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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-40550

 

Intapp, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

46-1467620

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

 

 

3101 Park Blvd

Palo Alto, California

94306

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (650) 852-0400

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.001 per share

 

INTA

 

The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of October 31, 2023, the registrant had 69,583,094 shares of common stock, $0.001 par value per share, outstanding.

 

 

 


 

Table of Contents

 

Page

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)

1

Condensed Consolidated Balance Sheets as of September 30, 2023 and June 30, 2023

1

Condensed Consolidated Statements of Operations for the Three Months Ended September 30, 2023 and 2022

2

Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended September 30, 2023 and 2022

3

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended September 30, 2023 and 2022

4

Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2023 and 2022

5

Notes to Unaudited Condensed Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

31

Item 4.

Controls and Procedures

32

 

PART II.

 

OTHER INFORMATION

33

Item 1.

Legal Proceedings

33

Item 1A.

Risk Factors

33

Item 2.

Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

33

Item 3.

Defaults Upon Senior Securities

33

Item 4.

Mine Safety Disclosures

33

Item 5.

Other Information

33

Item 6.

Exhibits

34

 

Signatures

35

 

 

 

 


Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, particularly in the sections captioned “Risk Factors” under Part II, Item 1A, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part I, Item 2, contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, potential acquisitions, market growth and trends, and our objectives for future operations, are forward-looking statements. You can identify these forward-looking statements by the use of forward-looking words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “predict,” “project,” “potential,” “should,” “will,” or “would,” or the negative version of those words or other comparable words. Any forward-looking statements contained in this Quarterly Report on Form 10-Q are based upon our historical performance and on our current plans, estimates and expectations in light of information currently available to us. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business, prospects, growth strategy, and liquidity. Accordingly, there are, or will be, important factors that could cause our actual results to differ materially from those indicated in these statements. We believe that these factors include, but are not limited to:

 

our ability to continue our growth at or near historical rates;

 

our future financial performance and ability to be profitable;

the effect of global events on the U.S. and global economies, our business, our employees, results of operations, financial condition, demand for our products, sales and implementation cycles, and the health of our clients’ and partners’ businesses;

 

our ability to prevent and respond to data breaches, unauthorized access to client data or other disruptions of our solutions;

our ability to effectively manage U.S. and global market and economic conditions, including inflationary pressures, economic and market downturns and volatility in the financial services industry, particularly adverse to our targeted industries;

the length and variability of our sales cycle;

our ability to attract and retain customers;

 

our ability to attract and retain talent;

 

our ability to compete in highly competitive markets, including artificial intelligence (“AI”) products;

 

our ability to manage additional complexity, burdens, and volatility in connection with our international sales and operations;

our ability to incur indebtedness in the future and the effect of conditions in credit markets;

the sufficiency of our cash and cash equivalents to meet our liquidity needs; and

our ability to maintain, protect, and enhance our intellectual property rights.

These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should read the section titled “Risk Factors” set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q and in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended June 30, 2023 for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report on Form 10-Q will prove to be accurate. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

i


Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

INTAPP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)

 

 

 

September 30, 2023

 

 

June 30, 2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

141,547

 

 

$

130,377

 

Restricted cash

 

 

200

 

 

 

808

 

Accounts receivable, net of allowance of $1,337 and $994 as of September 30, 2023 and June 30, 2023, respectively

 

 

68,815

 

 

 

92,973

 

Unbilled receivables, net

 

 

14,547

 

 

 

10,661

 

Other receivables, net

 

 

571

 

 

 

878

 

Prepaid expenses

 

 

8,972

 

 

 

7,335

 

Deferred commissions, current

 

 

12,076

 

 

 

11,807

 

Total current assets

 

 

246,728

 

 

 

254,839

 

Property and equipment, net

 

 

17,695

 

 

 

16,366

 

Operating lease right-of-use assets

 

 

16,050

 

 

 

17,180

 

Goodwill

 

 

278,601

 

 

 

278,890

 

Intangible assets, net

 

 

40,552

 

 

 

43,257

 

Deferred commissions, noncurrent

 

 

16,139

 

 

 

16,529

 

Other assets

 

 

1,818

 

 

 

1,846

 

Total assets

 

$

617,583

 

 

$

628,907

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

6,185

 

 

$

6,018

 

Accrued compensation

 

 

25,574

 

 

 

39,761

 

Accrued expenses

 

