INTA - NASDAQ

Good day and thank you for standing by. Welcome to Intapp's Fiscal Third Quarter 2024 Webcast. At this time, all participants are in listen only mode. After the speaker's 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 first speaker today, David Trone, Senior Vice President of Investor Relations. David, please go ahead.

Thank you. Welcome to Intapp's fiscal third quarter 2024 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 fourth quarter and full year 2024. 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. As a reminder, all of our financial figures we will discuss today are non-GAAP, except for revenue and revenue growth and current remaining performance obligations. 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.

Thank you, David. Good afternoon, everyone. Thank you for joining us, as we share the results of our fiscal third quarter. We had an exciting quarter filled with events and announcements that I'll recap for you today. In Q3, we announced the release of new generative AI capabilities designed for the specialized needs of our target markets. We hosted our inaugural Investor Day. We held successful client and partner events. We acquired AI provider delphai and we updated our Applied AI intelligence applied branding. We also drove strong results through the acquisition of new logos and the expansion of our existing accounts around the world. In Q3, our cloud ARR grew to $274.2 million up 33% year-over-year. Cloud now represents 72% of our total ARR of $382.7 million. In the quarter, we earned SaaS and support revenue of $80.8 million up 22% year-over-year and total revenue of $110.6 million up 20% year-over-year. Before I go deeper into our third quarter highlights, you may have seen that just last week, we announced the acquisition of Transform Data International, a long time Intapp partner that builds and implements enterprise collaboration technology. We believe the combination of Intapp's solutions and TDI's domain expertise will optimize our clients' work within Microsoft applications, facilitating collaboration and laying the groundwork for the use of more advanced AI tools like Copilot. We're pleased to welcome the TDI team to Intapp. Now I'll turn to our Q3 highlights, beginning with product innovation. In February, we celebrated intelligence applied launch day at NASDAQ Marketplace in New York. After ringing the opening bell, we held Investor Day followed by a standing room only client event. There, we unveiled our intelligent supply strategy, which further strengthens our commitment to leading vertical AI for the markets we serve. We also released a set of new applied AI capabilities under our Intapp Assist product brand. I'm pleased to be able to share a bit more about these with you now. First, we launched Intapp Assist for deal cloud, which integrates AI into everyday workflows to save professionals' time by generating deal, company and meeting summaries and creating relevant personalized targeted email outreach. Leveraging our partnership with Microsoft, the solution uses both Azure OpenAI and Intapp's proprietary firm data within deal cloud to generate much more knowledgeable language about the firm's deals, clients and engagements, a significant advantage that helps the AI deliver more relevant accurate results for our professionals on the first try. Intapp Assist for deal cloud is now generally available and it has already been adopted by clients including corporate law firm, A&L Goodbody and the investment team at U.S. Realty Advisors, who chose deal cloud to replace a legacy horizontal CRM that required modification to meet the firm's needs. USRA view deal cloud as a long-term investment to future proof their business and our platform stood out due to its real estate blueprint, impressive roster of client adopters and now new applied AI features like Intapp Assist. The power of generative AI depends on data, which is why we released Intapp Data as a solution available to all DealCloud clients. Intapp Data augments firm's internal intelligence with information on more than 85 million companies and 200 million contacts, plus even more connectivity with third-party data partners. This nucleus of core data is critical to our application of generative AI so that our results are specific, accurate, relevant and actionable. Drawing on our successful partnership with Microsoft, we welcomed their executives to the stage at our launch event as we shared the release of Intapp Walls for Copilot, a new solution that combines the power of Microsoft's technology with our industry specific expertise and innovation in regulated markets information security. Intapp has long helped firms take control of their sensitive information with our Walls solution. Intapp Walls helps control access to information for each professional based on their unique rights under their client and regulatory obligations. Intapp Walls for Copilot extends this ability to AI, giving firms' visibility and control over the data that Copilot is authorized to access and surface for each user. It processes complex overlapping policies and rules governing each professional and the firm's body of work and translates firm policies into native security controls for each system that may contain sensitive information. Walter Copilot is yet another example of the combined power of Microsoft's technology with Intapp industry specific expertise and innovation. Our partnership with Microsoft continues to add value in other ways. In March, technology leaders from some of the world's most prominent accounting, consulting and law firms attended our second annual CIO Summit in Redmond. During this two-day event, CIOs, Intapp leaders and Microsoft Executives dug into the key issues they face today, including innovation, best practices and change management needed to support these markets as we move into the generative AI era. Attendees were enthusiastic about both the event and the potential for continued innovation between our organizations. Returning to our launch event. The last new solution we revealed originated from a market research initiative