Intapp, Inc.

David Trone. Senior Vice President, Investor Relations.

Thank you. Welcome to NTAP's fiscal second quarter 2025 financial results. On the call with me today are John Hall, Chairman and CEO of NTAP, 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 third quarter and full year 2025. 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. INTAP 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, including non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP diluted net income per share, and free cash flow. As a reminder, all of our financial figures we will discuss today are non-GAAP, except for revenue and revenue growth, cash and cash equivalents, and total and current remaining performance obligations. Our gap financial results, along with reconciliations of gaps and non-gap 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 8K 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.

Thank you, David. Good afternoon, everyone. Thank you for joining us today as we share the results of our fiscal second quarter. I'm happy to share that once again, we've achieved strong quarterly results supported by cloud ARR, new AI capabilities, new partnerships, new logos, expanded client accounts, and cloud migrations around the world. I'll share details on these growth drivers on this call. In Q2, Our cloud ARR grew to $331 million, up 29% year over year. Cloud now represents 76% of our total ARR of $437 million. In the quarter, we earned SAS revenue of $80 million, up 27% year over year, and total revenue of $121 million, up 17% year-over-year. Now I'd like to share some highlights from our fiscal second quarter. I'll start with our continued success in executing on our vertical AI roadmap, specifically our ongoing applied AI innovation and its practical applications in professionals' daily workflows. This quarter, we introduced a new AI-powered search feature within Intap Assist for DealCloud, applying even more generative AI to the daily work of professionals. Using natural language query, professionals are now more easily able to bring together multiple types of DealCloud information to answer more sophisticated questions. This ability to discover and analyze client and deal intelligence across complex datasets is helping professionals apply broader firm-wide intelligence to their work. We also deepened DealCloud's integration with Microsoft Outlook, helping professionals perform work even more seamlessly with DealCloud directly from their Outlook inboxes without needing to continually switch back and forth. We also created a new integration which allows users to leverage DealCloud's relationship intelligence functionality within Google Calendar and Gmail, eliminating the need for manual data entry and app switching for that segment of our market. Finally, we expanded IntapWalls for Copilot to include comprehensive risk assessment data. In addition to giving firms control over the data that Copilot is authorized to access and surface for each professional, the solution now also identifies and alerts compliance teams to previously unknown potential oversharing and security risks among the thousands of documents stored across the firm in one drive. It's another way that we're enabling the secure adoption of AI for our clients and continually strengthening our partnership with Microsoft. Speaking of partnerships, our alliances and partner ecosystem continues to be an important cornerstone of our company's strategy and our INTAP Intelligent Cloud. Since launching our updated and expanded partner program at the beginning of last fiscal year, we've seen strong growth in the number of our partnerships, which is now 20% higher than a year ago, with 137 data, technology, and services partners. We formed several notable new integration partnerships last quarter, including PROMS, a commercial real estate data management platform and PassThrough, a SaaS-based investor onboarding platform. Both of these new partners integrate with Intap DealCloud to add additional capabilities for fund managers and investors in real estate and private capital. Meanwhile, our Microsoft partnership continues to be a growth lever and differentiator for our business. In Q2, we helped several of our clients purchase Intap solutions through the Azure Marketplace. For example, one of the world's largest investment banks significantly expanded their adoption of Intap DealCloud as part of their contract renewal this quarter. The availability of Intap solutions on the Azure marketplace allowed the client to use some of their pre-committed Microsoft spend to acquire our technology. This deal is a great example