 

13,369

 

 

 

11,626

 

Deferred revenue, net

 

 

191,435

 

 

 

191,042

 

Other current liabilities

 

 

7,536

 

 

 

10,902

 

Total current liabilities

 

 

244,099

 

 

 

259,349

 

Deferred tax liabilities

 

 

1,309

 

 

 

1,422

 

Deferred revenue, noncurrent

 

 

1,184

 

 

 

1,355

 

Operating lease liabilities, noncurrent

 

 

14,993

 

 

 

16,195

 

Other liabilities

 

 

9,325

 

 

 

9,378

 

Total liabilities

 

 

270,910

 

 

 

287,699

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value per share, 50,000 shares authorized; no shares issued or outstanding

 

 

 

 

 

 

Common stock, $0.001 par value per share, 700,000 shares authorized; 69,378 and 68,574 shares issued and outstanding as of September 30, 2023 and June 30, 2023, respectively

 

 

69

 

 

 

69

 

Additional paid-in capital

 

 

818,716

 

 

 

797,639

 

Accumulated other comprehensive loss

 

 

(1,630

)

 

 

(1,339

)

Accumulated deficit

 

 

(470,482

)

 

 

(455,161

)

Total stockholders’ equity

 

 

346,673

 

 

 

341,208

 

Total liabilities and stockholders’ equity

 

$

617,583

 

 

$

628,907

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

1


Table of Contents

INTAPP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

 

 

 

Three Months Ended September 30,

 

 

 

 

2023

 

 

2022

 

 

Revenues

 

 

 

 

 

 

 

SaaS and support

 

$

73,061

 

 

$

56,813

 

 

Subscription license

 

 

13,903

 

 

 

12,248

 

 

Total recurring revenues

 

 

86,964

 

 

 

69,061

 

 

Professional services

 

 

14,611

 

 

 

10,477

 

 

Total revenues

 

 

101,575

 

 

 

79,538

 

 

Cost of revenues

 

 

 

 

 

 

 

SaaS and support

 

 

14,413

 

 

 

12,398

 

 

Total cost of recurring revenues

 

 

14,413

 

 

 

12,398

 

 

Professional services

 

 

17,160

 

 

 

12,936

 

 

Total cost of revenues

 

 

31,573

 

 

 

25,334

 

 

Gross profit

 

 

70,002

 

 

 

54,204

 

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

 

 

28,496

 

 

 

19,679

 

 

Sales and marketing

 

 

34,419

 

 

 

31,312

 

 

General and administrative

 

 

21,052

 

 

 

20,410

 

 

Lease modification and impairment

 

 

 

 

 

1,949

 

 

Total operating expenses

 

 

83,967

 

 

 

73,350

 

 

Operating loss

 

 

(13,965

)

 

 

(19,146

)

 

Interest expense

 

 

(39

)

 

 

(39

)

 

Interest and other income (expense), net

 

 

(904

)

 

 

(684

)

 

Net loss before income taxes

 

 

(14,908

)

 

 

(19,869

)

 

Income tax expense

 

 

(413

)

 

 

(185

)

 

Net loss

 

$

(15,321

)

 

$

(20,054

)

 

Net loss per share, basic and diluted

 

$

(0.22

)

 

$

(0.32

)

 

Weighted-average shares used to compute net loss per share, basic and diluted

 

 

68,937

 

 

 

62,864

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

 

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INTAPP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(unaudited)

 

 

 

Three Months Ended September 30,

 

 

 

2023

 

 

2022

 

Net loss

 

$

(15,321

)

 

$

(20,054

)

Other comprehensive loss:

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(291

)

 

 

(678

)

Other comprehensive loss

 

 

(291

)

 

 

(678

)

Comprehensive loss

 

$

(15,612

)

 

$

(20,732

)

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

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INTAPP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)

 

 

 

 

 

Three Months Ended September 30, 2023

 

 

 

 

Common Stock

 

Additional
Paid-in

 

Accumulated
Other
Comprehensive

 

Accumulated

 

Total Stockholders'

 

 

 

 

 

Shares

 

Amount

 

Capital

 

Loss

 

Deficit

 

Equity

 

Balance as of June 30, 2023

 

 

68,574

 

$

69

 

$

797,639

 

$

(1,339

)

$

(455,161

)

$

341,208

 

Issuance of common stock upon exercise of stock options

 

