Intapp Inc

NASDAQ:INTA

Earnings Call Analysis

Strong Q1 Growth with Positive Outlook

The company had a strong first quarter, with optimism for future growth through new platform capabilities and expanded global reach. SaaS and support revenue grew 29% to $73.1 million, and overall revenue increased 28% to $101.6 million. Gross margin improved slightly to 71.8%, with continued investment in development. Q2 forecasts suggest SaaS revenue of $75-76 million, and total revenue of $102.5-103.5 million, with an operating profit of $5-6 million.

Strong Foundation and Continued Growth

The company has laid a robust foundation with commendable performance in the first quarter. There's a significant increase in the number of clients, particularly those with ARR (Annual Recurring Revenue) exceeding $100,000, showcasing a 20% surge to 626 clients. Additionally, the company is seeing a solid year-over-year Cloud ARR jump of 38% to $242.5 million, indicating the increasing adoption of cloud-based services. Total ARR has also risen markedly by 28%, amounting to $350.1 million, which emphasizes the robustness of the subscription revenue model and the strength of the company's growth strategies.

Innovation and Strategic Partnerships

Innovation remains a key focus, with significant strides made in applied AI and the strategic deepening of the partnership with Microsoft. The expansion of applied AI capabilities across the platform underscores the company's commitment to driving modernization and increasing the utility and stickiness of its solutions. The collaboration with Microsoft not only enhances the company's service offerings but also broadens its market reach.

Financials and Profitability

Financial health remains strong, with SaaS and support revenue marking a 29% increase to $73.1 million. Subscription license revenue and professional services revenue have also observed growth, respectively rising by 14% and 39%. Overall, the company reported a total revenue upswing of 28% to $101.6 million. International operations have bloomed, contributing to about one-third of total revenue with significant revenue growth. Demonstrating improved operational efficiency, the operating profit has almost quadrupled from the prior year to $6.4 million, and net income per fully diluted share increased from $0.01 to $0.06.

Fiscal Projections and Market Positioning

Looking ahead, for the forthcoming quarter, the company anticipates SaaS and support revenue between $75 million and $76 million, and total revenue between $102.5 million and $103.5 million. The company also forecasts an operating profit in the order of $5 million to $6 million. For the full fiscal year 2024, the expectation is set for a raise in SaaS and support revenue between $310 million to $314 million, total revenue between $422.5 million to $426.5 million, an operating profit ranging from $24.5 million to $28.5 million, and net income per share between $0.25 and $0.29. This forward-looking guidance highlights confidence in the company's growth trajectory and its robust go-to-market strategy.

Earnings Call Transcript 2024-Q1

[Operator]

Good day, ladies and gentlemen. Welcome to Intapp's Fiscal First Quarter 2024 Financial Results Conference Call and Webcast. [Operator Instructions] Please note that today's conference is being recorded.I will now hand the conference over to your speaker host for today, David Trone, Senior Vice President of Investor Relations. Please go ahead.

[David Trone, executive]

Thank you. Welcome to Intapp's Fiscal First 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 second 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.

[John Hall, executive]

