Intapp, Inc. (INTA) Q4 2022 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to the Intapp Fiscal Fourth Quarter 2022 Webcast. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, David Trone, Senior Vice President, Investor Relations. Please go ahead.

Thank you. Welcome to Intapp's fiscal fourth quarter and year-end 2022 financial results. On the call with me today are John Hall, Chairman and CEO of Intapp; 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 first quarter and full-year 2023. These forward-looking statements are based on management's current views and expectations, 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. A reconciliation to comparable GAAP metrics can be found in today's earnings release, which is available on our website and as an exhibit to the Form 8-K furnished with the SEC prior to this call. With that, I'll hand the conversation over to John.

Thank you, David. Good afternoon, everyone. Thank you for joining us. We are pleased to be here with you to share the results of our fiscal fourth quarter and full-year fiscal 2022. I'm proud to say that we had a fantastic first year as a public company with great results across the business, including our tremendous cloud ARR growth of 48% year-over-year. We added new clients, grew our existing clients, released new applied AI applications on our cloud platform and beat our guidance every quarter. We enter fiscal year 2023 with strong momentum. Intapp targets the $3 trillion technologically underserved professional and financial services industry. We bring our clients in this market our purpose-built industry cloud platform that is highly differentiated from traditional CRM and ERP systems because it's designed specifically for the unique partnership model of these firms and their unique business model, which is driven by each professional's highly specialized market knowledge and expertise. Our platform enables these professional firms to arm their professionals with the full collective knowledge of the firm to better compete in their marketplace in order to generate greater returns and revenues to operate more efficiently and profitably all while managing the highly specialized risk and compliance requirements across these regulated industries. Our target firms across our markets are continuing to demonstrate strong fundamental demand for our purpose-built solutions and industry cloud platform. Looking at our results for Q4 and for fiscal year 2022, it's clear that our value proposition is resonating and demand for our platform and the competitive strength of our solutions remain strong. As I noted earlier in Q4, our cloud ARR grew 48% to $162.9 million. Cloud now represents 60% of our total ARR of $270.5 million, which is up 27% year-over-year. In the quarter, we earned SaaS and support revenue of $52.7 million, up 34% year-over-year and total revenue of $75.5 million, up 23% year-over-year. We ended our fiscal year serving more than 2,100 premier firms across our target verticals. Okay. Starting with products. Our continued innovation helped fuel growth throughout fiscal year 2022, and set us up for continued product leadership in fiscal year 2023 and beyond. We continue to add valuable product capabilities to our industry cloud platform. This enables us to increase the value of our platform to each client. During fiscal year 2022, we captured this value as we landed many new clients. We also captured this value by expanding through cross-sell and upsell to our existing clients, driving net revenue retention. Our client-led innovation, also opened new markets for us, as we extended the capabilities of our cloud platform. In one example, we launched new functionality in our DealCloud solution to directly support the unique complex needs of real estate investors. Over the year, we continued to expand that capability to fully support real estate deal execution with enhanced visualization of pipeline and properties, map-based property discovery and tools that streamline market and deal analysis. Alternative real estate investor Kayne Anderson with $9 billion under management selected DealCloud to replace a competing CRM. They told us that the increased efficiency between DealCloud and their former solution is night and day. In another example, we launched a new relationship intelligence capability across the Intapp platform. Relationship intelligence uses Intapp's applied AI technology to answer the key question, what is our firm's best way to get into this prospect firm and to navigate to this key person. Relationship intelligence leverages metadata from the firm's contacts, email and meetings, enabling individual deal makers to better nurture and harness the entire firm's network of professionals to grow their business. Already, we see dozens of clients taking advantage of these new capabilities, including Hg Capital, a leading international software and services investor with over $55 billion in assets under management. They are using this new capability to identify and leverage the relationships of employees across the firm to form a competitive advantage for the entire firm. In another example, we launched the Intapp Collaboration & Content suite, combining the capabilities gained through the Repstor acquisition with Intapp's industry cloud platform. Extending our capabilities natively into Microsoft Office 365 and Teams, this solution solves complex security compliance and governance requirements. All of which are critical issues for professional and financial services firms of all sizes, as they increasingly move to Office 365 and Teams. Okay. Let's turn to new markets. Our capabilities along with the strength of our industry cloud platform, created opportunities for us to expand into new markets during the year. Picking up on real estate as part of our client-led innovation strategy, we worked with our large multi-strategy private capital clients to define and develop valuable new real estate capabilities on the platform. In addition to providing a unique whole solution to the large multi-strategy firms, these new features have enabled us to target and win new clients who are dedicated to real estate investing, including municipal acquisitions, a private real estate investment firm based in Washington D.C. and Sienna Investment Managers, the alternative investment platform of holding company GBL among many others. We believe the long-term opportunity to support the investors and advisors ecosystem that invests in real assets is significant and is a natural extension to our success, serving the growing private equity industry. Finally, the acquisition of Repstor in June, 2021 and the subsequent launch of Intapp