 

229

 

 

 

 

2,324

 

 

 

 

 

 

2,324

 

Vesting of performance stock units and restricted stock units

 

 

575

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

18,757

 

 

 

 

 

 

18,757

 

Issuance of common stock upon follow-on public offering, net of offering costs of $1,569

 

 

 

 

 

 

(4

)

 

 

 

 

 

(4

)

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

(291

)

 

 

 

(291

)

Net loss

 

 

 

 

 

 

 

 

 

 

(15,321

)

 

(15,321

)

Balance as of September 30, 2023

 

 

69,378

 

$

69

 

$

818,716

 

$

(1,630

)

$

(470,482

)

$

346,673

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2022

 

 

 

 

Common Stock

 

Additional
Paid-in

 

Accumulated
Other
Comprehensive

 

Accumulated

 

Total Stockholders'

 

 

 

 

 

Shares

 

Amount

 

Capital

 

Loss

 

Deficit

 

Equity

 

Balance as of June 30, 2022

 

 

62,739

 

$

63

 

$

643,227

 

$

(1,672

)

$

(385,736

)

$

255,882

 

Issuance of common stock upon exercise of stock options

 

 

111

 

 

 

 

1,029

 

 

 

 

 

 

1,029

 

Vesting of performance stock units and restricted stock units, net of shares withheld for taxes

 

 

135

 

 

 

 

(1,501

)

 

 

 

 

 

(1,501

)

Stock-based compensation

 

 

 

 

 

 

15,768

 

 

 

 

 

 

15,768

 

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

(678

)

 

 

 

(678

)

Net loss

 

 

 

 

 

 

 

 

 

 

(20,054

)

 

(20,054

)

Balance as of September 30, 2022

 

 

62,985

 

$

63

 

$

658,523

 

$

(2,350

)

$

(405,790

)

$

250,446

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

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INTAPP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

Three Months Ended September 30,

 

 

 

2023

 

 

2022

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

Net loss

 

$

(15,321

)

 

$

(20,054

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

4,009

 

 

 

4,116

 

Amortization of operating lease right-of-use assets

 

 

1,130

 

 

 

1,273

 

Accounts receivable allowances

 

 

425

 

 

 

158

 

Stock-based compensation

 

 

18,757

 

 

 

15,768

 

Lease modification and impairment

 

 

 

 

 

1,949

 

Change in fair value of contingent consideration, including unrealized foreign exchange gain

 

 

(1,431

)

 

 

(147

)

Deferred income taxes

 

 

(113

)

 

 

(158

)

Other

 

 

38

 

 

 

38

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

23,472

 

 

 

15,240

 

Unbilled receivables, current

 

 

(3,886

)

 

 

(2,198

)

Prepaid expenses and other assets

 

 

(1,342

)

 

 

(1,307

)

Deferred commissions

 

 

121

 

 

 

(394

)

Accounts payable and accrued liabilities

 

 

(11,277

)

 

 

(15,827

)

Deferred revenue, net

 

 

222

 

 

 

7,112

 

Operating lease liabilities

 

 

(1,571

)

 

 

(2,137

)

Other liabilities

 

 

(1,621

)

 

 

(217

)

Net cash provided by operating activities

 

 

11,612

 

 

 

3,215

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(1,141

)

 

 

(1,668

)

Capitalized internal-use software costs

 

 

(1,861

)

 

 

(1,266

)

Net cash used in investing activities

 

 

(3,002

)

 

 

(2,934

)

Cash Flows from Financing Activities:

 

 

 

 

 

 

Payments for deferred offering costs

 

 

(633

)

 

 

 

Proceeds from stock option exercises

 

 

2,324

 

 

 

1,029

 

Payments related to tax withholding for vested equity awards

 

 

 

 

 

(1,501

)

Payments of deferred contingent consideration associated with acquisitions

 

 

 

 

 

(9,299

)

Net cash provided by (used in) financing activities

 

 

1,691

 

 

 

(9,771

)

Effect of foreign currency exchange rate changes on cash and cash equivalents

 

 

261

 

 

 

(968

)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

10,562

 

 

 

(10,458

)

Cash, cash equivalents and restricted cash - beginning of period

 

 

131,185

 

 

 

54,311

 

Cash, cash equivalents and restricted cash - end of period

 

$

141,747

 

 

$

43,853

 

Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

141,547

 

 

