Earnings Call Transcript - INTA Q1 2024

Operator, Operator

Good day, ladies and gentlemen. Welcome to Intapp's Fiscal First Quarter 2024 Financial Results Conference Call and Webcast. 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, Senior Vice President of Investor Relations

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, Chairman and CEO

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 email 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 pre-populated 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 sub-verticals, 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, Chief Financial Officer

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 multi-year 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 to 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

And our first question is 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, Chairman and CEO

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, Chief Financial Officer

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, Operator

And our next question coming from Kevin McVeigh with UBS.

Kevin McVeigh, Analyst

Congratulations on another strong quarter. Steve, you continue to make impressive progress, or John, I apologize for the mix-up. Regarding the larger clients, can you clarify whether these are new clients or existing clients scaling up? Is some of this growth attributed to the partnership with Microsoft starting to take effect? It seems that as we deepen our relationship with them, it could serve as an additional growth driver.

John Hall, Chairman and CEO

Thank you, Kevin. The growth in our larger clients is driven by both acquiring new business and expanding our engagement with existing clients beyond the $100,000 threshold. This is the figure you're referring to. What’s exciting is our increased focus on enterprise-class firms, which is proving effective. We're witnessing more large companies engaging with us initially and then presenting significant opportunities for upselling and cross-selling. This highlights the vast total addressable market and the depth of opportunities with large firms. Additionally, we are pleased to see companies start at $20,000 or $30,000 and successfully grow beyond the $100,000 mark, and there are many such firms. We monitor this as a way to illustrate the market's potential. Regarding Microsoft, I believe it is contributing positively. We've mentioned several aspects of our relationship with Microsoft. One key development is our availability on the Azure marketplace. This quarter, Microsoft adjusted its incentives, allowing their sellers to gain credit for sales made through the marketplace. This change enhances their ability to recommend us, co-sell, and receive quota relief when we sell. We see this as a significant advantage. Additionally, as we noted in a previous call, when customers have the Microsoft Azure Contract with a minimum spend requirement, many firms can utilize that commitment to purchase our solutions now. Several components of our relationship with Microsoft are aiding us in both acquiring larger firms and expanding existing ones.

Kevin McVeigh, Analyst

The margins continue to impress despite significant growth in professional services, which are usually lower margin. Do you have any thoughts on this? If professional services keep scaling, could that be a positive sign for future revenue?

David Morton, Chief Financial Officer

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, Operator

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

Bobby 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, Chairman and CEO

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.

Bobby 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, Chairman and CEO

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 sub-verticals. 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, Operator

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

Alex 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, Chairman and CEO

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.

Alex 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, Chief Financial Officer

We did experience a slight increase in our net revenue retention. We likely focused more on our expansion efforts rather than acquiring new clients. Both strategies are important for us, but we continue to deepen our relationships with existing clients, surpassing our initial engagements. We had a successful quarter in this area.

Operator, 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, Chairman and CEO

I believe we are benefiting from the ongoing trend towards private capital, which has been developing for years and is still progressing. There is a growing need for firms, regardless of their fund sizes, to have the necessary infrastructure to operate effectively. Historically, these firms have not had adequate technological support. Therefore, there is a significant modernization opportunity that exists outside of the economic cycle you've mentioned. Additionally, we are still early in our market penetration, as many firms have not yet transitioned to cloud solutions or implemented AI technologies that align well with their operations, like DealCloud does. This creates a positive trend for us. We've also expanded into the multi-strategy category, which has taken some time, but a significant portion of our opportunities lies within diverse multi-strategy and private capital firms. These firms are adapting similarly to professional services firms over the years by focusing on fundraising and investment strategies that are relevant to the current economic climate. We anticipate strong growth in this area, especially as we see rising demand across various strategies and categories. This is part of why our Industry Solutions strategy is effective, as we can tailor our developments to market segments that are experiencing growth. Overall, we have a solid foundation with promising sales opportunities ahead.

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, Chairman and CEO

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, Operator

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

Parker 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, Chairman and CEO

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. 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.

Parker Lane, Analyst

Got it. Okay. Regarding the AI development you mentioned, should we consider that as something exclusively for your cloud-based customers? Will that sufficiently motivate others to switch if some functionalities are only available through the cloud offering?

John Hall, Chairman and CEO

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 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, Operator

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

Matt 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, Chairman and CEO

The midsized and large banks have become a significant market for us. We're still in the early stages, and it's one of the more recent segments where we've achieved notable successes, especially among the larger banks. I see a couple of opportunities ahead. First, these banks are large and diversified, and they are engaging us to replace many custom applications they have built in-house. Each bank has developed its own unique systems, and they are transitioning towards a more standardized IT architecture, seeking to partner with a supplier like us if we can provide a solution that replaces those in-house built and maintained systems. This presents a logical division of labor and economic rationale for collaboration with a partner like us, particularly from the IT departments. As they assess their budgets and determine their priorities, there is a valid reason for them to turn to us. Thus, this creates a solid foundation for modernization demand. Additionally, various segments of the banks are experiencing growth, each pursuing their own strategies to explore opportunities across different products, and we have successfully developed applications to support the launch of those new initiatives. It's clear that, across all segments we cater to, if there's one area that might feel more economic pressure, it would be the investment banks. However, we have continued to perform well in spite of that challenge, and we are excited about the deals we have secured.

Matt 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, Chairman and CEO

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, 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, Chairman and CEO

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, Chairman and CEO

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, 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, Chairman and CEO

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, Operator

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