Thank you, David. Good afternoon, everyone. Thank you for joining us today as we share the results of our fiscal first quarter. I'm pleased to share that once again, we've achieved strong quarterly results, supported by cloud ARR growth, new logos and expansion of our existing client accounts around the world.We also released additional new applied AI capabilities to our platform and furthered our strategic partnership with Microsoft. I'll share more details on each of these select growth drivers throughout this call.In Q1, our cloud ARR grew to $242.5 million, up 38% year-over-year. Cloud now represents 69% of our total ARR of $350.1 million. In the quarter, we earned SaaS and support revenue of $73.1 million, up 29% year-over-year and total revenue of $101.6 million, up 28% year-over-year. We continue to expand our client base, with particularly strong growth in clients with over $100,000 in ARR, which totaled 626 clients at quarter end, up 20% from a year ago.Now I'd like to share a few business highlights from our fiscal first quarter. I'll talk first about innovation and specifically our applied AI strategy. Intapp has embedded industry-specific AI throughout our platform and our solutions. We've done this to help our clients use their vast data stores to improve critical processes and make better, faster decisions. Intapp is not a newcomer to AI. Our AI team has been delivering capabilities into our solutions for more than 10 years. We've been leveraging the portfolio of AI technology, including automation, machine learning, deep learning and generative AI. We've applied these across firm operations, including strategy, business development, risk and compliance and work execution. And during this quarter, we expanded our applied AI capabilities.For example, within our risk and compliance solution, we introduced a new applied AI capability that helps firms more easily identify employee conflict and interest before signing an engagement team. This capability leverages our historical strength, in managing firm conflicts and adds employee compliance data, gained in our Paragon Data Labs acquisition earlier this year.Using applied AI to analyze both types of data and make more integrated compliance recommendations helps our clients to win more business by increasing their accuracy and efficiency. This addresses a critical regulatory compliance need, for our financial services clients. And with pending PCAOB regulations, it will be increasingly relevant to the accounting market as well.Leveraging our strategic Microsoft partnership, we also delivered our first generative AI feature, using Microsoft Azure OpenAI services. The feature in this release creates content based on context and historical firm data applied to help streamline e-mail marketing for busy professionals. It's a first step in a series of generative AI releases, featuring increasingly advanced contextual content generation, and marketing automation via the use of large language models.These are just 2 examples of applying our industry expertise to build industry-specific solutions that help our clients to realize practical, immediately usable advantages, from AI's continuing generational technology advances.In September, we showcased our applied AI capabilities at our client conference in Boston. The feedback validated our Applied AI strategy and its capability to drive tangible results and positive outcomes for our clients. As an example, Jack Recinto, Manager of Application Development at Law firm Vedder Price said, 'I'm excited that Intapp has made strides in expanding their already robust and powerful AI tools, by incorporating generative AI and large language models. I believe these tools will empower our fee earners to focus more on the billable hour, than on the repetitive but necessary daily administrative tasks, thereby freeing them up to better service our clients, while still providing the organization what it needs.' We're very excited to be working with Jack and his team at Vedder Price.We're also investing in our industry solution strategy, which incorporates built-in best practices for the various markets that we serve, via our prepopulated industry blueprints. Designed using our team's deep industry experience, these blueprints provide specific DealCloud configurations, that suit a range of specific application needs for each type of firm that we serve.Our field team uses our industry solution to clearly showcase our industry-specific fit for each of our prospects, and our services team uses them to deliver fast and clear time to value for each of our clients. We release updates regularly using some of our most recent industry blueprints, we're seeing clients ready to go live with their new solution in just 1 to 2 weeks. And our portfolio of industry solutions continues to expand. In our most recent release, we're now providing industry blueprints for 15 different subverticals, such as transaction advisory services, fund formation and M&A with more on the way.I'll turn now to partnerships, where I have some exciting news to share. Last quarter, I