$

40,325

 

Restricted cash

 

 

200

 

 

 

3,528

 

Total cash, cash equivalents and restricted cash

 

$

141,747

 

 

$

43,853

 

 

 

 

 

 

 

 

Supplemental Disclosures of Cash Flow Information:

 

 

 

 

 

 

Cash paid for interest

 

$

1

 

 

$

1

 

Cash paid for income taxes, net of tax refunds

 

$

128

 

 

$

31

 

Non-cash investing and financing activities:

 

 

 

 

 

 

Purchases of property and equipment in accounts payable and accrued liabilities

 

$

8

 

 

$

 

Changes in capitalized internal-use software costs in accounts payable and accrued liabilities

 

$

(378

)

 

$

 

Changes in deferred offering costs in accounts payable and accrued liabilities

 

$

(629

)

 

$

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

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Intapp, Inc.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Description of Business

Intapp, Inc. (“Intapp” or the “Company”), formerly known as LegalApp Holdings, Inc., was incorporated in Delaware in November 2012. The Company is a holding company and conducts its operations through its wholly-owned subsidiary, Integration Appliance, Inc.

The Company is a leading provider of industry-specific, cloud-based software solutions for the global professional and financial services industry. The Company empowers the world’s premier private capital, investment banking, legal, accounting, and consulting firms with the technology they need to operate more competitively, deliver timely insights to their professionals, and meet rapidly changing client, investor, and regulatory requirements. The Company serves clients primarily in the United States, United Kingdom and Australian markets. References to “the Company,” “us,” “we,” or “our” in these unaudited condensed consolidated financial statements refer to the consolidated operations of Intapp and its consolidated subsidiaries.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and the requirements of the U.S. Securities and Exchange Commission (the “SEC”) for interim reporting. Certain information and disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2023 filed with the SEC on September 7, 2023. The unaudited condensed consolidated financial statements include accounts of the Company and its consolidated subsidiaries, after eliminating all inter-company transactions and balances.

The interim unaudited condensed consolidated financial statements have been prepared on a basis consistent with the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal and recurring adjustments, necessary to state fairly the Company’s financial condition, its operations and cash flows for the periods presented. The historical results are not necessarily indicative of future results, and the results of operations for the three months ended September 30, 2023 are not necessarily indicative of the results to be expected for the full year or any other period.

Use of Estimates

The preparation of the accompanying unaudited condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the unaudited condensed consolidated financial statements and accompanying notes. Those estimates and assumptions include, but are not limited to, revenue recognition including determination of the standalone selling price (“SSP”) of the deliverables included in multiple deliverable revenue arrangements; allowance for credit losses; the depreciable lives of long-lived assets including intangible assets; the expected useful life of deferred commissions; the fair value of stock-based awards; the fair value of assets acquired and liabilities assumed in business combinations; goodwill and long-lived assets impairment assessment; the fair value of contingent consideration liabilities; the incremental borrowing rate used to determine the operating lease liabilities; valuation allowances on deferred tax assets; uncertain tax positions; and loss contingencies. The Company evaluates estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from these estimates, and those differences could be material to the unaudited condensed consolidated financial statements.

Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023. Our revenue recognition policy is included below due to its significance to our financial statements. Except for the accounting policies for cash equivalents and allowance for expected credit losses described below, there have been no material changes to the significant accounting policies during the three months ended September 30, 2023.

Revenue Recognition

The Company’s revenues are derived from contracts with our clients. The majority of the Company’s revenues are derived from the sale of our software as a service (“SaaS”) solutions and subscriptions to our term software applications, including support services, as well as the provision of professional services for the implementation of our solutions.

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The Company accounts for revenues in accordance with Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of ASC 606 is to recognize revenues upon the transfer of control of services or products to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services or products.

The Company applies the following framework to recognize revenues:

Identification of the contract, or contracts, with our clients

The Company considers the terms and conditions of written contracts and its customary business practices in identifying its contracts under ASC 606. The Company determines it has a contract with a client when the contract is approved, each party’s rights regarding the services and products to be transferred can be identified, payment terms for the services and products can be identified, the client has the ability and intent to pay, and the contract has commercial substance. The Company evaluates whether two or more contracts entered within close proximity with one another should be combined and accounted for as a single contract. The Company also evaluates the client’s ability and intent to pay, which is based on a variety of factors, including the client’s historical payment experience or, in the case of a new client, credit and financial information pertaining to the client.

