth and become more effective at winning M and A. With DealCloud, the firm's professionals will be armed with more timely and tailored market information, enabling them to cover and win more deals. We also continued to acquire new logos and expand Dealfloud's footprint in financial services. In Q3, one of the top 10 private equity firms in the U.

Speaker 2

S. Selected deal cloud to replace its current traditional horizontal CRM and multiple homegrown deal management systems. DealCloud will enable a unified firm level view of deal interactions, while streamlining fundraising and client coverage. Through a highly competitive selection process, the firm chose DeelCloud because of its market leading reputation, Its industry specific capabilities and our unique market expertise. In addition to new sales, we also continued to see deal cloud implementations throughout the quarter, including at leading firms Like LGT Capital Partners, a Switzerland based investment management firm.

Speaker 2

Okay. Turning now to innovation. During this quarter, we expanded our applied AI capabilities and continue to develop our partnership with Microsoft. We advanced our applied AI strategy with further enhancements to our relationship intelligence offering, which we've been covering with you. In Q3, we introduced multiple language support for our AI driven email signature parsing engine that automatically populates key client contact data Now across multiple languages.

Speaker 2

The feature further streamlines the work of busy professionals, Reducing or eliminating manual data entry and improving data quality and insights. And it helps us to meet the requirements of our international and global clients. In Q3, we also enhanced deal cloud with embedded document management and collaboration, Now a native capability of our client and deal management platform. Our integration with Microsoft Office 365 puts key document and collaboration tools directly in the core deal and client management workflow, helping teams to work together on the documents and Spreadsheets that are critical to a complex deal or engagement or matter. Importantly, the integration also advances Our 0 entry strategy, bringing key data into deal cloud automatically while professionals are working in Microsoft Teams or Office 3 And following on from this product example, I'll turn next to some further progress And our strategic partnership with Microsoft.

Speaker 2

In March, Intap and Microsoft co hosted a legal CIO Summit at Microsoft's headquarters in Redmond, Washington. CIOs from the world's top law firms took part in an interactive 2 day event With topics that range from the potential of AI innovations like chat GPT to the increasingly complex regulatory landscape. Harpreet Suri, who is CIO at Polsonelli, an Analog 100 firm, Told us that she values the unique opportunity our partnership with Microsoft brings to the legal industry. We already provide her firm with the purpose built solutions that help her team to execute efficiently, including embedded integration That extends her Microsoft investment. She expressed excitement about the future and leveraging the significant AI innovations through her Intap partnership.

Speaker 2

And although it did not occur in Q3, I'm also pleased to share that last week Intap acquired Paragon Data Labs. Paragon's cloud based software helps firms to track and monitor employee compliance like personal trading and political donations. Paragon enables firm's compliance teams to quickly spot and remediate Personal conflicts of interest or policy violations. The employee compliance product enhances our existing suite of risk and compliance products, which are all purpose built for the unique regulatory compliance needs of our client firms. We're pleased to welcome Paragon Co Founder, Jeff Mitchell and his talented team of product, engineering, support and sales colleagues to Intab.

Speaker 2

We're excited to have them on board to help us continue to enhance the Intap platform's highly differentiated compliance capabilities for this regulated marketing. Okay. I'd like to now highlight a few interesting client wins from Q3 3, as we continue to add new logos, grow existing client accounts through cross sell and up sell and expand our international footprint. I'll begin with a notable new logo from a law firm that is blazing a path in the innovative delivery of legal services. The fully virtual law firm practice selected our conflict solutions delivered via the Microsoft Azure Cloud.

Speaker 2

Using the solution, the firm will implement a centralized AI driven approach to ensure that all ethical business and subject matter conflicts are addressed quickly and confidently. John Lively, Managing Partner and Founder at Practice told us, Partnering with Intap will enable our attorneys to maximize the time spent delivering the highest levels of representation that our clients depend on. I'd also like to share a few examples of our ability to grow existing client accounts through cross sell. First, an AmLaw Top 25 firm chose to expand its Intap investment with the goal of creating a more connected firm. They opted to migrate their existing time solution to the cloud and to purchase our risk and compliance suite.