mentioned that our solutions are now available on the Microsoft Azure marketplace. This step prepared us well for a major strategic change that Microsoft made this quarter, specifically Microsoft's co-sell incentives for its sellers, are now tied to solutions that are available on the marketplace.We were ready for this change in Microsoft's seller incentives, and we are positioned very well to garner additional interest and support for Microsoft's field team, to further accelerate the growth of our business. For example, as a result of this change, in Q1, we successfully sold a large Intapp collaboration and content deal in the consulting vertical, via the Azure marketplace with the support and assistance of Microsoft's team.Furthermore, our partnership with Microsoft is increasingly supporting our global growth. We have grown into a global partner, and Microsoft has grown our team, to include both global and U.S. partner managers to help us identify, win and grow large global accounts together.Turning to our broader partner ecosystem; we also launched Intapp's new partner program with more than 100 active partners. The program expands our clients' access to trusted technology, data and services providers, who are helping our clients drive innovation and grow their business. Our new program supports the development, marketing, sales and delivery of joint solutions with our partners, driving new revenue opportunities for Intapp and its partners together.I'll turn now to Q1 wins and implementations, and share some examples of how we're continuing to grow our client base, and expand our global reach. First, I'm pleased to share that we are growing through the addition of new clients, including national CPA and advisory firm, Forvis, who selected Intapp employee compliance to improve their quality control system, better address regulations and prepare for upcoming regulatory changes.At Storskogen, a Stockholm-based international group of businesses across trade, industry and services, we selected DealCloud to strengthen their sourcing and origination efforts via end-to-end support for their M&A and corporate development processes. This client is a great example, showing how our industry solution blueprint built for the corporate development function, helps us to better showcase our value and land a new relationship.Additionally, cross-selling and upselling success in our existing accounts continued to drive strong net revenue retention. For example, global law firm Mayer Brown, selected Intapp Workspaces to modernize and improve collaboration. Intapp Workspaces will help manage Microsoft's Teams, Governance, Workspace Provisioning, Matter Lifecycle Management and Client Collaboration.At Warner, Norcross+Judd, a longtime law firm client added to their Intapp portfolio by selecting Intapp Risk and Compliance as their new cloud-based risk management and compliance solution. As the Executive Director at Warner said, when it comes to risk and compliance, it's essential that we provide our attorneys and staff with the resources to make smart and efficient decisions on our client [ integrity ].This quarter, we also had a number of notable go-lives, including U.K.-based accounting firm, [ AAV ], which went live this quarter on Intapp Collaboration and Content. Our solution has streamlined [ AAV's ] process for saving, retrieving and sharing e-mails and documents, by aligning with familiar Microsoft 365 applications. [ AAV's ] professionals are now efficiently accessing information related to their engagements and collaborating with peers and clients more effectively.Additionally, prominent Japanese law firm, Nishimura & Asahi went live on multiple Intapp Solutions aimed at modernizing their risk management and timekeeping practices. Hajime Ueno, the firm's Chief Technology Officer said, with the move to Intapp, we're building a foundation of contemporary products, that will enable us to compete on a global scale, continue our trajectory of international growth and maximize profitability.In conclusion, we're proud of our strong performance in our first quarter, and we're optimistic about our continued growth opportunities. As our Q1 performance has shown, we continue to grow by adding new capabilities to our platform and increasing our global reach. We see continued opportunity both to add new clients across a broad TAM, and to deliver greater value by expanding within our existing client base.We're serving a durable end market with our subscription revenue model, industry-specific cloud platform and applied AI and compliance capabilities. We have a great growth opportunity to drive AI, cloud adoption and modernization across all 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.And finally, before I turn things over to our CFO, Dave Morton, I'm pleased to share that Intapp will hold its first Investor Day. It will be held at NASDAQ in Times Square in New York City on February 22nd. In the coming weeks, we will post more details and links to the broadcast on our website at investors.intapp.com. We hope you can join us.Okay. Dave, over to you.