of the way our Microsoft partnership adds value for our clients. I'll turn now to Q2 wins. both new clients and expansions, as well as cloud migrations. First, I'm pleased to share that we're continuing to grow through the addition of new clients. In accounting and consulting, new firms are adopting solutions across our product offerings. For example, Alvarez and Marcell, a global consulting firm, selected Intap DealCloud, to help its expanding corporate finance practice group manage origination, sales pipeline, and deal workflows. Next, Milstead Langdon, a UK-based accounting firm, chose Intap Collaboration to automate workspace governance and gain greater structure and control around collaboration. Next, Armanino, a top 20 accounting firm in the US, chose Intap Conflicts as its centralized solution to more quickly and accurately identify and resolve conflicts of interest. We're seeing a similar trend in the legal industry, with new law firm clients also choosing Intap solutions across our solution set. I'll share a few highlights. shows in-tap compliance solutions to support and enhance its robust new business intake processes. By leveraging this advanced technology, Skadden aims to maintain its leading position in delivering a seamless and efficient experience to clients during the intake process, while also establishing more efficient workflows to enhance partner productivity and risk management. Colin Biggers and Paisley chose cloud-based Intap Time to modernize its timekeeping practices and enable more efficient work processes for its professionals. Next, Sackers selected Intap DealCloud for its powerful enterprise relationship management capabilities. Additionally, new financial services firms continued to move away from their legacy horizontal CRM solutions and onto Intac DealCloud to centralize information, improve utilization, and reduce manual processes. Wins this quarter include the investment banking arm of one of the largest banks in America, asset management firm Cartesia, and a growing European private equity firm. We see this trend as a significant growth area for Intac. This quarter, cross-selling and up-selling success in our existing accounts continue to drive strong cloud net revenue retention. I'll share some notable examples. Law firms continue to add DealCloud to their Intaps solution stack, including three clients in the AMLAW 100. Troutman Pepper Locke chose DealCloud as its single consolidated system for its ERM, CRM, event management, and business development needs. Next, a Global 50 law firm moved off its legacy CRM and onto DealCloud with Intap Assist for improved CRM access, functionality, and AI capabilities. Next, Blank Roam, longtime users of Intap Time and Compliance solutions, added DealCloud and Billstream as part of a strategic initiative to modernize its marketing, business development, and pre-billing technology. The firm is also migrating its existing Intap portfolio to the cloud to enhance data integration and maximize the synergies across the Intap platform. Large accounting and consulting firms also continued to add solutions I'll share a few. Aprio added Intap conflicts to streamline operations, reduce manual reporting, and improve tracking of gifts and entertainment compliance. Next, one of the big three consulting firms replaced its legacy compliance software with Intap employee compliance to increase automation and scalability. Next, a large global consulting firm added Intap Walls and Intap Collaboration to facilitate the compliant use of Microsoft Teams and transform the firm's Microsoft 365 platform into a compliant, engagement-centric collaboration solution. Additionally, a Big Four client firm expanded Intap DealCloud further, now adding professionals in its Ireland firm, to enable more efficient deal-making and global collaboration. And we're seeing success with legal clients choosing to migrate their Intap solutions to the cloud this quarter. I'll share two more notable examples. An AMLAW 50 firm is migrating Intap time to the cloud as well as adding Intap deal cloud to centralized lawyer and key client plans. And finally, Benesh is migrating both Intap Time and Intap Buildstream to the cloud to further streamline processes. In conclusion, we're proud of our strong second quarter performance, and we continue to be optimistic about the growth opportunities. As our Q2 performance has shown, we are growing by adding new capabilities and increasing our global enterprise go-to-market 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 Intap team for their teamwork and dedication. Thank you all very much. Okay, David, over to you.