Identification of the performance obligations in the contract

Performance obligations promised in a contract are identified based on the services or products that will be transferred to the client that are both:

i.
capable of being distinct, whereby the client can benefit from the service or product either on its own or together with other resources that are readily available from the Company or third parties, and
ii.
distinct in the context of the contract, whereby the transfer of the services or products is separately identifiable from other promises in the contract.

To the extent a contract includes multiple promised services or products, the Company applies judgment to determine whether promised services or products are capable of being distinct and distinct in the context of the contract. If these criteria are not met, the promised services or products are accounted for as a combined performance obligation.

The Company derives its revenues primarily from the following four sources, which represent the performance obligations of the Company:

i.
Sales of SaaS under subscription arrangements: revenue derived from subscriptions to our SaaS solutions;
ii.
Sales of subscriptions to our licenses: software revenues derived from the sale of term licenses to clients;
iii.
Support activities: support activities that consist of email and phone support, bug fixes, and rights to unspecified software updates and upgrades released on a when, and if, available basis during the support term; and
iv.
Sales of professional services: services related to the implementation and configuration of the Company’s SaaS offerings and software licenses.

SaaS and subscription licenses are generally sold as annual or multi-year initial terms with automatic annual renewal provisions on expiration of the initial term. Support for subscription licenses follows the same contract periods as the initial or renewal term. Professional services related to implementation and configuration activities are typically time and materials contracts.

Determination of the transaction price

The transaction price is determined based on the consideration to which the Company expects to be entitled in exchange for transferring services and products to the client. Variable consideration is estimated and included in the transaction price if, in the Company’s judgment, it is probable that no significant future reversal of cumulative revenues under the contract will occur.

In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined that contracts generally do not include a significant financing component. The primary purpose of the Company’s invoicing terms is to provide clients with simplified and predictable ways of purchasing the Company’s products and services, not to receive financing from clients or to provide clients with financing.

Allocation of the transaction price to the performance obligations in the contract

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on its relative SSP. The majority of the Company’s contracts contain multiple performance obligations, such as when subscription licenses are sold with support and professional services. Some of the Company’s performance obligations have observable inputs that are used to determine the SSP of those distinct performance obligations. Where SSP is not directly observable, the Company determines the SSP using information that may include market conditions and other observable inputs.

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Recognition of revenues when, or as, the Company satisfies a performance obligation

The Company recognizes revenues as control of the services or products is transferred to a client, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services or products. The Company is principally responsible for the satisfaction of its distinct performance obligations, which are satisfied either at a point in time or over a period of time.

The Company records revenues net of applicable sales taxes collected. Sales taxes collected from clients are recorded in other current liabilities in the accompanying unaudited condensed consolidated balance sheets and are remitted to state and local taxing jurisdictions based on the filing requirements of each jurisdiction.

Performance obligations satisfied at a point in time

Subscription licenses

The Company has concluded that its sale of term licenses to clients (“subscription licenses”) provides the client with the right to functional intellectual property (“IP”) and are distinct performance obligations from which the client can benefit on a stand-alone basis. The transaction price allocated to subscription license arrangements is recognized as revenues at a point in time when control is transferred to the client, which generally occurs at the time of delivery or upon commencement of the renewal term. Subscription license fees are generally payable in advance on an annual basis over the term of the license arrangement, which is typically noncancelable.

Performance obligations satisfied over a period of time

SaaS and support as well as professional services arrangements comprise the majority of distinct performance obligations that are satisfied over a period of time.

SaaS and support

The transaction price allocated to SaaS subscription arrangements is recognized as revenues over time throughout the term of the contract as the services are provided on a continuous basis, beginning after the SaaS environment is provisioned and made available to clients. The Company’s SaaS subscriptions are generally one to three years in duration, with the majority being one year. Consideration from SaaS arrangements is typically billed in advance on an annual basis.

The Company’s subscription license sales include noncancelable support which entitle clients to receive technical support and software updates, on a when and if available basis, during the term of the subscription license agreement. Technical support and software updates are considered distinct from the related subscription licenses but accounted for as a single stand ready performance obligation as they each constitute a series of distinct services that are substantially the same and have the same pattern of transfer to the client. The transaction price allocated to support is recognized as revenue over time on a straight-line basis over the term of the support contract which corresponds to the underlying subscription license agreement. Consideration for support services is typically billed in advance on an annual basis. In some instances, the client may purchase premium support services which are generally priced as a percentage of the associated subscription license.