[David Morton, executive]

Thanks, John, and thanks, everyone, for joining us today. I'm pleased to report our solid first quarter performance, driven by strong revenue growth, expanding customer base and early returns on our purposeful investments in the go-to-market and R&D functions, all of which we believe positions us to extend our leadership as we pursue an exciting market opportunity in fiscal 2024 and beyond.SaaS and support revenue was $73.1 million, up 29% year-over-year, reflecting sales to new clients and expansion of existing clients from both cross-selling and upselling sales motion. Subscription license revenue was $13.9 million, up 14% year-over-year, largely due to several large clients opting for multiyear on-premises renewals. Professional services revenue was $14.6 million, up 39% year-over-year, reflecting a strong attach rate in recent quarters, coupled with increased client size. Total revenue was $101.6 million, up 28% year-over-year, driven primarily by sales of our cloud solutions as well as by strong growth in professional services revenue.Our international business continued to perform well and provides a growth opportunity to further expand and invest in the use of our platform outside of the U.S. Revenue from international operations grew 33% in the first quarter, and represented approximately 31% of total revenue.Q1 gross margin was 71.8% as compared to 71.3% in the prior year period. Operating expenses were $66.5 million, $11.6 million increase year-over-year as we continue to invest in go-to-market and product development to support our growth. Operating profit was $6.4 million, as compared to first quarter of fiscal 2023 operating profit of $1.8 million.Net income per fully diluted share was $0.06 in the first quarter of fiscal 2024 as compared to $0.01 in the first quarter of fiscal 2023. Free cash flow, which is defined as our cash flow from operations, less capital expenditures for the first quarter was $8.6 million or 8.5% of revenue. We exited the quarter with $121.5 million of cash and cash equivalents.Turning to our key metrics; cloud ARR was up 38% year-to-year, and total ARR was up 23% year-over-year. Current remaining performance obligations were $254.3 million, up 27% year-over-year.Overall, we continue to execute our land and expand model, ending the quarter with more than 2,350 clients, 626 of which had ARR of at least $100,000, up from 522 in the prior year period. Our net revenue retention rate underscores our ability to retain and steadily expand business with our existing customers. This key metric continues to track within our range of 113% to 117%.Now turning to our outlook; for the second quarter of fiscal 2024, we expect SaaS and support revenue between $75 million and $76 million and total revenue in the range of $102.5 million to $103.5 million. Operating profit in the range of $5 million to $6 million and our per share results of $0.04 to $0.06, using a fully diluted share count weighted for the quarter of approximately 82 million common shares outstanding.For the full year fiscal 2024, we expect that we will be increasing our SaaS and support revenue of between $310 million and $314 million, an increase in our total revenue in the range of $422.5 million to $426.5 million. We also expect our operating profit to be in the range of $24.5 million to $28.5 million. And net income per share in the range of $0.25 to $0.29, using a fully diluted share count for fiscal 2024 of approximately 83 million in common shares outstanding.And as John had mentioned, we will be hosting our Investor Day on February 22, and we look forward to seeing many of you there. More details will follow later this year.And now I would like to turn the call back to the operator.

[Operator]

[Operator Instructions] And our first question coming from Koji Ikeda from Bank of America.

[Natalie Howe, analyst]

This is Natalie Howe for Koji. I wanted to ask on the industry solutions with the preset configurations. What sort of customers gravitate towards that? Is that more for new logos that are looking for a quicker out-of-box solution, or is that an opportunity also for cross-selling within the existing base?

[John Hall, executive]

Natalie, thanks for the question. It appeals to both. So the new clients are absolutely attracted to it because we can show them exactly the business process and the solution that makes sense for their situation, and they really get the sense that the team has deep understanding of the specific issues that these types of firms face. So we definitely win competitively using these industry solutions. But also, we're going back to many of our existing clients and showing them the advances that we have made as we've learned over the years, and we've developed more of the technology capabilities to meet their processes, and we're able to get them even more value, which helps us with cross-sell ourselves. So it's both situations.

[Natalie Howe, analyst]

Got it. And then a quick second question. I wanted to ask about your sales and marketing investment. You guys said you were investing more in your go-to-market [ motion ] there. As a percent of revenue, sales and marketing seemed to have decreased a bit sequentially, is the investment going to come later in the year? Has there been a shift in your go-to-market strategy there?

[David Morton, executive]

The narration -- hi Natalie. The narration was more about we do like the investments we've already kind of laid out. Obviously, we'll continue to monitor those various degrees of returns, but we like what we see thus far. And so no, we don't see an absolute step-up in spend as a percentage of revenue.

[Operator]

And our next question coming from Kevin McVeigh with UBS.

[Kevin McVeigh, analyst]

Great. Congratulations on just another really, really strong quarter. Steve you continue to see really, really good progress -- or John, I'm sorry. On the kind of larger clients, can you give us a sense -- is that new logos or kind of existing clients being pulled up on scale, and is some of that kind of the benefit from the Microsoft partnership really starting to kind of crystallize -- because it seems like, obviously, as you get more and more embedded with them that, that that could be another incremental driver.