that we conducted last year with DCM Insights. We studied business development behaviors and habits at partner led firms. The research findings identified with strong data that professionals who behave as activators, people who make understanding and connecting with networks part of their daily habits tend to be the most successful in their firms. Using this research, we developed and launched the Activator experience for deal cloud. To help facilitate professionals' successful behaviors and habits using AI powered signals. The solution helps each professional to be more conscious and consistent in these behaviors to drive more success in their business development activities. Finally, we shared that Intapp was acquiring Berlin based Delphai, a cutting edge organization that applies AI across public data, ensuring that firm graphic data is collected, structured and presented to professionals with critical provenance. In an era where more and more content is AI generated, provenance is critical and its significance can't be understated in our industries who make foundational promises of trust and accuracy each day. The acquisition of delphai is a big step forward for Intapp AI strategy. Delphai brings a brilliant team of data scientists, AI engineers and researchers who further augment our already rich AI talent. We believe delphai's AI models and tech stack will help form the next generation of our data foundation. Intelligence Applied Launch Day was a big day. Judging from the response, it was for our clients as well. Reinforcing our vertical AI positioning and offerings has led to a groundswell in activity, creating even more applied AI conversations in an already active client base and spurring new meetings and demonstration requests. The strong interest only reinforces how well positioned we are to take advantage of this moment through our Applied AI strategy. Okay. Turning now to client wins. I'd like to share just a few examples of how we're continuing to grow our client base and expand our global reach. First, I'm pleased to share that we continue to grow our client base with new logos, including a leading European consulting firm who purchased Intapp Collaboration and is now live on thousands of seats across APAC, EMEA, and LATAM with the North American go live planned this year. They selected Intapp Collaboration to help manage teams sprawl, automate team governance and streamline asset archiving. They are now managing their proposals, projects and exceptions on SharePoint and Teams within our solution. Additionally, in Q3, several firms became new clients after having tried to use a horizontal legacy CRM to meet their industry specific needs, which proved unsuccessful. A few examples of this. Real assets investment firm, Fengate, who selected DealCloud based on our industry expertise and specialized focus and our ability to support their specific asset management workflows. Private equity firm Flexpoint Ford, who selected DeelCloud to centralize firm deal and industry intelligence. DealCloud won out over other solutions due to its market leading brand and ease of use for the firm's professionals. And Generate Capital who replaced their legacy CRM with DealCloud to manage the needs of their investor coverage, capital markets and investments team. DealCloud has the ease of use and out of the box purpose built features that their previous system lacked. Additionally, cross-selling and upselling success in our existing accounts continued to drive net revenue retention. For example, investment banking firm, Perella Weinberg, who were already live on our conflict solution now added in Intapp Walls. The firm will use walls to create necessary barriers around sensitive information, manage SharePoint permissions and security, and track user activity to maintain regulatory client and the firm's own risk and compliance requirements. As a second example of cross-selling and upselling, law firm Warner, Norcross and Judd, a longtime user of our Thyme solution added DealCloud and our Conflicts solution to support its firm wide growth strategy. Tom Smanik, Warner's Director of Business Development and Marketing shared that as part of the strategy, the firm encourages its attorneys to deepen their relationships with current clients while also nurturing their networks to source new business. He believes that DealCloud will help attorneys facilitate growth by providing relationship management, intelligence and outreach capabilities all-in-one easy to use platform. And the third example, UK based law firm, DAC Beachcroft added our collaboration solution to its Intapp stack, which already included Intapp Time and DealCloud. David Aird, the firm's IT Director, said they are looking to better leverage their investment in Microsoft 365 to align with how they believe their lawyers will use AI innovations like Microsoft Copilot. They believe the work Intapp is doing to deliver legal specific modern work tools in partnership with Microsoft will help safely drive innovation across the firm. And in a large final example, one of the world's largest accounting firms and existing Intapp client selected our employee compliance offering to automate the auditor independence attestation process. Previously, the firm had relied on a time consuming error prone manual process that required data entry duplication, navigation of multiple systems and poor data quality. In conclusion, we're proud of our strong third quarter performance and we're pleased with the level of continued innovation and meaningful touch points that we achieved with clients, partners and investors over the course of the quarter. We are also pleased with the response and interest in our new intelligence applied AI capabilities and optimistic about our continued growth opportunities with them. With our intelligent supply strategy, we believe that we are well poised to be the vertical AI leader for the industries we serve. As always, I'd like to thank our clients, our partners, our investors, our Board and our global Intapp team for their teamwork and dedication. Thank you all very much. Okay, Dave, over to you.