Documents for Corporate Legal has provided us entry into the in-house legal market. Building on the capabilities of our Collaboration & Content suite, we launched the solution in May to deliver intuitive and collaborative matter lifecycle management for in-house legal departments. These solutions allow in-house legal teams to streamline management of critical documents and information, enabling them to reach better decisions faster. We now have in-house legal clients across a wide range of sectors, including insurance, professional services, manufacturing, biotech, and more. Large clients include a multinational European-based sportswear manufacturer and a FTSE 100 listed insurance company. Turning to partnerships. Another key accomplishment in fiscal 2022 was the expansion of our partner ecosystem. Our partner ecosystem includes data providers, technology solutions, and professional services partners who enhance the value that we provide to our clients. In February, we entered an exciting new chapter in our decade long history with Microsoft. We announced a new strategic partnership that validates our industry cloud leadership in the market and amplifies our ability to combine our purpose-built solutions with the Microsoft software that firms use every day. We have committed to programs to help our clients move to the cloud securely with joint migration support and deeper integration between our platform and Microsoft workforce solutions. Our clients have shared their enthusiasm for the critical role that we can play in helping them leverage their own investments with Microsoft and continue to move to the cloud. Then in April, we expanded our partnership with KPMG to help us support Intapp’s growing base of large enterprise class and global firms. Intapp's industry cloud platform combined with KPMG's scaled capabilities in cloud transformation services will enable us to deliver essential solutions and services to make our joint clients complex digital transformation programs successful. As an example of our partnership, KPMG recently announced a global Alliance ecosystem highlighting Intapp and Microsoft to further empower the future of legal services for both law firms and in-house legal departments. Turning now to M&A. During fiscal 2022, we added two important technology capabilities to our industry cloud platform through acquisition. As I mentioned, we acquired Repstor in June 2021. We successfully integrated this business over the past year and are seeing increasing demand from clients across our target market to better leverage their investment in Office 365 and Teams. We are seeing adoption across all the industries we serve, including a big four accounting firms, where we are delivering on the modern workplace vision dramatically improving collaboration. In June, we acquired a technology called Billstream that automates critical billing workflows. Integrated into the Intapp platform, this technology extends our solution for operations and finance teams. Billstream eliminates manual billing steps, enabling our clients to achieve more profitable delivery of work. The addition of Billstream allows our clients to derive even greater value from our purpose-built industry cloud platform. We've seen strong client interest, particularly from the hundreds of clients who already rely on us for their operations and finance needs. Turning to industry recognition. In fiscal 2022, third-party validation for our innovation came in the form of several industry awards. Our DealCloud solution was recognized, winning top honors with the Best Deal Origination award at the U.S. 2022 Private Equity Wire Awards and DealCloud won two 2022 Private Equity Wire European Awards for best fundraising and best deal origination technology. Finally, our OnePlace solution was named 2022 legal tech trailblazer by the National Law Journal. As you can see, fiscal 2022 was a year of expansion for Intapp on many fronts. On the people front, we are pleased to have welcomed many new team members to support our growing client base. An important part of our culture and differentiation with our clients is that our Intapp people are recognized as true experts in the industries that we serve and we continue to build on that leadership. We also expanded our Board. In February, we welcomed Beverly R. Allen, General Counsel and Chief Compliance and Privacy Officer at Inovalon, a leading provider of cloud-based platforms, empowering data-driven healthcare as a new director. Beverly possesses a deep understanding of cloud-based platforms designed to address complex regulated industries and their unique client challenges. And we're proud to have her on our Board. On the client front, we are excited to have added so many new logos globally throughout the year, while cross-selling and upselling our existing accounts, driving strong net revenue retention. The client list is long, but some examples include Graphite Capital, a leading U.K. mid-market private equity firm, who is now using DealCloud to boost the efficiency of deal management, value creation and Investor Relations. Hannes Snellman, a Nordic law firm who selected our OnePlace solution for risk and compliance. A large independent global business advisory firm with over 6,600 employees who turned to Intapp to improve compliance and business intake in their complex European and regulatory environment. And one of the largest private equity firms in the world based in Europe who signed a sizable agreement to implement DealCloud. And we've continued to expand at Asia Pacific, adding new logos, like ADV Partners, a Hong Kong based private equity firm who selected DealCloud to manage deals and Investor Relations across multiple locations. And we've also increased our presence in Australia and expanded our go-to-market capabilities in Singapore to pursue the significant growth opportunity we see in the Asia-Pacific region. In conclusion, we are proud of our performance in 2022, which launches us into fiscal 2023 with strong momentum. We are serving an extremely durable end market with our deeply differentiated industry cloud platform. Our subscription revenue model is highly predictable, and we see continued opportunity both to add new clients across a broad TAM and to deliver greater value to expand significantly within our existing client base. We have a great growth opportunity to drive cloud adoption and modernization across all these industries. I'd especially like to thank our clients, our partners, our investors, our Board, and our global employee team whose teamwork and dedication led to such a successful first year as a public company. Thank you all very much. Okay, Steve, over to you.