[John Hall, executive]

Yes. Thanks, Kevin. So the growth in the larger clients is coming both from landing new business and from expanding firm's footprint with us past that $100,000 mark. I guess that's the number that you're pointing to. What's exciting is that, more of our go-to-market with a little bit more focus on the enterprise class firms is working, and we're seeing more big firms come in, in the first place, that then have a large upsell, cross-sell opportunity. That's one of the big points about how big the TAM is, and how deep this market is with the large firms.But in addition, we're very encouraged by being able to see firms that might start out at a $20,000 or $30,000 starting point being able to move up past the $100,000 market beyond, and there's a very large number of those. So we track that and talk about that as a way to help people see the depth of the market.As far as Microsoft goes, I think it is helping. We've talked about a couple of points on the Microsoft relationship. One is, we're now available on the Azure marketplace. And then this quarter, Microsoft changed its incentive, so that its own sellers got credit for selling things through the marketplace. So that reinforces their opportunity to recommend us and co-sell with us and get quota relief for when we sell. So we think that's a big help to us.And then as we mentioned on an earlier call, we have the opportunity when customers have the -- they call the MAC, the Microsoft Azure Contract that has a minimum spend; if people have that and a lot of the firms do, they can use that pre-commitment to buy our solutions now. So several parts of the Microsoft relationship, I think, are helping us to both land larger firms and to grow firms past that market.

[Kevin McVeigh, analyst]

Helpful. And then just -- the margins just really, really continue to impress despite what's a pretty dramatic growth in professional services, which tend to be obviously lower margin. Any thoughts around that and if the professional services continue to scale, is that just even more favorable indicator of future revenue?

[David Morton, executive]

So a couple of things, Kevin. First and foremost, I really do like the leverage that we were able to yield off the increase in revenue. And so as what I kind of narrated on previously, really liked some of our beginning investments, whether it's our partner economy, whether it's our roadmap within product and engineering with AI, whether it's varying degrees of pipe gen, and so on and so on. And so I think that's been quite beneficial, as we look out for the remainder of this year.With respect specifically to professional services, it's still work in progress. We're not quite there from a margin equilibrium, as well as I don't think for us, we're not setting the standard to continue to see that type of year-over-year growth, and that's something that we just want to stay close to and continue to moderate.

[Operator]

And our next question coming from the line of Terry Tillman with Truist.

[Robert Dee, analyst]

This is Bobby Dee on for Terry. Starting off here, should we expect the cadence of new customer wins to continue and could go-to-market productivity enhancements help for more customer wins, while at the same time selling products back to the base? And then I have one follow-up.

[John Hall, executive]

Yes, one of the things we benefit from, Bobby, is the consistent demand as these firms that we've targeted, who historically have been pretty underserved by the technology industry, because people were not building purpose-built solutions for them, but we are, is that they're marching through this modernization effort, that they've kind of been left out of for many years. But the cloud is happening and they're moving and applied AI is a key interest for them. So we had very consistent demand each and every quarter, and we're excited about that. We think it's a hallmark of the long-term growth opportunity of the company generally.I think we have put some additional purposeful spend into our go-to-market to help take advantage of the growth opportunity there, so we're seeing that. I think on the customer win side, we're seeing strong successful wins in a variety of segments in the market, that give us confidence that we've got a very compelling value proposition for these folks; both the folks who are focused on the cloud transition, and the folks who are focused on the applied AI opportunities, that are a little bit more forward-looking.

[Robert Dee, analyst]

That's great. And then how have the opportunities expanded with maybe more nontraditional verticals, like corporate development and in-house legal teams? Are you seeing traction there or anything to call out in emerging use cases?

[John Hall, executive]

Yes, definitely. There's a broad ecosystem of firms and companies who participate in both the private capital markets and all the advisory services that go with them. And we've seen good traction in several of the additional subverticals. We talked about corp-dev specifically with one of the examples on the call today. We also have shown a lot of progress in private credit, which is a relatively newer area for us. But as I already talked about, that's a big booming space right now. So several of the industry blueprints that we brought out more recently, have been intentionally focused on addressing some of these additional new sub-verticals for us and represent great expansion opportunity for us.