Speaker 2

Like many firms in the last year, this firm also added our BuildStream product, which we acquired and talked about in our Q2 call. As you'll remember, BuildStream automates critical pre billing workflows and helps firms to improve their revenue realization and profitability by improving the timeliness and compliance in client billing and efficiency and cash management. Together, these new solutions move this firm toward their goal of integrating all the data across their operations to better empower their attorneys. Another existing client in the AML 100 similarly purchased multiple additional Intap solutions during the quarter, also including BillStream to replace its previous pre billing system. With BillStream, the firm will improve revenue realization and strengthen client relationships through faster and more accurate pre billing practices.

Speaker 2

And additionally, They selected Intap Workspaces to enhance collaboration across their distributed teams. As you'll recall, we developed Intap workspaces using technology from our Ref Store acquisition in 2021. With solutions that cover risk and compliance, pre billing, time tracking and now collaboration, This large Intap client is steadily progressing towards their goal of becoming a more connected firm and modernizing How they work by expanding their adoption of the Intap platform and all of its capabilities. Okay. And last but not least, a pair of industry awards in the quarter validated both our innovation and SteelCloud's continued market leadership.

Speaker 2

1st, Globe Street Real Estate Forum named DealCloud a top influencer in commercial real estate technology. And DealCloud was also named the winner in 2 categories of the 2023 Private Equity Wire European Awards for best deal origination technology and best secure workflow management provider. To conclude, as we near the end of our fiscal year, we're pleased with our consistent growth and performance. Our revenue model is highly predictable and our durable end market with a $24,000,000,000 TAM continues to invest in digital and cloud transformation despite some global economic uncertainty. We continue to add new clients and to grow existing accounts, and we're pursuing the significant Long term growth opportunity ahead to help our industry achieve their cloud transformation goals.

Speaker 2

Our purpose built industry cloud platform has compelling value for our client firms, helping them to increase revenues and returns, operate more efficiently and profitably, Manage risk and compliance more effectively and leverage their collective knowledge for competitive advantage. I'd like to thank our clients, partners, investors, Board and our employees whose hard work and dedication led to our strong Q3 performance. Thank you all very much. Okay, Steve, over to you.

Speaker 3

Thanks, John, and thanks everyone for joining us today. As John noted, we had a strong quarter with our cloud ARR up 40% year over year And our total ARR up 24% year over year. Before I go through our financials, I'd like to quickly review a few fundamentals of revenue recognition in financial model. Just as a reminder, cloud ARR is recognized as SaaS revenue ratably following a new sale or renewal. On Premises ARR is recognized in 2 parts: 50% as subscription license revenue, recognized upfront at the time of the sale or renewal And 50% has support revenue recognized ratably and included in our SaaS and support revenue line.

Speaker 3

Because it is recognized ratably, SaaS and support revenue is more predictable quarter to quarter, while subscription license revenue can vary based on the timing of revenue recognition. Okay. Moving to our numbers. SaaS and Support revenue was $66,100,000 up 33% year over year, reflecting both new sales to new clients and upsells and cross sells to existing clients of Intev's purpose built cloud solutions. Total revenue was $92,000,000 up 32% year over year, driven primarily by continued strong sales of our cloud solutions, as well as by solid growth in professional services revenue.

Speaker 3

Subscription license revenue was $13,600,000 compared to $10,900,000 in the prior year period, reflecting larger CPI based price increases on annual renewals, as well as renewals on certain multi year contracts. Professional services revenue was $12,400,000 as compared to $9,000,000 in the prior year period, reflecting an increased growth rate consistent with the current pace of software implementations. Overall, we continue to execute our land and expand model, ending the quarter with more than 2,250 clients, 572 of which had ARR of at least $100,000 up from $484 in the prior year period. In addition, we up sold and cross sold our existing clients such that our 12 month trailing net revenue retention rate was within our recently increased range of 113% to 117%. Before discussing gross margins, expenses and profitability, please note that I will be discussing non GAAP results going forward.

