Intapp Stock – An institutional Fintech platform
Selling a product or service to financial institutions is a tough chore, which is why BSD business sellers make such great coins. Once you have some traction it gets easier. When you tell a business that all of their competitors are using your tool, they don’t want to feel left out. Once you sell something to everyone, selling them more stuff becomes an easy conversation. When you see a business that has entered a large percentage of key customers in a particular area with a ssoftware-am-a–sservice (SaaS) offering, you know they’re doing something right. Intapp is one of those SaaS companies.
About Intapp Stock
Founded in 2000, the Silicon Valley startup Intapp took a not disclosed amount of financing, some of which has been used to make a number of acquisitions over the years. The end result is a product offering made up of two main components:
- DealCloud – transaction and relationship management solution for financial services companies.
- A square – a solution to manage all aspects of the client life cycle and the missions of a professional services firm
It looks a lot like vscustomer rrelationship mmanagement (CRM), something that turned CRM cloud provider Salesforce.com into a $ 226 billion company. Intapp’s need to reinvent the wheel comes from the specialized needs of the highly regulated financial services industry which must adapt to an ever-changing list of requirements to stay compliant. Most companies have their own Frankenstack app which is very expensive to maintain, not to mention the latest and greatest technologies like artificial intelligence (AI).
IA and Low Code
Industry-specific AI algorithms are built into the entire Intapp platform for everything from improving pricing strategies to automatically capturing billable activity. There is also a reference to “low code,” which means companies can make changes without having to hire expensive developers. The company says its use of AI creates “a significant competitive advantage”, and proof of this is the number of industry-leading companies that have adopted their solution.
It is still early days though. Intapp estimates that if its top 100 customers fully embraced the platform so that it served all of their users in all parts of their organization, that would add an additional $ 1 billion in execution rates – the old strategy. “Land and expand”. Speaking of execution rate, it stands at $ 201 million as of March 2021. Looking at their revenue segments, it’s a little more complicated than usual. ssoftware-am-a–sservice (SaaS) business. Here’s why.
Two types of recurring income
Financial firms are often reluctant to put their most valuable information in the cloud (it means hosted on another company’s servers). Thus, they will adopt the platform on their own servers, which is called “on-premise”. About 49% of aannual rrecurrent revents (ARR) comes from “on premise” and the other half comes from the cloud. Obviously, there is a lot more work to be done when a customer wants to adopt an on-premise solution, and this is where Intapp is able to charge their customers for “professional services”, which is to be expected. pretty much what it says on the tin. Think of it as a project based job that only evolves if you throw more bodies at it. About 13% of Intapp’s revenue is one-time.
Note that the above reflects actual income, not ARR, which is confusing. Keep in mind that if ARR increases, so does income.
Total addressable market
We often use the term “ttotal aaddressable mmarket ”or TAM, and there is actually quite a bit more. TAM is the ideal market share that could be captured in a perfect world. Inside TAM, you then have sreparable aavailable mmarket (SAT) and sreparable orecoverable mmarket (SOM), two segments that are best described by the graphic below.
For all intents and purposes, we don’t need to dig deeper than SAM. For example, your product may only be available in one language, which means a good chunk of your TAM is banned until it changes. Or, you could deliberately target a subset of TAM customer types, which Intapp does. The company estimates their SAM to be around $ 9.6 billion, of which more than $ 6.5 billion is attributable to large companies with more than 500 employees. Since targeting a concentrated number of companies, investors will need to pay close attention to one key metric that most SaaS companies track: the expansion of ARR.
The graph above considers the value of each year of new customers as a cohort. For example, customers who joined in 2014, and are still on board today, now pay 3.3 times more annual recurring revenue than they were when they first signed up.
To buy or not to buy
Every investor has to make buying decisions based on what they already own. We have been on DocuSign for a long time now and could not find anything negative to say about the company. We don’t feel the need to add another fintech stock to our portfolio. Comparing the two companies, DocuSign is a much easier business to understand. They also have significantly more customers, 988,000, compared to 1,600 for Intapp. Fewer customers means more consolidated revenue streams, which can lead to increased risk in the event of a key customer being canceled. About 95% of DocuSign’s revenue comes from subscriptions compared to 87% for Intapp. DocuSign targets all industries of all sizes while Intapp focuses on large finance and legal companies. There is nothing wrong with Intapp, we just find DocuSign to be the more compelling of the two – the one with the least risk.
The abbreviation “fintech” stands for financial technology, and that is clearly what is offered by Intapp – a fintech platform designed for the unique needs of financial services companies. For the platform to be successful, it’s not enough to say that industry leaders are using it. Intapp must be widely used by all users of these organizations in order to become the success story it aspires to be.
If the IPO goes as planned, Intapp’s shares will trade under the symbol INTA.
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