Thanks, John, and thanks everyone for joining us today. I also want to express my gratitude to all who participated in or listened to our inaugural Investor Day this past February. We are thrilled about the strong trajectory and future of this company. To that end, I'm pleased to report our solid third quarter performance driven by strong cloud ARR growth and expanding customer base and enhanced operational efficiency within the quarter. These achievements collectively position us to further extend our leadership as we embark on exciting market opportunity in our fiscal Q4 2024 and beyond. SaaS and support revenue was $80.8 million up 22% year-over-year, reflecting sales to new clients and expansion of existing clients from both cross-selling and upselling sales motions. Subscription license revenue was $16.5 million up 22% year-over-year, largely due to a couple large clients opting for multiyear on premise renewals. With that said, 91% of our clients have at least one cloud module. We will continue to temper our multiyear renewals as we work with our clients to transition their on-prem to cloud in the coming year. Professional services revenue was $13.3 million marking a 7% year-over-year increase. This growth rate aligns with our deliberate strategic shift to deemphasize professional services. The ongoing success of our industry solutions further contributes to clients realizing quicker time to value through an expedited implementation process. Total revenue was $110.6 million up 20% year-over-year, driven primarily by sales of our cloud solutions and growth of subscription license revenue. Our international business presents a growth opportunity to expand and invest in utilization of our platform beyond the U.S. Revenue generated from our international operations remained robust, accounting for approximately 30% of total revenue for fiscal Q3. Our partner co-sell motion is gaining significant traction, driven by a partner influence and sourcing and the adoption of some of our partner products. I'm pleased to announce that we have recently onboarded six new partners, further enriching our network. Additionally, we have strengthened our relationships with five existing partners, enhancing our ecosystem even further to 125 in total. Q3 non-GAAP gross margin was 75.1% as compared to 71.7% in the prior year period. Non-GAAP operating expenses were $71.9 million and $8.8 million increase year-over-year as we continue to invest in product development and go-to-market to support our growth. As we continue to focus on our operational efficiency, our non-GAAP operating profit was $11.2 million as compared to $2.9 million in the prior year period. Non-GAAP diluted EPS was $0.14 in the third quarter of fiscal 2024 as compared to $0.03 in the prior year period. Free cash flow, which is defined as our cash flow from operations less capital expenditures, was $16.1 million for the third quarter or 15% of total revenue. We exited the quarter with $187.4 million of cash and cash equivalents. Turning to our key metrics. Cloud ARR was up 33% year-over-year and total ARR was up 21% year-over-year. Total remaining performance obligations were $467.9 million up 23% year-over-year. Overall, we remain committed to executing our land and expand model concluding the quarter with over 2,450 clients and among those 673 had annual recurring revenue of at least 100,000, up from 572 in the previous year. Our net revenue retention rate underscores our ability to retain and steadily expand business with our existing customers. This key metric was 115%, which continues to track within a range of 113% to 117%. Our cloud NRR in Q3 FY24 was 120%. Now turning to our outlook. For the fourth quarter of fiscal '24, we expect SaaS and Support revenue of between $83.5 million $84.5 million and total revenue in the range of $111 million to $112 million. Non-GAAP operating profit in the range of $10.5 million to $11.5 million and non-GAAP EPS results of $0.11 to $0.13 using a diluted share count weighted for the quarter of approximately 81 million common shares outstanding. For the full year fiscal 2024, we expect SaaS and Support revenue of between $314.5 million and $315.5 million and increasing our total revenue in the range of $427 million to $428 million. We also expect non-GAAP operating profit to be in the range of $35.5 million to $36.5 million. And non-GAAP EPS in the range of $0.42 to $0.44 using a diluted share count weighted for fiscal year 2024 of approximately 81 million common shares outstanding. Thank you. And I will now turn the call back to the operator.