Thanks, John, and thanks everyone for joining us today. As John noted, we had another strong quarter with our cloud ARR up 48% year-over-year and our total ARR of 27% year-over-year. Before I go through our financials, as a reminder, I'd like to quickly review a few fundamentals of revenue recognition in our financial model. Cloud ARR is recognized as SaaS revenue rateably following a new sale or renewal. On-premises ARR is recognized in two parts: 50% as subscription license revenue, recognized upfront at the time of the sale or renewal, and 50% as support revenue, recognized ratably and included in our SaaS and support revenue line. Because it is recognized ratably, SaaS and support revenue is more predictable quarter-to-quarter, while subscription license revenue can vary based on the timing of revenue recognition. Okay. Moving to our numbers. Q4 SaaS and support revenue was $52.7 million up 34% year-over-year, reflecting both sales to new clients and upsells and cross-sells to existing clients of Intapp's purpose-built cloud solutions. Subscription license revenue was $13.4 million compared to $14.4 million in the prior year period, reflecting our plan to migrate on-premises clients to the cloud over time. Professional services revenue was $9.4 million as compared to $7.4 million in the prior year period in line with the growth of our software implementations year-over-year. As a result, total revenue was $75.5 million up 23% year-over-year. Before discussing gross margins, expenses and profitability, please note that I will be discussing non-GAAP results for Q4 going forward. 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. Total non-GAAP gross margin was 68.2% as compared to 70.1% in the prior year period, due to the absolute and relative decline of our high margin on-premises license business, as compared to our cloud business in the quarter, as well as the decrease in the services gross margin as a function of several factors, including increased travel expense and use of subcontractors for the quarter. Non-GAAP operating expense was $55.3 million, a $13 million 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 $24.6 million, a $5.9 million increase year-over-year as a function of increased headcount and increased marketing program spend to capture new business in our growing markets. Non-GAAP R&D expense was $16.2 million, a $3.6 million increase year-over-year, as we increased the headcount and made investments in our product roadmap. Non-GAAP G&A expense was $14.5 million a $3.5 million increase year-over-year in line with expected expense increases associated with being a publicly traded company. Non-GAAP operating loss was $3.9 million as compared to our fourth quarter fiscal 2021 non-GAAP operating profit of $0.6 million, primarily reflecting planned growth investments in the business. Non-GAAP net loss per share was $0.04 in the fourth quarter of fiscal 2022 as compared to a loss of $0.19 in the fourth quarter of fiscal 2021, primarily reflecting a year-over-year reduction in interest expense and an increase in the weighted average share count. Moving to our full-year results for fiscal 2022. Cloud ARR grew 48% year-over-year to $162.9 million. At June 30, 2022, cloud ARR represented 60% of our total ARR up from 52% a year-ago, reflecting our cloud-first business focus and the market's ongoing shift to the cloud. Total ARR grew 27% year-over-year to $270.5 million. We continued to execute our land and expand model and at June 30, 2022, we had more than 2,100 clients, 506 of which had ARR of more than a $100,000 up from 420 in the prior year period. In addition, at the end of the fiscal year, we had 41 clients of more than $1 million in ARR up from 31 clients at the end of fiscal 2021. Due to the steady increase in ARR from upsell and cross-sell motions, we achieved an average net revenue retention rate of more than 114% in fiscal year 2022 up from an average of more than 110% in fiscal year 2021. SaaS and support revenue increased 34% year-over-year to $193 million reflecting continued strength in the sale and adoption of our cloud solutions. Subscription license revenue was $44.2 million, primarily reflecting renewals of our subscription license business. This was a modest decrease year-over-year in line with our strategy to migrate legacy clients to the cloud when they are ready. Professional services revenue increased 42% year-over-year to $34.9 million and total revenue increased 27% year-over-year to $272.1 million. Before discussing full-year gross margins, expenses and profitability, please note that I will now be discussing non-GAAP results. 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. Non-GAAP gross margin was 68.1% down from 69% in the prior year as a result of a change in the mix of our SaaS and support, subscription license and services revenue. Overall, non-GAAP operating expense was $192.3 million, a $52.1 million increase year-over-year as we invested in a variety of resources and support of the growth of the business, while absorbing the cost of going public. As a result, non-GAAP operating loss was $7.1 million as compared to an $8 million operating profit in the prior fiscal year. Non-GAAP net loss per share was $0.12 in fiscal 2022 as compared to $0.56 in fiscal 2021, primarily reflecting a year-over-year reduction in interest expense and an increase in the weighted average share account. Turning to the balance sheet. We ended the fourth quarter with $50.8 million in cash and cash equivalents as compared to $37.6 million at the end of fiscal 2021. In terms of cash flow, our unlevered free cash flow was $15.4 million for fiscal 2022 as compared to $9.4 million for fiscal 2021 as we remain committed to positive free cash flow on an annual basis while investing in the growth of Intapp’s business. Now turning to guidance. For the first quarter of fiscal 2023, we expect SaaS and support revenue of between $55 million and $56 million and total revenue in the range of $76 million to $77 million. We expect a non-GAAP operating loss in the range of $1 million to $2 million and a non-GAAP net loss per share in the range of $0.03 to $0.05 using a basic share count weighted for the quarter of approximately 63 million common shares outstanding. For the full-year fiscal 2023, we expect SaaS and support revenue of between $238 million and $242 million and total revenue in the range of $324.5 million to $328.5 million. We also expect a non-GAAP FY2023 operating loss in the range of $1 million to $5 million and a non-GAAP net loss per share in the range of $0.08 to $0.12 using a basic share count weighted for fiscal year 2023 of approximately 64 million weighted common shares outstanding. With that, John and I look forward to taking your questions.