Speaker 3

As a reminder, our GAAP financial results, along with the reconciliation between GAAP and non GAAP results, can be found in our earnings press release and its supplemental financial tables. 3rd quarter results were as follows. Total non GAAP gross margin was 71.7% as compared to 67.3% in the prior year period, primarily reflecting an increase in our services gross margin and a previously executed organizational realignment of a portion of our client success team from cost of sales to sales and marketing. Non GAAP operating expenses were $63,100,000 a $14,000,000 increase year over year as we continue to invest in sales, marketing and product development to support our growth. Non GAAP sales and marketing expense was $27,500,000 a $7,500,000 increase year over year as a function of increased headcount and related sales commissions to capture new business in our growing markets along with the previously mentioned organizational realignment.

Speaker 3

Non GAAP R and D expense was $20,700,000 a $5,400,000 increase year over year as we increased headcount and made investments in our product roadmap. Non GAAP G and A expense was $14,900,000 a $1,100,000 increase year over year as we continue to see some leverage and scalability in the business. Non GAAP operating profit was $2,900,000 as compared to our Q3 fiscal 2022 non GAAP operating loss of 2,200,000 Non GAAP net income per fully diluted share was $0.03 in the Q3 of fiscal 2023 as compared to a loss of $0.04 in In terms of the balance sheet, we ended the quarter with $53,200,000 in cash and cash equivalents. Now turning to guidance. For the Q4 of fiscal 2023, we expect SaaS and support revenue between $67,000,000 $68,000,000 and total revenue in the range of $92,500,000 to $93,500,000 We expect non GAAP operating profit in the range of $1,500,000 to $2,500,000 and non GAAP per share results in the range of of $0.02 to $0.02 using a fully diluted share count weighted for the quarter of approximately 78,000,000 common shares outstanding.

Speaker 3

For the full year fiscal 2023, we expect SaaS and Support revenue between $251,500,000 252,500,000 and total revenue in the range of $349,000,000 to $350,000,000 We also expect non GAAP operating profit to be in the range of $9,000,000 to $10,000,000 and non GAAP net income per share in the range of $0.07 to $0.09 using a fully diluted share count waiting for fiscal year 'twenty three of approximately 74,000,000 common shares outstanding. With that, John and I look forward to taking your questions.

Operator

Thank you. And one moment please for our first question. Our first question will come from Koji Ikeda of Bank of America Securities. Your line is open.

Speaker 4

Hey, guys. Thanks for taking the questions. So a couple from me. I just wanted to kind of touch on the resiliency of the end market. Clearly, you guys are operating well here.

Speaker 4

And I think I have you guys this every quarter, but Have things changed at all? Are you seeing any effects of maybe the banking industry turmoil that might be affecting your target end markets? Just trying to figure out how you guys are seeing the health of your overall target market? Thanks.

Speaker 2

Thanks Koji. We're continuing to watch, but no, we have not seen an effect on sales cycles. The industry that we call on has supported us through the last couple of cycles and we've grown right through the previous recessions. So we're optimistic. We have said that if you look across our target verticals, The private capital firms tend to do well.

Speaker 2

We get paid out of their management fee. So that's very stable. The law firms, the Accounting firms, consulting firms have always been very stable for us. The one that we do want to watch is investment banking, although our position there tends to be at the Mid size, we're growing up into the larger firms more and more. So we're going to pay attention, but so far, no, we've been doing well.

Speaker 4

Got it. And then just one follow-up from me here. Last year on the Q3 call, I recall Steve gave kind of an early look into fiscal 2024. And I don't think I heard you mention it in the prepared remarks, and I don't recall seeing it in the presentation either. So is that something you're not prepared to give this quarter?

Speaker 4

And if not, maybe why?

Speaker 3

Yes. Koji, that was kind of a one time thing that we did last Kind of as a courtesy, this quarter with an extension out to September until We come back with our typically with our full year and talk about 2024 guidance. We have consistently pointed people to The fact that our ARR our total ARR growth is not a bad way to think about our long term revenue Over time and over cycles and we continue to feel that that's one way to look at it. But no, we're going to give our guidance in the next time around.

Speaker 4

Got it. Thank you. Thanks guys for taking my questions.

Speaker 3

You bet.