Thank you. At this time, we will conduct the question-and-answer session. [Operator Instructions] The first question comes from Koji Ikeda with Bank of America.

Hey, this is Natalie Howe on for Koji. Congrats on the quarter. I wanted to ask about your levers for margin expansion because you guys have really done a nice job there, especially in sales and marketing. Going forward, how will you balance investing in the platform and AI with margin expansion?

Thanks, Natalie. We have a strong opportunity to take advantage of this moment in generative AI and AI more generally. And I think that this launch that the team executed in February was an excellent moment to communicate to the market how far we had come in bringing Applied AI throughout the platform. You really saw the culmination of quarters and quarters of work there, and I'm so proud and thankful to the product team and the launch team for helping us communicates so clearly what we can do for this special market with applied AI. So you're going to see that as the beginning of an ongoing road map under this intelligence applied strategy to continue to bring out more and more applied AI and generative AI capabilities throughout all of the products. In fact, the Intapp Assist product brand, we talked about Intapp Assist for DealCloud, but we also talked about the fact that in the future, you will see Intapp Assist for additional components of the platform. So we're committed to a road map of increasing capability using this applied AI moment and technology throughout the platform. That being said, I do think we're getting good leverage. Dave, you can talk a little bit more about this as we grow for a whole variety of reasons. And, we shared at Investor Day that we're going to continue to demonstrate some of that as the model scales.

No. You're absolutely correct, John. We've been working really diligently within the respective teams, just enhancing our own operational efficiency as we continue to scale to the $1 billion attributes that we discussed on February 22nd. So you can view that across all of our key Fin types across the P&L, whether it be product and engineering, sales and marketing, as well as G&A. So there's more to come there as we manage those respective levers and processes. With respect to our own product and offerings, we've been working really hard with the respective teams on our pricing and packaging and what have you to make sure that we can monetize these respective feature sets that we brought forward here in this current quarter as well as into FY25.

The next question comes from Kevin McVeigh at UBS.

Great. Thank you so much. And let me add my congratulations as well. Hey, I don't know who this should be for, but it seems like the Microsoft Alliance and the KPMG alliances continue to scale, which we really think is just a terrific opportunity. David, is there any way to maybe frame how much revenue comes from them today? And are you starting to see some of the implementation work go through KPMG? And is that helping drive some of the leverage you saw in the quarter? Because obviously, there was a nice outcome on the leverage as well as revenue. I wanted to start there if we could.