[Operator Instructions] Our first question will come from the line of Kevin McVeigh from Credit Suisse. Your line is open.

Hey. Thank you so much and really just congratulations on the exceptional results and outlook. I wonder if you could talk – maybe start a little bit with just the net revenue retention, if picked up the numbers, right. It seems like it came in at about 114% up from 110%. And what's interesting, I would think maybe just tie that in because obviously some of the law firms and things like that, some of the more discretionary parts of the business I'm sure have slowed around M&A, things like that or IPOs, but you folks are clearly powering through that. So maybe help us understand what's driving that a little bit if we could start there?

Sure. I'll take that Kevin. First of all, yes, we were actually a little north of 114%. I think what we said was we averaged more than 114% for the year. And as you may remember, we raised our range a little bit a quarter or two ago. I think what's driving it really is a balanced set of cross-sell and upsell motions in the business. I mean, typically in the professional services business, it's more about cross-sell of new capability and functionality. And typically in the financial services business, at least recently, we have a lot of upsells in terms of new users. We've get some of both in both sides of the business, but those are the leading drivers in both those two. And I think we feel that this is a good sign. The business is strong and people – it's just part of the land and expand strategy that's working pretty well right now.

Really, really exceptional. And then, can we talk a little bit just about Billstream and then I'll get back into queue. I mean, I remember from the IPO, I think that was one of the parts of the offering that there was a gap in terms of the billing and things like that. Is there any way to think about the revenue associated with that? And then from when you acquired it and then ultimately what the potential can be as you extrapolate that across your existing client base?