Professional services

The Company’s professional services revenues are primarily comprised of implementation, configuration and upgrade services. The Company has determined that professional services provided to clients represent distinct performance obligations. These services may be provided on a stand-alone basis or bundled with other performance obligations, including SaaS arrangements, subscription licenses, and support services. The transaction price allocated to these performance obligations is recognized as revenue over time as the services are performed. The professional services engagements are billed to clients on a time and materials basis and are recognized as invoiced. In instances where professional services arrangements are sold on a fixed price basis, revenues are recognized over time using an input measure of time incurred to date relative to total estimated time to be incurred at project completion. Professional services arrangements sold on a time and materials basis are generally invoiced monthly in arrears and those sold on a fixed fee basis are invoiced upon the achievement of project milestones.

The Company records reimbursable out-of-pocket expenses associated with professional services contracts in both revenues and cost of revenues.

Contract Modifications

Contracts may be modified to account for changes in contract scope or price. The Company considers contract modifications to exist when the modification either creates new rights or obligations or changes the existing enforceable rights and obligations of either party. Contract modifications are accounted for prospectively when it results in the promise to deliver additional products and services that are distinct and contract price does not increase by an amount that reflects standalone selling price for the new goods or services.

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Balance Sheet Presentation

Contracts with our clients are reflected in the unaudited condensed consolidated balance sheets as follows:

Accounts receivable, net represents amounts billed to clients in accordance with contract terms for which payment has not yet been received. It is presented net of allowance as part of current assets in the unaudited condensed consolidated balance sheets.
Unbilled receivables, net represents amounts that are unbilled due to agreed-upon contractual terms in which billing occurs subsequent to revenue recognition. This generally occurs in multi-year subscription license arrangements where control of the software license is transferred at the inception of the contract, but the client is invoiced annually in advance over the term of the license. Unbilled receivables may also arise on professional services arrangements sold on a fixed fee basis and on which revenue is recognized in proportion to the hours worked on the project, relative to the total expected hours. In some instances, revenue may be recognized in advance of the amounts which are invoiced on the achievement of contractual milestones. Unbilled receivables are presented net of allowance, if applicable, in the unaudited condensed consolidated balance sheets with the long-term portion included in other assets. Under ASC 606, these balances represent contract assets.
Contract costs consist principally of client acquisition costs (sales commissions). The Company classifies deferred commissions as current or non-current on our unaudited condensed consolidated balance sheets based on the timing of when the Company expects to recognize the expense.
Deferred revenue, net represents amounts that have been invoiced to the client for which the Company has the right to invoice, but that have not been recognized as revenues because the related products or services have not been transferred to the client. Deferred revenue that will be realized within twelve months of the balance sheet date is classified as current. The remaining deferred revenue is presented as non-current. Under ASC 606, these balances represent contract liabilities.

The Company may receive consideration from its clients in advance of performance on a portion of the contract and, on another portion of the contract, perform in advance of receiving consideration. Contract assets and liabilities related to rights and obligations in a contract are interdependent. Therefore, contract assets and liabilities are presented net at the contract level, as either a single contract asset or a single contract liability, in the unaudited condensed consolidated balance sheets.

Cash and Cash Equivalents

All highly-liquid investments with a remaining maturity of three months or less at the time of purchase are considered to be cash equivalents. Cash equivalents consist primarily of investments in institutional money market funds.

Accounts Receivable and Allowance for Expected Credit Losses

Accounts receivable are recorded at invoiced amounts, net of allowance for expected credit losses. The Company evaluates the collectability of its accounts receivable based on known collection risks, historical experience and forecasts of future collectability, and maintains an allowance for expected credit losses for estimated losses resulting from its clients failing to make required payments for subscriptions or services rendered. Sufficiency of the allowance is assessed based upon knowledge of credit-worthiness of our clients, review of historical receivable and reserves trends and other pertinent information. Actual future losses from uncollectible accounts may differ from these estimates.

Concentrations of Credit Risk and Significant Clients

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash, cash equivalents and accounts receivable. The Company maintains its cash and cash equivalents with multiple high credit quality financial institutions. The Company is exposed to credit risk for cash held in financial institutions to the extent that such amounts recorded on the balance sheet are in excess of amounts that are insured by the Federal Deposit Insurance Corporation (“FDIC”). The Company has not experienced any such losses.