Yes, for sure. We haven't talked about the absolute opportunity or the pipe that they brought, but just know that it is starting to become a more enhanced motion for us. But we're still very early innings. But we like these respective partnerships and more, and we'll continue to use this, as an accelerator as we discussed, going forward.

And then when you think about, I guess, going to those on-prem renewals, how should we think about the timing on that just given how much emphasis there has been from a Gen AI perspective? How are you balancing those on-prem with the Gen AI opportunity more broadly?

Yes. It's a nice balance. In fact, if you want access to the newer technology, you need to be in the cloud. And so it's a push pull motion. When we come back around in FQ4 and provide FY25's annual guidance, we'll provide some more insight into that as what it means to that specific line item. But just know that behind the scenes, operationally, the team is working very hard with our respective clients and supporting their narrative or trying to accelerate that motion, to go more and more into the cloud.

And the next question comes from Steve Enders with Citi.

I guess maybe just to start; I guess it would be good to hear what you're kind of hearing out there in kind of the macro environment and the deal environment. And I guess maybe how it's changed versus some of the maybe weakness you're seeing in financial services last quarter? And then I guess as well like I think the SaaS and Support line maybe is kind of more in line with what we typically seeing the execution there. So is there anything to call out to that may have kind of impacted that line in the quarter here?

Yes. Thanks, Steve. So, we look at the market opportunity as a meaningful underserved industry that traditionally did not benefit from the digital transformation movement that benefited every other industry because these firms are organized in a special way as partnerships and because the type of work that they do is not selling widgets through a sales force, but they are developing and working with clients or investment opportunities deals on the basis of their expertise. And so the space here is pretty significant for us to grow both the new client acquisition and in client expansion. And one of the things we emphasized on the best day is how significant the SAM and TAM really are for this underserved space that I think people have kind of overlooked. We've got excellent examples now, and we talked about some of them in the script here of firms that are meaningfully expanding their footprint across our platform, and we think that's going to be a very strong growth driver for us as we grow the business. In terms of the macro, I think we've shared with you all that there are areas of our market that have survived very well through some very turbulent times, more turbulent than this, and we've actually successfully bootstrapped the business all the way through the 2008 recession and other periods because the law firms always do well, the accounting firms always do well. More and more of the professional services firms that we sell to have a very stable business. We said if there's any place that there is some potential variability for us, it's probably investment banking. We talked about that. But you know, a lot of the firms that we talked about on the last call did come through and buy for us. We actually talked about one of them here in the script, and some of them we're still working on. So it's a pretty good setup for us as far as growth goes looking forward. We're cautious as always, and we try to be prudent, but I think we've got a very good story to tell. And this Intelligent Supply launch event really put us into a conversation with so many of these firms that are trying to figure out how do they take advantage of AI in their specialized industry that's highly regulated. How do they do it? And I think we brought a whole recipe for them to how to get their professionals empowered with applied AI in a way that actually works for their marketplace, and we're going to continue to roll that out. So we're encouraged.

And then I guess coming off of that event, I guess where have you kind of seen the most, are there any particular products or solutions that are seeing kind of the most interest coming off of that customer event? And I think you mentioned you're beginning to see a groundswell of interest and you have an increase in conversation. So I guess any way to kind of frame how you're kind of viewing the timeline or potential of those conversations converting?