Thanks, Kevin. I'll take…

Go ahead, John.

I'll take the concept, Steve, and then you can do some numbers. But generally speaking, you're right. This was an area that we identified in the IPO and prior to that, that we knew we had client demand for, and we actually acquired this technology from one of our closest services partners who had a very similar development model to ours that was really client-driven. So we're very excited about this. It extends the capabilities of the Intapp platform for the firms who are using us in the operations and finance area. We've had a long history of being very strong in the time recording – AI supported time recording category. And this moves us one step down the line towards the – what they call the pre-billing process, which helps the professionals figure out how they're going to present bills to their clients and get paid. So it's an expansion of an existing capability and it's very consistent with our land and expand concept.

Yes. And I would just add, it's a relatively modest acquisition, Kevin. In terms of size, we are optimistic about it. We've baked into our thinking for our guidance, the impacts and the near-term from this, but yes, it's positive and down the road, we would expect some good things from this combination.

Thanks again, and just great job. Thank you.

Thank you. [Operator Instructions] Our next question will come from the line of Koji Ikeda from Bank of America. Your line is open.

Hey, John. Hey, Steve. Thanks for taking the questions. Congrats on a nice finish to the year here. I wanted to ask a question on the guidance really in the confidence, what's giving you that confidence in the guidance for fiscal 2023. You did talk in the prepared remarks a lot of great data points on new logos, expansion deals and even the momentum hitting into fiscal 2023. But given all the macro issues out there and the recession fears out there, what is giving you that underlying confidence in your guidance not only from an absolute number, but you essentially raised the growth rate to 20% at the midpoint?

Well, I'm happy to start John, and maybe you could – I mean, Koji, I look the business is, it truly is strong across the board. We do have some visibility out into the year in terms of our pipeline and the opportunities we're seeing in the field are, yes, everyone has some concerns about recession, we understand. But our business in particular, there's certain parts of the equation in the world that really aren't a factor for us. We feel we're not subject to oil shocks and logistics, supply chains. And our clients are doing pretty well and are really looking to adopt our solutions and put them in and make themselves better as affirmed. So we're just seeing good balanced opportunities across the board. We certainly run scenarios in a lot of directions about what might happen and feel pretty good about this guidance. We really do.

Great.

I would only add…

Oh yes, go ahead. Sorry.

I would only add that we are looking at the possibility of inflation and recession effects on the business. But we did grow through the 2008, 2009 recession successfully as a bootstrapped business. This end market is relatively durable and has weathered downturns in the past much better than many of the other industries. So I think its part of our general positioning towards the professional and financial services industry that helps us in the situation. We're going to watch it.

Okay. Got it. Thanks, John and Steve. And just one follow-up here, thinking about services margin, looks like subscription gross margins still pretty strong at 80% plus, but services a little bit of a drag on overall gross margins. So how do we think about margins in the services business kind of going forward from here? Thanks guys.

Yes. Actually Koji, I’ll add to that question, it is a very important focus for ours in the coming year. We are going to – those margins will get better as the year goes on. We are very focused on that. We've talked for a while about having built a big organization and services that's capable of managing a much bigger book of business and to do so well. And we feel we are now at that place and we expect to drive better margins consecutively all year long in the services business. So that's a key focus for us.

Yes. Got it. Thanks, John and Steve. Thank you so much.

[Operator Instructions] Our next question will come from the line of Matthew Kikkert from Stifel. Your line is open.

Hi. This is Matthew on for Parker. Thanks a lot for taking my questions. First off, I want to continue talking about the really nice NRR increase that you saw 4 basis point increase over the past year. You mentioned upselling and cross-selling as drivers there, but are there any specific products, applications or verticals that are also driving a majority of that expansion?

Thanks, Matthew.

Well, I – John, did you want to…

Go ahead.

Yes. I was just going to say, it actually is fairly balanced between let's say professional services and financial services. And as you know, we tend to land in a number of different places and then therefore expand in a number of different places. I wouldn't – I don't think I would call out anything in particular. I think it is an aggregate. My view is as an aggregate sense that the market sees our solutions as valuable and we land and people are ready to continue to buy and to add to their solution set with us. It maybe that our increasing cloud percentage of our business makes that a little bit easier and quicker to do, which is positive, but I wouldn't call out anything particular.