[Operator]

And our next question coming from the line of Alex Sklar with Raymond James.

[Alexander Sklar, analyst]

Great. John, first on the Microsoft go-to-market partnership and some of those changes there. Can you just elaborate on your prepared remarks in terms of what you've seen from a rep enablement standpoint. So the idea how many Microsoft sellers are familiar with Intapp now versus a year ago? And what are you doing on the Intapp side to kind of drive further rep enablement and arm those kind of Microsoft reps?

[John Hall, executive]

Thanks, Alex. So we're very excited about the progress that we're continuing to make with Microsoft. We've been working with them for 18 months or so now, as you all know, and it's been a steady program starting with the product and then more recently, several steps in the go-to-market, including this most recent one, where Microsoft has shifted its seller incentives to reward people for selling things from the Azure marketplace, which includes all of Intapp solutions now.The support that we're getting from Microsoft has increased pretty meaningfully. One of the big things that happened this quarter, was they started adding global partner managers in addition to U.S. partner managers to our relationships. So we're very excited about that, because up until now, it's been a U.S.-focused relationship. So our team, not just in the U.S., but our whole global team is meeting with and working with the Microsoft sellers in all of our geographies, and we have a regular review meeting between our go-to-market team and the Microsoft go-to-market team quarterly or more frequently. So that kind of connection, I think, is an increase in the volume of conversations, deal by deal.We're also successfully getting into some of the larger accounts, where we can bring Microsoft in through the MAC agreement that we've talked about earlier, and there's a lot of excitement about that because the clients have already committed to spending X with Microsoft, and they can soak that up by buying solutions from Intapp now.

[Alexander Sklar, analyst]

Okay. Great color there. Dave, maybe then one follow-up for you. Just with ARR kind of reaccelerating versus the fourth quarter, can you just provide some more context, because that's the result of kind of better expansion activity? I know it's a wide range, that $1.13 to $1.17, but did you see that step up or is that new logo ARR pick up?

[David Morton, executive]

So to give some color on that, yes, we did see a small step-up in our NRR. We saw, I would say -- we over probably indexed on our expand motion than the net new. And so for us, we have both of those motions clearly, but those expands, we continue to earn our way into these respective clients. And we continue to move just far beyond that original land. So we had quite good success this past quarter with that.

[Operator]

And our next question coming from the line of Saket Kalia with Barclays.

[Saket Kalia, analyst]

Okay. Great. Nice solid [ print ] for the quarter. John, maybe for you. I think one of the questions that I get often, is just the cyclicality of the DealCloud business, right, just given the end customer there with private capital. Can you just talk to that at all, just given the volatility in some financial markets, how does sort of that thought maybe compare to what you actually see in the DealCloud business? Does that make sense?

[John Hall, executive]

Obviously, I think we benefit from the larger structural trend toward private capital, and that's happened for us over many years and continues to happen. So there's a general demand for these firms who have raised small, medium or large funds or one or many funds, to need infrastructure to run the firm and to need purpose-built infrastructure that's designed specifically for the way that the private capital operation runs. And historically, those firms have been relatively underserved with technology.So I think there's just an underlying modernization opportunity that's independent of the cycle that you're describing, which is obviously true. But I think we benefit from being pretty early in our penetration of the space, the fact that most firms have not gotten to the cloud and not gotten the applied AI technologies deployed, that really fit their business in the way that DealCloud does. So I think there's just an underlying trend that's helped us.And then we've moved up into the multi-strategy category now, which has taken us a while to get there, but a lot of our opportunity is in these large multi-strategy and private capital firms that are pretty diversified. And what you see them doing is very analogous to what the professional services firms have done as well for many years, which is to shift their emphasis on where they're raising funds, the types of funds strategies that they're deploying, into areas that fit the current economic cycle so -- current point of the economic cycle.So I think where we see a lot of growth generally on top of that, we get surges in demand across different strategies and categories. And that's one of the reasons the Industry Solutions strategy is working for us, because we're able to develop specifically for the segments of the market that are really in growth mode. And so I think it's a pretty stable foundation, with some great opportunistic sales opportunities on top.