Operator

Thank you. One moment please for our next question. Our next question will come from Kevin McVeigh of Credit Suisse AG, your line is open.

Speaker 5

Great. Thanks so much and just a really terrific job given the current environment. Hey, John, if I heard you right, I think you referenced a 1,000 implementations at DealCloud. If I think about that relative to the current client base about 2,500, Is that the right way to think about it? Or is it just specific implementations, maybe it's not that pronounced across the overall client base?

Speaker 5

I guess, is there any way to think about what percentage of deal cloud is within your existing clients at this point?

Speaker 2

Thanks, Kevin. We haven't quoted that number. We are steadily expanding the footprint of deal cloud throughout our marketplace. As we mentioned, we began With deal cloud in the private equity, private capital industry and then the investment banking firms and now we're excited to be bringing it To the legal accounting and consulting firm is one of the things that happened this past couple of quarters is that we really started to get more and more requests for deal cloud by name from the professional services firms. We're very excited about that.

Speaker 2

It shows the Connection of this industry, how the professionals work together cross disciplinarily on deal teams and other types of projects And they see each other using deal cloud. And so the decision was to simplify our branding a little bit, say thank you to the One Place brand And move to deal cloud across the markets and that's working really well for us. So we're excited about this as one of several Growth sectors that we have and the word-of-mouth is really supporting the expansion there.

Speaker 5

That's terrific. And then just Seems like your the relationship with Microsoft is coming closer and closer. With all the incremental optionality on chat GPT, Does that accelerate the linkage with Microsoft and any way to think about chat GPT within the lens of your kind of existing clients as they implement that because it seems like clearly with a little bit of pace of faster acceleration, which I'd imagine will be better for the platform overall?

Speaker 2

We're very excited about that. We've talked about the overall Microsoft partnership that's about almost 18 months in now, where we're Pursuing several tracks. 1 is the technology innovation track, 1 is go to market, 1 is co marketing. On the technology track, We are taking advantage of a wide range of Microsoft's technologies, including moving our whole platform to Azure, which is really the cloud provider of choice for this Industry for several reasons, including its security capabilities. And one of the announcements that we made on this call was about one of the firms, One of the virtual law firms that has taken up deal cloud on Azure and Another firm has taken up the compliance capabilities on Azure.

Speaker 2

So we're excited about what's happening there. In terms of Chat GPT and our applied AI Technology, we have a lot of capabilities in applied AI. We've talked about relationship intelligence and some of the other application areas on the platform. We just had an event in Redmond, Washington with a lot of the CIOs from some of the largest law firms In the world, who were looking at the potential to use a wide range of AI, applied AI from Intab and then Chatbeat GPT and the OpenAI Technologies. We're actually very excited that Microsoft ended up with that technology because we think this end market that we serve Is one of the markets that's particularly high potential for the application of Chat GPT and large language model type technology.

Speaker 2

So nothing to announce today, but a lot of work going on to what we're going to be able You take advantage of that through the Microsoft partnership.

Speaker 5

Terrific. It sounds like you're tethered to the right horse, so congratulations.

Operator

Thank you. And one moment please for our next question. Our next question will come from Alex Sklar of Raymond James. Your line is open.

Speaker 6

Great. Thank you. Two questions on the DealCloud brand consolidation that you've talked about Good night. First, John, I know you have 90% plus penetration of those AMLAW 100 Firms. Can you just help frame how your business development CRM penetration is within those existing one place Intap clients?

Speaker 6

Like how big of an opportunity is the deal cloud cross sell? And then I have a follow-up on that.

Speaker 2

Thanks, Alex. We have a great opportunity there. As in many of these markets, the traditional solution has been either entirely homegrown Or some combination of trying to use traditional horizontal CRM plus a bunch of homegrown technology trying to get it to work For the unique needs of these firms, both operationally and from a compliance standpoint. And with deal cloud, we're bringing to market A system that's purpose built just for these firms. And as you know, we developed a lot of the platform directly with the CIOs in these firms helping to commercialize the The systems that they had designed in house that actually were meant to work for their firm.