Yes. So one of the things that has really helped us, and I think this is not a surprise, but the whole world's been talking about generative AI for a year or more, and everyone is super excited about it because they've gotten to try the consumer experiences. What we're really finding is that the firms are looking to suppliers like us with a real knowledge of the workflows and the data and the users in these industries and in our industry solution strategy in our blueprints that we bring out for how do they practically take advantage of the generative AI opportunity in a trusted way that's consistent with their compliance and regulatory obligations. This is kind of the trick here for this specialized industry is how do you bring a practical set of answers to people where they can get real value out of the potential of this in a trusted way. And so we've seen good response, very exciting conversations across the board, whether it's Intapp Assist for DealCloud, our Intapp Data Solution, which provides the foundation for a lot of the applied AI that we're rolling out, the Intapp Walls for Copilot solution, the Activator Experience or DealCloud, which is helping the firms with business development. These are all areas that we've had very strong response. And in fact, we're having multiple conversations with the same firm across different aspects of this. And I think as we continue to roll out more of the applied AI capabilities across different aspects of the platform, you'll see it become a bigger and bigger central component of what these firms are trying to do. So, very exciting times for us to be bringing all this out. It was one of the biggest quarters we ever had from a release standpoint. I just can't say enough about what the team did to get these products into the marketplace. It was awesome.

The next question comes from Parker Lane of Stifel.

Looking at the 100,000 ARR customer ads, compared to last year, it looks like you're tracking slightly ahead. John, is that reflective of you guys landing larger with either bigger clients or more product initially? Or is the majority of that continue to come from long standing customers who are just naturally expanding with you?

Well, it's a little of both. We are landing larger accounts. It's been a conscious strategy of ours to move into some of the larger enterprise class firms. And when you land even with one component of the platform there, they are bigger deals. They take a little bit longer to land and they take a little bit longer to get up and running, but they're bigger deals. But that number is also influenced by the fact that we have a lot of cross-sell and upsell that happens. So we can land it under a 100,000, and expand within the account, and it'll move over that number and you'll see that change too. So you get a little bit of both in that increase.

And then Dave, one for you real quick. Professional services, I know you guys are sort of deemphasizing the component that you do with that. What's the ideal mix in your mind going forward over the sort of mid- to long-term of professional services revenue as a percentage of this total business? Thanks.

Yes. I would say over the longer term, it should be in the range of 10% or less. As we navigate that between here and the future and obviously facilitating our clients first, we'll continue to get in that zone. But that's kind of where we're headed.

The next question comes from Saket Kalia with Barclays.

Hi, guys. Thanks for taking my questions here, and apologies in advance I joined late, so apologies if these were asked. John, maybe for you, great to see the net new ARR on cloud kind of bounce back compared to what we saw in Q2. I'm curious as we sort of had 90 days to look back on Q2, I mean, I think we talked about maybe just the investment bank vertical being a little softer. Anything that you've kind of learned postmortem on what maybe drove that, what I'll call a dip in sort of net new ARR and then sort of the commensurate recovery that we've seen here in Q3?

Thanks, Saket. Well, we did talk about the fact that within the year people were doing some budget management and looking carefully and what we saw is that some of the deals that pushed came in. So we're very excited to see that. It was a good sign that people are committed to making this transition. And for large deals, particularly to the earlier point, as those become a bigger part of our story, they have a little bit more variability in their cycle, but when they come in, they can really help. So we're excited about the progress that we're making there, and I think it's a good sign more generally.

Dave, maybe for my follow-up for you. I know that we don't guide to ARR or net new ARR, but is there are there any sort of broad brushes that you'd give us here in Q4, whether it's seasonality or product launches or any way that you kind of have us think about sort of net new ARR here in the June quarter just as we sort of fine tune our models?

Yes. Thanks, Saket. We're still looking at how we're monetizing a lot of our new product offerings as John had narrated on. I think it was probably one of our biggest releases ever in the history of Intapp. And so there's a lot of opportunity there for us as we think about not only in FQ4, but also as we enter FY25 and really galvanize the opportunity ahead of us as well as the market and client need. And so there's a lot of puts and takes to that. But I think where you're seeing has come off is more of a succession and really embarking or taking kind of what we've learned and see in that market and continue to build ahead into this next 90 days. And so, again, we're going to continue to be very prudent, but then also drive towards the plan as we put forward here today.

The next question comes from Alex Sklar with Raymond James.