[Saket Kalia, analyst]

Got it. Got it. That makes a lot of sense. Dave, maybe for you. I think maybe this is just to the earlier question, just on Q4 and Q1. I think one of the questions kind of coming out of Q4, at least that I got was, was just around the lower net new ARR than some were maybe expecting, right, given the seasonally strong Q4. And clearly, you've accelerated the cloud ARR growth here in Q1, so well done. But I wonder if now sort of 90 days later, if there was any sort of deal timing consideration here, that might help explain sort of the ARR growth between Q4 and Q1? There's always kind of deal slippage for any enterprise software business, right? But I'm just kind of curious, as you've had sort of more time to look at it, if that's something to consider here, as we sort of look at sort of the Q4 performance and then the Q1 acceleration in ARR?

[John Hall, executive]

I wouldn't say there's any new news there. I do think if we go back and digest that Q4, once again, comparing the FY '23 to FY '22, I think we forget about how tough some of those comps were for FY '22. And there were some material deals that fell into that timeframe. And so when you're looking at it from a year-over-year perspective, I think there was a perceived decel.As we think about go forward, and obviously, there's going to be a lot of numbers, some of that noise gets zeroed out. And so I think we're on the right rate of pace, and we like what we see in the back half of this year.

[Operator]

And our next question coming from the line of Parker Lane with Stifel.

[J. Lane, analyst]

John, I'm curious if you can give us a sense of the contribution that's coming from the channel today? I know those partnerships with KPMG and Microsoft were only formed over the last year plus. And where do you expect that could trend with these changes that Microsoft has made on the co-selling side?

[John Hall, executive]

Honestly, it's still early in our relationship. We're getting to know the folks in the Microsoft [ deal ]. We're getting to do some joint selling deals with them in a variety of regions, but we have not done it in all the spaces of our territories that we could. So a lot of it is getting to know each of the people out there and getting the relationship formed between our sellers and theirs. And I think we have made excellent progress, but there's more opportunity in front of us to go do that. So I think there's space in front of us for this to go.Similarly with KPMG, we've had some very exciting large wins with KPMG. They've built up more of a practice around Intapp's platform and technology. They've helped us win some of the large investment banks and deploy there, which is a great opportunity space for us. But similarly, it's still early, and they're just ramping up. So I think the majority of the opportunities is ahead of us for really getting to leverage on the channel.

[J. Lane, analyst]

Got it. Okay. And then on the AI -- applied AI development you talked about there, when I look at that, should we think about that as something that's only available to your cloud-based customers? And is that enough of an incentive, I guess, down the road for people to actually switch, if you're only providing some of that functionality as part of the cloud offering?

[John Hall, executive]

Yes, that's the case. The AI capabilities are available in our cloud. And as you know, we're not doing meaningful R&D on our on-premise's software anymore. We're supporting the clients that we have that have been with us for a long time. We're grateful and most of them have already talked to us about migrating to the cloud. It's more practical question about what the right timing is for them within their overall IT project portfolio.As we shared in some of the previous calls, a very large percentage of our clients are now working with us in the cloud. So most of our clients do something that way already, and it's just the remaining portion of their overall business that they need to migrate. But to your point about AI, I do think that absolutely is an incentive for people to move.It's not the only reason. Some people want to go to the cloud because they want to go to the cloud. That's the modern model and COVID really helped them understand they need to get off of their local on-premises systems into a cloud-based system. And there's a lot of benefits on that alone. But AI is a further incentive that I think is really helping people to make that decision.

[Operator]

And our next question coming from the line of Matt VanVliet with BTIG.