Speaker 2

So there's a real product market fit For deal cloud across the market, they are generally on older generation CRM to answer your question specifically. We also are serving a broader category than pure CRM because these firms have a very strong knowledge and For Keith's components, the information that they need to manage. And so when we bring deal cloud in, it is helping them with CRM type And other types of practice management issues that the firms have. So we think there's a huge opportunity for us To grow inside the market. We've got a great footprint, as you say.

Speaker 2

We've built up relationships with these firms over many years. We do absolutely have Beginning footprints with over 90% of the top ML100, if you want to start there, that was where the company began. But the cross sell and up sell opportunity inside those firms is enormous. We've talked about the fact that just within our top 100 clients generally, there's $1,000,000,000 of ARR that we can go get if we continue to sell our platform through. So that's a lot of what you heard on my prepared remarks were Examples of cross sell and up sell opportunities to help people appreciate the potential that we have there and deal cloud into the CRM category and into the broader knowledge category is a great example of that.

Speaker 6

Okay. That's great context. Thank you. And then just a quick follow-up on that. Steve, are there any financial benefits or implications you're looking for with that change?

Speaker 6

And then separately, the sales and marketing expense growth has somewhat decelerated despite shifting some of that support revenue down there.

Speaker 3

Yes. As far as financial benefits from the Microsoft relationship, look, we certainly will expect some over time, but we're not really in a position now to start being granular about We do have nice momentum in a lot of parts of the partnership. So we'll probably come back in future quarters and talk about that kind of thing, I would think, Alex. As far as sales and marketing investment, yes, we're continuing to invest in sales and marketing. We are growing our Sales reps, in particular, kind of, on the same growth rate that we've been doing for the most of the year here.

Speaker 3

So, there may be a comparison quarter over quarter that looks different there, but we are forward investing. We're seeing growth. Our pipelines are strong and we want to make sure we capture it.

Speaker 6

Great. Thank you both.

Speaker 3

Yes.

Operator

Thank you. And one moment please for our next question. The next question will come from Terry Tillman of Truist Securities. Your line is open.

Speaker 7

Yes. Hey, John, Steve and David, congrats For me on the strong results, maybe the first question just relates to it's been like clockwork adding about 50 plus net new customers per quarter, if my math is right. Sometimes the 100 ks plus customers can kind of move around a little bit. But as it relates to just bringing net new logos into the fold, Do you see that kind of consistently staying in that current range? The reason why I asked this is it seems like Microsoft's got multiple avenues to help On the go to market side, you've got KPMG, you've got international expansion.

Speaker 7

Just trying to understand kind of the balancing act of maybe new logos going forward and if it could step up versus Taking deal cloud and just selling a lot more to the installed base. And then I had a follow-up for Steve.

Speaker 4

Thank

Speaker 3

you. Yes. Well, Terry, I'll actually I'll take this one too. I think we do see a steady add of new logos along with good NRR, sort of the twin engines of the financial model here. Microsoft, you're right, there should be opportunities there, but they will be in both areas, right?

Speaker 3

They will be often in upsell areas with existing clients and in new clients. So I don't expect things to change there. We continue to have growth on both sides of the equation.

Speaker 7

Okay, got it. Well, you took a question. I was going to give it to John. So I want to hear John's voice. So thank you, Steve.

Speaker 7

That's helpful. Okay. It sounds like you're more of the same goodness. No, it's alright. No, it's good.

Speaker 7

That's good. So maybe more of the same goodness than in terms of those kind of balances, in particular around new logos. Maybe John for you, the one thing is You were talking about some uptake of some more recent either acquired products or just kind of organic and M and A oriented development like BuildStream and the collaborative workspace. What I'm curious about is any kind of quantification on those emerging products? And are you able to, because of the economic times, start to Turn the dials around vendor consolidation play.

Speaker 7

Thank you.