Thanks, John, and thank you, everyone, for joining us today. I'm pleased to report a strong second quarter performance. driven by robust cloud adoption across NTAP's vertical-specific offerings, an expanding enterprise client base, and continued improvements in operational efficiency. As we enter the second half of fiscal 2025, we are well-positioned to capitalize on multiple growth levers and drive sustained profitability at scale. Let's begin with the fiscal Q2 results. Fast revenue was $80 million, up 27% year-over-year, driven by new client acquisitions, contract expansions, and the migration of on-premise products to the cloud. As of December 31st, 92% of our clients had adopted at least one cloud module. License revenue, which represents the combined on-prem revenue, was $28 million in fiscal Q2, approximately flat year-over-year. While price increases and contract expansions contributed positively, these were offset by client migrations to the cloud reflecting the ongoing transition to our SaaS offerings. Professional services revenue totaled $13.2 million, up 4% year-over-year. Our strategic decision to outsource more activities to partners has allowed us to place greater emphasis on enhancing client satisfaction and driving co-sell pipeline generation, supporting our long-term growth objectives. Total revenue was $121.2 million, up 17% year-over-year, driven primarily by sales of our cloud solutions. Revenue from our international operations accounted for almost a third of our total revenue this quarter and continues to provide growth opportunities. International revenue grew 24% year-over-year in Q2. As highlighted in recent quarters, we continue to invest in and expand our alliances and partner ecosystem around INTAP. Our network now includes 137 data, technology, and service partners, reflecting our significant growth. Notably, our co-sell partners, which grew 30% year-over-year in Q2, are playing an increasingly pivotal role in client acquisition and retention through their implementation and expertise and value-added integrations. Our enhanced partner program bolsters capabilities in deal generation, technology, data, and implementation, and we remain optimistic about their ongoing impact on our growth strategy. As we continue to emphasize our product-led growth strategy, our new vertical SaaS AI offerings include Intap Assist, now featuring our term SKU, and Intap Walls for Copilot, continuing to make contributions in the quarter. While we're still in the early stages of product rollout, pipeline development, and client provisioning, we remain excited about the growth prospects ahead. Q2 non-GAAP gross margin was 76.7%, up from 73.4% in the prior year period, reflecting progress toward breakeven professional services gross margins and optimizing the relative top-line contribution from that business. Non-GAAP operating expenses totaled $74.1 million, compared to $68.6 million in the prior year period, reflecting our continued investment and our product-led growth. As we continue to focus on our operational efficiency, non-GAAP operating income was 18.99 as compared to 7.6 million in the prior year period. Non-GAAP diluted EPS was 21 cents in the second quarter of fiscal 2025 as compared to 11 cents in the prior year period. Free cash flow, which is defined as our cash flow from operations, less capital expenditures, was $25.2 million for the second quarter, or 21% of total revenue. We exited the quarter with $285.6 million of cash and cash equivalents. Turning to our key metrics, cloud ARR was up 29% year-over-year, while total ARR was up 20% year-over-year. Total remaining performance obligations were $615.3 million, up 37% year-over-year. Our go-to-market sales strategy remains focused on landing new logos, and we ended the quarter with over 2,650 clients. Of these, 728 had an annual recurring revenue of at least $100,000, up from $649,000 in the previous year. Our 119% cloud net revenue retention rate in Q2 highlights our ability to retain and steadily grow business with existing cloud clients. Now turning to our outlook, for the third quarter of fiscal 25, we expect fast revenue of between $84 and $85 million. As these are newly provided revenue outlook metrics, we'll also be providing the implied year-over-year growth outlook of between 27 and 28%. Total revenue in the range of 128.3 and 129.3 million. Non-GAAP operating income in the range of 18.5 and 19.5 million. And non-GAAP EPS results of 21 cents to 23 cents using a diluted share count weighted for the quarter of approximately 84 million common shares outstanding. For the full fiscal 25, we expect SAS revenue of between 328.8 and 332.8 million. And as these are newly provided revenue outlook metrics, we're also providing the implied year-over-year growth outlook of between 27 and 28 percent. Total revenue in the range of 498.5 and 502.5 million. We also expect non-GAAP operating income in the range of 70.2 and 74.2 million. and non-GAAP EPS in the range of 83 cents to 87 cents using a diluted share count weighted for the fiscal year 25 of approximately 84 million common shares outstanding. Thank you, and I'll now turn the call back to the operator.

Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. One moment for questions. Our first question comes from Alexey Gogolev with JP Morgan. You may proceed.

Hello, everyone, and congratulations on great results. John, I was wondering if there has been any change to your guidance philosophy. Do you feel that you now have more visibility and can guide more accurately? Because it seems like in the past there were more significant beefs. And in terms of the demand environment, I seem to recall that on the last earnings call, you suggested that demand is very strong and the pipeline is the strongest you've seen in history. Is that still the case? And if you could provide maybe some more color on top of what you said during your prepared remarks.

Sure. Thanks, Alexei. I'll take the beginning, and then, Dave, you can address some of the guidance questions. The quarter was very strong. The pipeline is strong and we actually brought in quite a few large deals. We did go through the organizational change that we talked about in the last quarter. And what we saw was a little bit of a backend loading of deals. So we did a lot of deals in December this quarter, but overall demand is very good. The AI is being taken up very well. We talked about some new capabilities within tap assists that have been adopted rapidly by the client base. The deal cloud with Outlook integration is very strong. And we announced some walls for co-pilot capabilities to extend to OneDrive and some other areas, which were all very well received. So I'm optimistic about where we stand. Dave, you want to talk about the philosophy?

Yeah, thanks, John. Yeah, I would just echo the same thing. And then with respect to the guide itself, You know, we continue to provide a very prudent guide that, you know, we have a lot of visibility in. We came into the quarter with a lot of pipe to convert. Very impressed with the teams of being able to enable that and convert that. We also have to remember that with specifically with SAS, at times, if it's so back-end loaded, the revenue yield on that is slim to none. And in many cases, you may be only getting a day or two of revenue in that instance. Or there could have been some deals that were signed that actually have a 1-1 of 25 start date. And you kind of see that when you start triangulating the different metrics as a public SaaS company. You can step back and look at our RPOs, our current RPOs, our billings, our deferred revenue, on and on and on. And it all correlates to the same attribute of having a very strong quarter that the team executed very well against.

Thank you, David. And a quick follow-up on your gross margins. Seems like another very strong quarter improving sequentially. It appears that service gross margins were improving as well. I was wondering if you have any midterm trajectory that you can share with us because you now have three-quarters sequentially of profitable service gross margins. Where do you see them in the mid-term?

So we haven't updated our formal metrics on that semi from to just get to break even. I will acknowledge the team has been overperforming on that and has yielded profitability to below the line. And so, again, our first and foremost has always been about serving our clients more from a customer satisfaction versus a top-line growth or even profitability center. but it has it how it's been lined off and the economics applied. We've gotten some leverage from that. So very, very pleased.

Thank you very much.

Thank you. Our next question comes from Parker Lane with Stifel. You may proceed. Yeah, guys, thanks for taking the question.

John, you know, you've been working on the enterprise account go to market motion over the last couple of years, and that was a big emphasis on the last quarter's call. wondering if there's any update on how those additional resources are assisting there and whether or not there's been any incremental hiring or it's mostly been sort of shifting folks around and getting them really centered in on those large deal opportunities.

Thanks, Parker. I'm very pleased with the way that the group went through that update to the organization, we wanted to emphasize more coverage in the large enterprise accounts because there's so much TAM there for us to continue to go pursue, both landing new accounts and expanding within existing clients among those firms. And we did successfully make that change in Q1. In Q2, there were some account transitions that were still going on, but by the middle of the quarter, everything was done and we saw some very good results from the team there. in December, people working together. We have continued to invest in the sales and marketing organization. We have a lot of growth ahead of us, and so we're going to be conscious about doing that. But we're also seeing very good results from the folks that we have on the field, and I'm very grateful to the hard work that people put in and some of the really significant successes that we had there in December. So I'm very proud of the group.

Thanks, John. David, I think it was last year at the analyst day, you talked about three to 500 basis points of margin expansion being sort of the guiding principle here. Looks like you're set to run a little above that, even at the midpoint of this guide. Can you just talk about some of the puts and takes there that have you delivering ahead of expectations this year and what we should expect going forward?

Yeah, thanks, Parker. We're able to really optimize our G and a function a lot sooner than had originally intended. And then obviously with services coming on top of that, with the break in event, a slight positive has, has yielded that opportunity set where we will continue to invest in, you know, just a reminder to everybody, we continue to be a product led growth organization. And so, you know, we will continue to invest in our product and engineering. as well as our go-to-market functions where we see opportunities. And since we see a lot of opportunities, we'll continue to drop X amount of dollars in those set functions as we continue to scale towards that billion dollars in that long-term model that we articulated back on February 22nd when it was.

Thanks, David. Appreciate the color.

Thank you. Our next question goes from Kojiya Akito with Bank of America. You may proceed.

Hey, this is Natalie Howe on for Kojiya. Thanks for taking my question. So it's good to hear that there's healthy traction in your partnerships, especially with Microsoft. So I wanted to ask, how do you see those partnerships evolving from here? And how does your AI strategy come into play? I know you mentioned that there were some AI products that are also on the marketplace there. So will it potentially accelerate momentum in that?