[Matthew VanVliet, analyst]

John, you mentioned a couple of large investment banks that you've won deals with. Curious on how that corner of the financial services market has been trending, what the pipeline maybe looks like, given the lack of capital markets activity is straining some of the revenue there, but just curious on how much demand there is for modernizing around your solution?

[John Hall, executive]

Matt, thanks. So the large banks -- the midsized and large banks have been a great market for us. We're early. It's one of the more recent additions, particularly at the large end that we've been able to get some real wins in.I think there's a couple of opportunities for us. One, these are large diversified banks, and they're bringing us in to replace often in-house built custom applications that we've seen many times across the market, but each of them has built their own. And they're really moving to a more standardized IT architecture, where they want to work with the supplier like us, if we have a purpose-built solution that can replace those traditionally in-house built and maintained systems. So it's just a natural division of labor, economic rationality argument to work with a partner like us, coming from the IT departments. And I think as they scrutinize their budgets and try to figure out what they want to do, there's actually a natural reason for them to come to us. And so I think that's a nice baseline of modernization demand.I also think there's several parts of the banks that have really grown. They've each got their own strategies, where they're trying to explore opportunities across a range of products, and we've been able to build applications to help them launch those new groups successfully. So there's no question, we said across all of the segments that we serve, if there's a group that might feel more of the economic pinch, it's probably the investment banks. But we've been doing well despite that reality as we've grown. So we're watching it, but we've been very excited about some of the deals that we've won.

[Matthew VanVliet, analyst]

All right. Very helpful. And then the subscription revenue came in quite a bit ahead of, I think, where we and most of the Street were on this. Should we expect that there's still potential for some of these larger, lumpier deals coming through? And any thoughts on when you maybe stop selling new term licenses and sort of insist on everyone moving to the cloud in the future?

[John Hall, executive]

Well, it is an option for us. We've talked about the fact that we want to make sure that we get everybody to be working with our cloud platform, because there's no reason not to support them and have them move, and we've had very good success moving people. So we haven't talked about a moment like that yet. But I think as we get more of our clients onto the cloud platform, we're going to have an opportunity to help folks make the shift.

[Operator]

And our next question coming from the line of Brian Schwartz with Oppenheimer.

[Brian Schwartz, analyst]

John, I wanted to ask you about what you're seeing in terms of the different geographies. I realize they're different sized businesses. Can you talk about the bookings and maybe the top of the funnel or the demand that you're seeing from North America versus the rest of the world? And then I have a follow-up.

[John Hall, executive]

So we've been growing pretty steadily, actually. The international portion of our business is about 30% of the overall revenue, and it's been growing pretty much in line. So we haven't seen the big distinction between North America growth rate and the rest of the world.

[Brian Schwartz, analyst]

So even though North America is much bigger size than Europe, that's continuing to grow strongly. I guess that's my read through on that, which sounds great. The follow-up question I wanted to ask you, was just on the topic of landing the bigger deals out there. Is there a difference in terms of the concentration of those deals where they're coming from, from your professional services end market versus the financial services end market?

[John Hall, executive]

Well, there are very large firms in both the financial services space and the professional services space. And we have more and less time in some of the sub-verticals that we've called on, but the large firms are a huge opportunity that is newer for us, as an organization. And we've done a lot of work over the past few years, to develop the technology to the point that we really are getting positive feedback from some of the very largest firms out there. So I think that the growth opportunity both to land and to expand significantly, inside the very large firms, whether it's the Big 4 in accounting or the investment banks or the large multi-strategy private capital firms or the big global consulting firms and law firms, where we have some very significant cross-sell, upsell opportunity. I think we've got a deep space to sell into across those.

[Operator]

And I see we have no further questions in the queue at this time. I will now turn the call back over to Mr. John Hall for any closing remarks.

[John Hall, executive]

Okay. I'd like to say thank you to everyone. We appreciate your attention and your questions, and we have a great Q1 behind us, and we're excited about our start to the fiscal year. So thanks for your time today. We look forward to talking to you next quarter.

[Operator]

Ladies and gentlemen, that concludes our conference for today. Thank you for your participation. You may now disconnect.