Okay, great. And then secondly, I was wondering if the current macroeconomic conditions have impacted the pace of any cloud migrations for any of your clients, or has it been pretty steady?

Yes. The cloud migrations have been pretty steady. Typically, we are doing them now often when a client is ready to buy some new cloud functionality, a number of our clients for example, might be what we call hybrid clients. They have both some on-premises and some cloud business. They want to buy some more cloud business, and that's the time at which it makes sense to migrate everything to the cloud. But that's been pretty steady quarter-after-quarter in line with our expectations in the modeling and the discussions we've had with everybody, and we see that continuing.

Okay. Thanks for answering the questions and congratulations on the quarter.

Thanks.

Thank you.

Thank you. [Operator Instructions] Our next question comes from the line of Brian Peterson from Raymond James. Your line is open.

Hey guys. This is [Chase] on for Brian. Congrats on the great quarter. We've seen a couple of banks out this week announcing that they're returning to office. I was just curious kind of high level, how you guys are thinking if there's any kind of impact on your end and banks start to get back to the office if they're looking to take on bigger projects or whether that's migrations or bigger upgrades, expansions, et cetera?

Yes. That's an interesting question. We have started going back to the office more frequently ourselves. And obviously some of the banks have asked their folks to come in five days a week. I don't think we've seen a ripple effect of that to the buying patterns so far. I will say that the whole COVID work from home change really adjusted folks' expectations of how their technology environment needed to support them in a hybrid experience or even in a highly mobile experience. And so a lot of the demand that we're getting is still coming from this mindset change that they had to get to the cloud, and they had to get a modern infrastructure for their people because the chalk of working from home instantly a few years ago was just not satisfactory to a lot of the firms of all sizes across these industries. And so I think that's helping us generally as a trend. And we'll see what the total work from home shift to potentially going back to the office full time has, but so far, we've seen very strong demand across the board, regardless of whether people are in a hybrid model or asking people to go back all the way.

Got it. Makes sense. And then just one follow-up, you mentioned building out the go-to-market motion in the Singapore in your prepared remarks. I was curious how you're thinking about [indiscernible] initial sales hiring target that you had to fiscal year? Thanks.

So I don't think we're breaking out specific numbers there. We have been in Asia-Pacific over the past decade, serving the market from Sydney, Australia, and that office has continued to grow. And as we've encountered more word of mouth and referrals, which is the general way that our business has grown into some of the other parts of Asia, Singapore was a natural place for us to expand to. So we've opened an office there and we've put a group there. We've actually won some clients there before we opened our office. So that's helped us. And now we're going to serve part of Asia-Pacific from that location. And we've got good demand across the region, which is exciting for us.

Good to hear. Congrats on your quarter. Thanks, guys.

Thanks.

Thank you. [Operator Instructions] Our next question comes from the line of Terry Tillman from Truist. Your line is open.

Yes. Can you all hear me?

Yes.

Yes. Hey, John, Steve and David, and congrats from me as well. I had two questions. First question is the cloud ARR, tremendous growth, you're going to have to deal obviously with the law of larger numbers, but anything you can share about, just given what you've got with your pipeline, the market opportunities, the expanded products, how we should think about the cloud ARR momentum continuing through the year, and is there any seasonality? And kind of related to cloud ARR, could that have a continued nice step up, the 60%, how to think about the step up from 60%? And then I had a follow-up after that. I think that became a three-part question.

Well, I'm happy to start. The step up will continue regularly as we go forward. We're selling all new cloud and those percentages from 60 will keep moving up regularly. And then on top of that, we're doing some modest migrations every quarter and every year as we've discussed. I don't think there's any meaningful seasonality. I mean, there's a little bit. We have had a history of a little bit of seasonality in professional services, as you may remember, but generally speaking, this should march pretty sequentially pretty regularly. And yes, other than the law of large numbers, as you say, we don't see anything stopping the momentum we're having now in the cloud sales business. So we would expect pretty good – pretty reasonable continued progress there.

Okay. Got it. And you have two major kind of flagship product area serving different markets, but I mean, I've been impressed today to hear about some brand new things going on, real estate investments and kind of just real asset markets and then potentially into this in-house legal market. Can you kind of stack rank those two opportunities and just share with us, maybe how needle moving they could be individually as it relates to cloud ARR? Thank you.