John, first one for you. Just on the TDI acquisition, bolstering the collaboration product suite. You had a nice large customer win with collaboration this quarter. Can you just tell us what this acquisition does in terms of maybe driving more penetration of your collaboration product broadly? Is that kind of the thought here? And then Dave, any color on the financial contribution in the fourth quarter or kind of annual revenue from Delphai or TDI going forward? Thanks.

Thanks, Alex. So we're very excited about the team from TDI joining us. They have particular expertise in collaboration solutions for several of our end markets, including legal. They have been working with us in a partnership for a very long time, and their technology was actually developed to work with ours. So this is a great example of using M&A selectively to really strategically expand quickly some of the capabilities that our platform can bring to market in specific segments. So that's absolutely the goal that matches our Microsoft partnership as well. This is very much about helping our clients to get the most leverage out of their Microsoft 365 investment, which has just taken over the market, and to bring the features and capabilities that you need as a professional services firm or a law firm or investment bank or a private capital firm to really start to manage your knowledge and your content successfully in Microsoft 365 in a compliant and organized way. And so, it's a very close acquisition that should really help us as we continue to grow that that component of our strategy.

And then, I guess one for you, Dave. Just it's been over, I think it's just been just over a year now since you kind of updated that NRR range to 113 to 117. And as you look kind of over the next 12 months or whatever timeframe you want to think about, based on what's on the pipeline and other is that still the right range to think about for NRR? Are there any other puts and takes to be aware of? Thanks.

Sorry. I didn't unmute the button. But, you know, as we think about those puts and takes, the 113 to 117, that's very much operationalized within the company. I think the math that we're quite candidly more focused on is the cloud NRR and continue to drive that motion because that's the real behavior set. And so, you know, as we all move a lot of our on-prem to cloud, that gives us an additional opportunity there as well as facilitate broader portfolio conversations with our existing clients. And so, I still think there's an opportunity across all of our product suites that we offer to all of our clients, and nobody's really fully saturated. And so we just view that kind of more of a, as a guiding post here for us as we transition more and more to the cloud.

And the next question is from Terry Tillman with Truist Securities.

Hi, this is Dominique Manansala on for Terry. Thanks for taking the question. So considering firms previously so considering first previously voiced concerns with using Gen AI, especially those within highly regulated industries, I'm just wondering if you've heard any feedback on Walter Copilot common these fears and could you double click on how customers have been using this product thus far and how it's affected that tone or that hesitation?

Thanks, Dominique. Yes, we're very excited about this because two reasons. One, the issue of generative AI has everyone interested and excited. People really do believe in these end markets that the generative AI era is going to transform the way that the professionals execute their work. People aren't really debating whether that's going to happen. The big discussion is how and in what areas, and to your point, what kind of governance and information security and compliance capabilities are the new systems going to need to have in order to enable people to successfully use this. And so you're hearing a lot of themes from us that are very specific and steeped in our history of compliance and information governance, specifically for these professional firms. So the issue of provenance, you heard me talk about in the Delphai acquisition story, and then Walls is a well established product line for us. We really defined this category for these end markets where they're looking for semantically based information governance that's very distinct from the traditional information security type of solutions that you might see in the horizontal mark. These professional firms really need a system that understands what a information barrier is; the kinds of semantic taxonomy that you need to really enforce those kinds of walls. And we have a great portfolio of reference customers that have been working with us in this area for a long time. So it was very natural for them to see us as people that could bring a solution for the generative AI here and how we can help them roll out, Microsoft Copilot and other generative AI solutions successfully. So we've had very positive conversations across the board, and we have had firms start to say, you know, we don't think that we can roll out Copilot without having a solution like this given the regulatory obligations that we live within. It's not a shortcoming of the excellent Copilot technology. It's just that if you look at the way the firms do their information governance, they have to put something like this in place to be able to take advantage of Copilot's capabilities. So we're excited about where this can go.

The next question comes from Matt Vanvliet at BTIG.