No client individually accounted for 10% or more of the Company’s revenues for either of the three months ended September 30, 2023 and 2022. As of September 30, 2023, no client individually accounted for 10% or more of the Company’s total accounts receivable. As of June 30, 2023, one client individually accounted for 15% of the Company’s total accounts receivable.

Recent Accounting Pronouncements

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (i) no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, the unaudited condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

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The JOBS Act does not preclude an emerging growth company from early adopting new or revised accounting standards.

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses, which requires the establishment of an allowance for estimated credit losses on financial assets, including trade and other receivables, at each reporting date. The Company adopted this guidance on July 1, 2023 on a modified retrospective basis. The adoption did not have a material impact on its unaudited condensed consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

There have been no recently issued accounting pronouncements that are expected to have a material impact on the Company's unaudited condensed consolidated financial statements.

Note 3. Revenues

Disaggregation of Revenues

Revenues by geography were as follows (in thousands):

 

 

 

Three Months Ended September 30,

 

 

 

2023

 

 

2022

 

United States

 

$

69,855

 

 

$

55,652

 

United Kingdom

 

 

14,726

 

 

 

13,012

 

Rest of the world

 

 

16,994

 

 

 

10,874

 

Total

 

$

101,575

 

 

$

79,538

 

 

No country other than those listed above accounted for 10% or more of the Company’s total revenues during the three months ended September 30, 2023 and 2022.

Contract balances

The Company’s contract assets and liabilities were as follows (in thousands):

 

 

 

September 30, 2023

 

 

June 30, 2023

 

Unbilled accounts receivable, net(1)

 

$

14,660

 

 

$

10,765

 

Deferred revenue, net

 

 

192,619

 

 

 

192,397

 

 

(1)
The long-term portion of $113 and $104 as of September 30, 2023 and June 30, 2023, respectively, is included in other assets.

There was no allowance for credit losses associated with unbilled receivables as of September 30, 2023 and June 30, 2023. During the three months ended September 30, 2023, the Company recognized $65.3 million in revenue pertaining to deferred revenue as of June 30, 2023.

Remaining Performance Obligations

Remaining performance obligations represent non-cancellable contracted revenues that have not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenues in future periods. SaaS subscription is typically satisfied over one to three years, subscription license is typically satisfied at a point in time, support services are generally satisfied within one year, and professional services are typically satisfied within one year. Professional services contracts are not included in the performance obligations amount as these arrangements can be cancelled at any time.

As of September 30, 2023, approximately $417.2 million of revenues is expected to be recognized from remaining performance obligations with approximately 61% over the next 12 months and the remainder thereafter.

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Note 4. Cash Equivalents

Cash equivalents consisted of the following (in thousands):

 

 

 

September 30, 2023

 

 

 

Amortized Cost

 

 

Unrealized Gains

 

 

Unrealized Losses

 

 

Fair Value

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

75,639

 

 

$

 

 

$

 

 

$

75,639

 

Total cash equivalents

 

$

75,639

 

 

$

 

 

$

 

 

$

75,639

 

There were no cash equivalents as of June 30, 2023.

Note 5. Goodwill and Intangible Assets

Goodwill

Changes in the carrying amounts of goodwill were as follows (in thousands):

 

 

 

Three Months Ended September 30,

 

 

 

2023

 

 

2022

 

Balance, beginning of period

 

$

278,890

 

 

$

269,103

 

Purchase price adjustment

 

 

 

 

 

784

 

Foreign currency translation adjustment

 

 

(289

)

 

 

(657

)

Balance, end of period

 

$

278,601

 

 

$

269,230

 

During the three months ended September 30, 2022, the Company recognized a purchase price adjustment of $0.8 million related to the Billstream acquisition that occurred in June 2022, which increased goodwill and deferred consideration.

Intangible Assets

Intangible assets acquired through business combinations consisted of the following (in thousands):

 

 

 

September 30, 2023

 

 

 

Useful Life
(In years)

 

Gross Carrying Amount

 

 

Accumulated
Amortization

 

 

Net Carrying Amount

 

Client relationships

 

9 to 15

 

$

48,900

 

 

$

(25,515

)

 

$

23,385

 

Non-compete agreements

 

3 to 5

 

 

4,907