Thanks, Natalie. Yes, the partners ecosystem, the alliances ecosystem that we have been investing to develop over the past few years is a core part of the strategy. So much of our opportunity in the market can be positively influenced by great relationships with many of the expertise partners that we have in each of the verticals. Microsoft obviously is the largest relationship that we have and extremely strategic to us. We've been doing a lot of work with them on AI in this market in particular. How do we apply all of the technology that's increasingly available to specific business problems in these firms? And so the partner system is helping bring us opportunities. It's also helping us deploy our software with particular solutions as we roll them out. It could be in tap assist for deal cloud or for terms. or walls for copilot or additional in-tab assist capabilities that we have coming up. And Microsoft is actually working directly with us in their engineering team because of the closeness of the relationship and the importance of this market to make sure that we can bring not only copilot but all of our technology into those firms in very specific applied applications that create value for the clients. And we've had a very positive reaction from the CIOs and the users and the executives in our client firms to the strength of our relationship. We will co-sell with them, co-demonstrate with them, and then deploy together, and it gives the clients a lot of confidence that we have an enterprise-grade solution that is really unavailable anywhere else in the marketplace. So we're very excited about that ecosystem strategy.

Got it. Thank you. Appreciate that.

Thank you. Our next question goes from Terry Tillman with Truist Securities. You may proceed.

Yeah. Hey, John, Dave, and David. Thanks for taking my questions. First question is just on the strength in cloud ARR, just kind of extrapolating off of that. You know, is there probably an expectation that there's going to be some seasonality and some lumpiness and maybe 4Q is kind of, you know, kind of the strongest quarter? And related to that first question, Is there anything kind of baked in on some of your larger kind of on-prem customers maybe converting by the fourth quarter and then a follow-up?

Hey, Terry, it's Dave. Let me take the initial and then John can add some comments there. Yeah, we are seeing a seasonality form specifically in and around December and June quarters with our respective clients. And so, you know, coming off of A year ago, we feel very successful of where we've been able to do. And even if you look at our first half of this fiscal year, we are actually ahead of our first half last fiscal year. And so even though we didn't get off to the best start for this fiscal year, we feel that we've overcome that and then some, and we'll continue to see what portends for us in the back half of our fiscal 2025. You know, with respect, to the on-prem to cloud transition, as I've indicated previously. We had a couple in flight this past quarter that we started the initiation. That work will time out in the next six to nine months, and then you'll see the full ratability up in the cloud ARR, as well as in the SAS revenue line. And so we'll continue to keep you updated as we continue to progress. But more and more of those deals and transitions are happening that will impact favorably to fiscal, the back half of fiscal 2025.

That's great. And then maybe the follow-up question. Thank you for that, Dave. John, you know, you talked about a variety of deal cloud wins in legal. And then, you know, obviously some customers moving to cloud. I think you mentioned a time example. And I'm totally short shrifting in terms of all the other stuff you talked about. But what I'm curious about is sometimes in the past I'll have investors say, you know, is the legal part of their business the slower growth, kind of more abundant part of their business? I'm curious if there's an inflection point or kind of an improving growth trend line in the legal side of your business, whether it's because either shift to cloud, AI, deal cloud, et cetera. Just maybe you could share a little bit more on the vitality on growth on the legal side. Thank you.

Thank you for picking up on that, Terry. It was a very strong quarter. across the board, but we wanted to highlight some really exciting trends in legal and accounting consulting for just this reason, because there have been questions about this. The underlying industries that we are serving are doing very well, and they themselves are optimistic about what the next few years portends for activity that will drive their business, and they're looking to invest in technology to support their growth as firms. And we're perfectly positioned to bring modern cloud AI to these firms in an industry-specific way. And we've established now a reputation over many years as the trusted partner of them and of important players like Microsoft to be able to bring the modern systems to them in an industry-specific solution. So I do think there are important things happening in many of these end markets because of the uptick in optimism more generally. And I think that plays through for us.

Thank you. Thank you. Our next question comes from Saqib Khalil with Barclays. He may proceed.

Hey, great. Hey, guys. Thanks for taking my questions here. John, maybe for you, just maybe hitting on that point around conversions. you know, this was one of the bigger sort of declines that we've seen in on-premise ARR, which is great, right? Because it sounds like there's healthy conversion activity. There was healthy conversion activity here in Q2. Can you just maybe talk about any changes that INTAP is making to drive that and how you think about sort of the journey for that on-premise space going forward?