Speaker 2

Thanks, Terry. We appreciate The market's uptake of both the organically developed technology, for example, the relationship intelligence, applied AI We've been having good success with. In addition to some of the products that we've been able to come out with through acquired technology like BuildStream And like Intev Workspaces, we really have a combined strategy. So there's a long history of organic development of It was designed specifically for this market by working with the CIOs in the market on a lot of the stuff they had designed in house, but we have used M and A of key technologies that we observe in the marketplace over time to augment the platform, and we think that's one of the Strength of our platform is that we can integrate technology that often our clients have recommended to us With it, we're very excited about this new acquisition that we just announced on this call, Paragon Data Labs, which is a new employee compliance capability that We're going to be able to bring to market here. We've got a very strong footprint in the risk and compliance space Originally for the law firms with a whole set of capabilities around ethical walls, information barriers, conflicts of interest, terms of business, a whole set of issues Around obligations management and now we're able to augment that with a set of employee compliance capabilities like personal trading compliance and other types of attestation management that the firms need to have everybody Perform regularly that will give us an even richer offering in risks and compliance for some of the financial services, both private capital and investment banking firms.

Speaker 2

So that's another example of a consistent pursuit of what are the areas that the clients are really asking us for? How can we continue to Stay on the Intap platform to be even closer to the ideal purpose built system for these partnership firms and how do we help them both with their operational needs, But also with their compliance needs as we grow the business and how do we bring Applied AI to make that a more modern experience for everybody. So I think you're going to continue to see that. We're going to bring out new organic capabilities and continue to look for great

Operator

Thank you. One moment please for our next question. Our next question will come from Brian Schwartz of Oppenheimer. Your line is open.

Speaker 8

Hi, John and Steve. Thank you for taking my questions this afternoon. John, I wanted to ask you a question on the velocity of the expansion business. Are you seeing any changes to the cadence of when customers are coming back to buy more from you?

Speaker 2

Well, we haven't published numbers about that, but we are excited about What happens when you get people to the cloud? The implementation is much easier, people get to success faster And you have an opportunity to come back to them for either additional seeds through other groups inside the firm or additional Solutions that you can sell into the firm more easily. And this is a big part of our overall strategy and a lot of what these firms Earlier question about vendor consolidation, really like about the Intap platform and our story is that we're bringing them an integrated capability that really helps the firm and the professionals inside the firm collaborate successfully within a compliance framework that makes everybody And so I do think that the cloud transition is an important part of the velocity for expansion going forward and we're continuing to drive that.

Speaker 8

Thank you. And then Steve, one question for you just on the margins in the The business is showing a lot of margin growth. And I just want to know, is that all a function of the revenue upside in the quarter? Or is the business also seeing greater efficiencies in the COGS and the expense lines too? Thank you.

Speaker 3

Yes. That's I think the answer is both. Clearly, we are bringing to the bottom line the revenue Success were happening, that's for sure. But we're also we've got a lot of initiatives internally on efficiency and they're starting to bear some fruit. We've talked For a while about our services group, for example, which continues to make progress and you'll really start to see that I think next year, The way you might normally see services in terms of its P and L.

Speaker 3

And in other parts of the business, our execution is just getting tighter And more efficient as we go forward. So it's a little bit of both, I think, Brian.

Speaker 7

Thank you.

Operator

Thank you. One moment please for our next question. Our next question will come from Parker Lane of Stifel. Your line is open.

Speaker 9

Yes. Hi, guys. Steve, I actually wanted to just go back to that last question there. And I know it's too early to give guidance For next year, but how do you think about sort of the midterm framework of the trade off between growth and profitability? You just delivered 40 On cloud ARR, you have a big opportunity in front of you.

Speaker 9

How much leverage could there actually be here on the sales and marketing line in particular over the next couple of years?

Speaker 3

Well, I think we're going to try to run the business to, if you will, minimize that trade off. I think we can show both Good sales growth and improving profitability, and that's our objective here over the next couple of years. We're in a position now where There is some natural leverage to the business, if you will, given the size we've gotten to and some of the efficient execution we're starting to repeat Now internally on a lot of fronts and sales growth looks good here. So, I think we're going to march steadily better in Both sides of that, Parker, going forward here over the next couple of years.

Speaker 9

Got it. Understood. Just quickly on Paragon, I was wondering if you could give us Sense of the scale of that business from a headcount perspective as well as revenue?

