Cloud Migration And Vertical AI Will Drive Powerful Long Term Upside Potential

Catalysts

About Intapp

Intapp provides industry-specific cloud and AI software that helps professional and financial services firms drive growth while maintaining strict compliance.

What are the underlying business or industry changes driving this perspective?

• Rapid adoption of vertical, compliance-grade AI across legal, accounting and financial services is deepening Intapp’s role in core workflows, supporting sustained double-digit SaaS revenue growth and higher cloud ARR per client, which should ultimately accelerate earnings.
• Ongoing digitalization and cloud migration in traditionally underpenetrated professional and financial services, often tied to mandatory modernization and risk management, are expanding deal sizes and driving 20% to 30% uplift on on-premise to cloud conversions, which enhances revenue visibility and gross margins.
• Industry consolidation in large law, accounting and private equity backed firms is creating bigger, more complex enterprises that are standardizing on Intapp’s platform, increasing wallet share and reinforcing strong cloud net revenue retention, which supports durable ARR growth and operating leverage.
• Deep, expanding partnerships, particularly with Microsoft and a curated global ecosystem, are opening new geographies, funding Azure-based deals and shifting implementation to partners, which supports higher win rates, faster sales cycles and structurally higher operating margins.
• Strong enterprise go-to-market execution, evidenced by growth in $100,000 plus ARR customers and rising cross-sell of products like Intapp Time, DealCloud and Assist, is increasing RPO and improving the mix toward high-margin recurring SaaS revenue, which should compound free cash flow and EPS over time.

Assumptions

This narrative explores a more optimistic perspective on Intapp compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Intapp's revenue will grow by 14.3% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -5.3% today to 8.1% in 3 years time.
• The bullish analysts expect earnings to reach $63.6 million (and earnings per share of $0.68) by about December 2028, up from $-28.1 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $43.8 million.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 137.3x on those 2028 earnings, up from -125.6x today. This future PE is greater than the current PE for the US Software industry at 31.9x.
• The bullish analysts expect the number of shares outstanding to grow by 3.18% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.49%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Firms in legal, accounting and financial services may slow or defer cloud migrations and AI projects due to budget constraints or implementation complexity. This would limit Intapp's ability to convert its large on-premise base and could dampen long-term SaaS revenue growth and cloud ARR expansion, ultimately weighing on earnings.
• Rapid adoption of horizontal AI platforms and numerous specialized AI start-ups inside client firms could dilute Intapp's vertical AI differentiation and pricing power over time. This may pressure deal sizes, constrain net revenue retention and limit expansion-driven improvements in net margins and earnings.
• Growing dependence on Microsoft and a concentrated ecosystem of 145 partners for co-selling, implementation and Azure investment dollars introduces strategic and commercial risk if partner priorities, incentives or economics shift. This could lengthen sales cycles, increase go-to-market costs and compress operating margins and free cash flow.
• Secular consolidation in large law, accounting and financial institutions may increase customer concentration and procurement leverage. This could enable large clients to negotiate discounts or pause expansions during downturns, which would heighten volatility in ARR, slow RPO growth and cap operating leverage and EPS accretion.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Intapp is $76.0, which represents up to two standard deviations above the consensus price target of $57.12. This valuation is based on what can be assumed as the expectations of Intapp's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $76.0, and the most bearish reporting a price target of just $42.0.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be $783.9 million, earnings will come to $63.6 million, and it would be trading on a PE ratio of 137.3x, assuming you use a discount rate of 8.5%.
  
• Given the current share price of $43.0, the analyst price target of $76.0 is 43.4% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.