Thanks, Terry. We're excited about both of them. On the real estate side, historically, the DealCloud business got started mainly in the private equity firms, the classic private equity firms. And over the years, we've moved up to some of the largest of those. And when you get up market, you enter a category of firm that's doing many different investing strategies of which private equity is just one and real estate is another adjacent. And some of our largest clients asked us, can you help us with real estate too? And as we looked at it, we discovered how similar the coverage model is, and the whole industry specific data architecture that we have in the industry graph data model that we built into the system that really differentiates it from the traditional CRMs was perfect for supporting them with the real estate investing strategy as well. So we had to change some of the data that we bring in. We had to create some more capabilities to look at real estate specific information like geographic map information, but we were able to do that. And once we were able to serve some of these large multi-strategy firms with a more well-rounded whole solution, we were able to enter the real estate investing category generally, including the firms that invest specifically in real estate and don't have, for example, a private equity component to their business. And it's a huge space in private capital. So it's a growth area for the private model of asset management is just the way that private equity is a growth model versus traditional public markets. And we have a fantastic system that serves that. So we think there's going to be a lot of growth there for a long time. Private equity is still growing itself, and there's more within that, that we can build out going forward. So we're very excited about that as an expansion for us. And then in-house legal, we have a long history serving the law firms, the large partnerships that are working on legal deals, advising on deals and disputes. And there's a circulation of professionals from the law firms to the in-house legal departments and back over the careers of these folks. And we've had more and more referrals and demand from people who said, oh, I used Intapp in my law firm. Can I use it here too? And it turns out – that's a very large section of the lawyers working in corporate deals in-house. And so that's a space where we're getting natural client-led market expansion to a second adjacency. And we're excited about both of them because they're good examples of this industry specific data architecture serving, the professionals working in a whole range of areas. And it's one of the reasons why we think that this SAM and TAM that we're chasing is actually quite a significant underserved industry where the professionals working on these deal types and the advisors advising on these deal types across the market have just been underserved over the years. So we're optimistic about what we can do in each of those in addition to the markets that we started in.

That's great. Thanks for the color.

Thank you. [Operator Instructions] And our next question comes from the line of Brian Schwartz from Oppenheimer. Your line is open.

Yes. Hi, John and Steve. Thank you for taking my questions this afternoon. One for John and then one for Steve. John, I was just wondering if you talk a little bit more about what you're seeing in the evolution of the pipeline specifically, just curious if you're seeing the same cadence of the number of opportunities or projects that are entering the top of the funnel, then say, what you saw three months ago or even earlier this year. And then the question for Steve is just in regards to kind of the guidance as you thought about the guidance. I was just wondering if you pushed it all for more pipeline coverage, when you formulated your guidance given kind of the potential issues that could emerge given the macro conditions that we're facing here in the second half of the calendar year? Thanks.

Thanks, Brian. So we're watching the pipeline carefully. We have not seen an impact from macro change on the number of deals or sales cycles and it gives us some confidence that there's some strong fundamental demand here. Obviously everybody is watching the economy and we'll see what happens, but so far specific to your question, no, we haven't seen a change in the last three months or otherwise.

Yes. And Brian, no, I don't think that we are pushing anything here in terms of guidance, in terms of more coverage. I think we are seeing more pipeline – we've been seeing more pipeline for a while, which is why we feel comfortable here in part with our guidance and the way that business is moving here for momentum perspective and it's balanced. And as John just said, we've got some new opportunities that are starting to develop. So, no, I think, but we certainly – look, we've run scenarios. We've thought about and tried to think – work through some of the macro issues out there and we've landed in a place we feel comfortable with, definitely, so not pushing here necessarily at all. Just this is how it feels the way the business is running right now.

Thank you.

Thank you. There are no further questions in the queue. I'd like to turn the call over to John Hall for any closing remarks.

Well, thank you all for spending some time with us. We're excited to be kicking off fiscal 2023 with some strong momentum here. I'd like to say thanks again to the whole team for helping us execute, especially successful first year as a public company and to you all for spending some time learning about us and covering us. We'll look forward to talking to you in just eight weeks at the Q1 report.

This concludes today’s conference call. Thank you for participating. You may now disconnect. Everyone have a great day.