Obviously, the applied AI strategy was just launched recently, but curious on how you're planning to fully monetize sort of a lot of these product releases. You're anticipating having sort of standalone SKUs that are premium modules to what you're offering now or is this really about enhancing the value of the product out there being able to sell more product to existing customers? And sort of wrapped within that, should we thing about this being able to push that cloud NRR number higher throughout this year as existing customers take on more and more of the applied AI?

Thanks, Matt. So as far as monetization goes, it's a mix. So we have some of the capabilities that we announced we are including because we want to help firms take advantage of applied AI and use it inside our system. We think it's a differentiator. We think we want to be the company that is the vertical AI leader for them, and we also have a strategic interest, particularly with things like Intapp Data, in getting more data into their environment that we can run the AI on and then bring in third-party additional data to help augment the information that the firms are using AI to analyze and work with. So there's a component that's included. But in addition, we absolutely are creating stand alone SKUs for several of these components, and it's early, we just announced this in February, and we've been working with customers early on. We've got a ton of interest, and we announced some of the wins, not all of them, but we announced some of the wins on the call to help see, help everybody see, look, this is real. At the same time, we're going to be prudent about how fast this goes. We need to sort of understand exactly what the rollout experience is like. We want to make sure that we continue our tradition of doing a great job with that, to get the right clients with the right references working across the market. So it's a product rollout like any other that takes the normal kind of time to get folks up and running. But I think generally speaking, it's a great portfolio of new launches for us that should support us as we grow.

And then I guess as you're looking at kind of the year plus ahead as we go into the fourth quarter here planning for fiscal '25, how should we think about headcount growth and maybe more specifically headcount growth in the go-to-market organization? Do you need to add overlay teams or any kind of sales specialist around the applied AI feature set? So how should we think about sort of go-to-market headcount more broadly?

Yes. I think we'll continue to be very thoughtful about our productivity, our cost of acquisition. We're not really looking to add any more overlays into the support of applied AI per se. You know, we've got really good coverage today across each of the verticals that we serve as well as the naming conventions of how we look at whether it be named accounts and or the long tail of opportunities. And so my point being is, yes, there'll be some investments as we continue to invest for growth as we have this year, but it's not going to be out in front of revenue or any other metric.

The next question comes from Brian Schwartz with Oppenheimer and Company.

Hey, this is Ari Friedman sitting in for Brian Schwartz. Thanks for taking my question. I was wondering if you could double click on the AI and monetization. I was wondering is the budget for like the AI queues and AI type of products net new budget like that is being created internally at these companies? Or do you have to like displace some sort of other IT budget or software budget in order to sell it? Thanks.

Thanks, Ari. I think the answer is both of those things. There are firms who through their innovation initiative, have decided that the innovation they want to invest in is AI based, which you would expect. But they absolutely do have AI budgets in many other firms, and that's exciting. As well, I think the AI capabilities are increasingly key differentiators across all of the traditional business application categories in these markets that we've served and others have served for a long time. And so the ability to bring a coherent, integrated, industry specific recipe for applied AI, generative AI to these firms. I think it's increasingly going to be a critical differentiator on win rates and trust of the firms that they're really buying into a modern environment. So we're committed to both. We want to go help the firms who are really trying to push AI into new areas and discover the best applications of this new potential technology for the specific industry solutions, blueprints, workflows for the professionals in a way that other companies we think don't have the industry expertise to really do for this market as well. And in addition, we want to make sure that our whole platform is market leading and competitive because we really understand how to use applied AI to maintain our competitive advantage generally and continue to be the innovators in the space. So we're going to do both.

This concludes our question-and-answer session. I would now like to turn it over to John Hall for closing remarks.

Okay. Well, thank you everyone. We appreciate your attention and your questions. We have a great Q3 behind us. We're very proud of our accomplishments, and we're excited about what's coming next. Thank you for your time, and we'll look forward to talking to you all again next quarter.