Speaker 3

Sure. It's fairly small. It's probably less than 20 people and includes some contractors. And it's Revenue kind of in the low single digits millions going forward. We think it's a kind of an attractive deal for us So, both strategically and financially, so we're kind of excited about it.

Speaker 3

But it's going to start at a relatively smaller place and we'll see how we do Working with Intaff and leveraging our business.

Speaker 9

Got it. Thanks again.

Operator

Thank you. And one moment for our next question. Our next question will come from Arvind from Nani of Piper Sandler. Your line is open.

Speaker 10

Hi, thanks for taking my question and So let me echo my congrats on a terrific set of results. Just as we kind of look at enterprise tech budgets, Overall, we're seeing quite a bit of pressure from kind of across the coverage universe and some of the checks that we do. But clearly, this is your Q3, you have raised guidance. It looks like things are going quite well. And From all that you've said in this call, things are you're really not seeing any of that pressure.

Speaker 10

Can you maybe just provide a little bit more color Because I'm sure you're kind of tuned in to kind of listen to see if there's any kind of pressure that your clients are going to place on Buying kind of Intap, but is there any color you can provide on like what's driving that robust demand that you're seeing From a customer base that would be super helpful.

Speaker 2

Sure. Thanks, Arvind. So first of all, it's a pretty resilient end market that has supported us through the entire bootstrapped era. These firms do well, generally speaking, in good times and bad. They're not immune to the economic cycle, but they definitely Or a better place to be compared to many others.

Speaker 2

So that supported us for many years. In addition, they really have made a commitment to the cloud transition. COVID was particularly important, has an experience in setting these firms on the path decisively to finally move to the cloud. As they do that, they have to get off all of this in house built software that they developed over the years on prem and we're here with a true industry cloud system that's designed Purposely for their needs and we just have the right product market fit for their cloud transition. And then finally, I think if you look at their revenues Generally, these are some of the most successful businesses on the planet.

Speaker 2

And as well as we're doing, we're still a relatively small Spend compared to what they're looking at overall, that's a great opportunity for us to grow inside their budget, but we're getting good uptake and I think those are some of the reasons.

Speaker 10

Perfect. And then just in terms of like kind of the value proposition, right, like I mean There's a lot of value both on the revenue driver, but also from a cost savings, from a compliance perspective, that kind of multiple Kind of like business drivers or kind of value propositions that you'll have. Has that changed? Our Kind of a lot of your clients now kind of using you for the same reasons or is it kind of more kind of interest or are they kind of Is your sales force pushing more of your kind of cost savings and compliance or more the revenue part or is it kind of clearly no change over the past like 12 to 18 months?

Speaker 2

Well, the sales team has done a fantastic job really studying the marketplace, getting to know these clients Over the years and establishing a relationship where we appreciate what each firm's strategy and priorities are. We work with them every year on their IT budget and their plan to figure out how we can best support where each of the firms is. There's a range of value drivers, Just as you mentioned from revenue growth and coverage programs to operational efficiency to knowledge management institutionalizing the relationships and the knowledge for the firm to ensure against potential turnover. There's some hard ROI components and then obviously compliance is a must have in good times and bad. So there's several different Areas that we look for as we're engaging with the firms.

Speaker 2

And I think you may say that in some of the firms today, More of the compliance, more of the efficiency value propositions are attractive, but there's also a very strong portion of our market that sees In the change in the economic cycle opportunity for the types of services or the types of investments that they want to make. And so the revenue oriented Part of our business, the coverage relationship intelligence part of our business has a very strong appeal to firms that see opportunity in this change. So it's still all of the above And there are certainly shifts that happen, but part of the strength of the company is a focus on these markets and really knowing how to play that in each engagement.

Speaker 10

Terrific. This is Asafo, thank you.

Operator

Thank you. This will end Q and A. I would now like to turn the conference back to John Hall for closing remarks.

Speaker 7

Okay. Well, thanks very much

Speaker 2

to all of you for joining us and for following the company. We really appreciate your support and the opportunity to work with each of you. And we will look forward to speaking again with our year end results on the next call. Thanks very much.

Operator

This concludes today's conference call. Thank you all for participating. You may now disconnect and have a pleasant

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