Thanks, Saket. Yes, obviously, this is a smaller and smaller part of our business as we continue to sell only cloud and grow the cloud business, but moving these important clients to the cloud is an important part of our operating plan. We talked in February at investor day about our intention to put an official program in place this fiscal year. And we've done that. We have an executive leading this with a group that's focused on helping the law firms to make the migration. You know, they want to go. One of the things that we, try to emphasize as well as how many of our clients have cloud already. So that number was in the 92 this quarter. But we're excited about how receptive they are. It's more of a practical program. How do they prioritize this project among their various IT projects to move? And the more of the AI technology that we bring to the cloud and the more eager the firms are to get that AI working to support various activities inside their own firm, the more attractive it is on the business side for them to move in addition to just the IT project of consolidation. So I think that's really helping us. And the Microsoft partnership is part of that too, because now people can use the Mac agreements with Microsoft to move. And many of our firms and increasing number of our firms have those. So it's all part of a general trend that we're optimistic is going to help us move these people and help them become even more successful with the more modern solution that we have in the cloud.

Got it. Got it. That makes sense. Dave, maybe for my follow up for you on that same topic, can you just talk a little bit about just the high level economics of a conversion? I mean, should we think about, you know, a conversion sort of being one for one from on premise to SaaS or is there additional value that you're able to deliver in those conversions?

Yes, we've started commenting over the last 90 days that there is additional value, either through contract compliance, either through upsell, and then obviously through the opportunity of cross-sell. And what we've experienced thus far is a nominal 20% upside that we've been seeing at this point in time.

Very helpful. Thanks, guys.

Thank you. Our next question comes from Steve Enders with Citi. You may proceed.

Okay, great. Thanks for taking the questions here. I guess to start, I want to follow up on some of the prior commentary on the go-to-market changes and the impact that's having. I guess are we at this point kind of like broadly through the changes in the account structure? And I guess secondarily, is there maybe any, you know, any flow through or still kind of like any catch-up spend that, you know, could potentially come in here in the next couple of quarters as some of those changes kind of still come into effect?

Thanks, Steve. No, we are through. It took us a quarter, a quarter and a half, and the team did a great job of making that change, and we saw some really positive results from that. accounts that folks were working with in december we are going to continue to invest in sales and marketing generally and if you can talk about that but for this particular transformation we're done okay yeah sorry steve i was just going to add on we as normal course of business we're going to continue to

invest in our sales on marketing, you know, obviously through whether it be some nominal increase marketing or pipe gen to adding more feet on the ground and ensuring productivity as we start scaling and thinking about FY26.

Okay, perfect. That's helpful context. And just quick follow up, just housekeeping, any maybe like FX impact or any kind of you know, movements this quarter that may be impacted, you know, either how we should think about the second half outlook or ARR or billings in the quarter?

No, we had a very straightforward quarter, if you will. The FX impact for NTAP is very immaterial. Most of our nominal contracts are done in U.S. dollar. We do have some in various local currencies, but again, it's immaterial. You know, with respect to getting into a broader theme, we'll just be thinking about December being a strong quarter. You're starting to see some evolving seasonality. And then as I kind of intimated at the very beginning, you know, to Alex's question is, you know, we had a broad-based success across a lot of our KPIs that are more forward-looking, just outside of just pure SaaS revenue. So when you start putting in context the deferred revenue, calculated billings, the current RPO, you know, there was some strength there that would also indicate, you know, we had some deals that were signed not only back half of this calendar year and this quarter, but also a couple that were signed to go 1-1 of 25.

Okay, perfect. No, appreciate the extra context there. So thanks for taking the questions, and I'll jump back in the queue.

Thank you. Our next question comes from Alex Sklar with Raymond James. You may proceed.

All right, thank you.

Dave or John, on the strong cloud NRR expansion this quarter, any change between the buckets of cross-sell, up-sell, pricing, retention in second quarter or year-to-date? And then, John, specifically on cross-sell, you had that slide of the investor day showing how underpenetrated you were on deal cloud and some of those services and legal base. Really nice quarter this quarter on that. How big of an opportunity is that deal cloud cross-sell within kind of that late-stage pipeline?

Well, Alex, I'll answer the first part. There was no material change from kind of how we view the cross-sell, up-sell opportunities that make up that overall cohort. I'll tell you, you know, we like the success across all. You know, churn continues to be very low for us and absolute GRR dollars, if you will. So that motion, that enterprise motion continues to work very, very well for us. And then John?

Yeah, thanks, Alex. The message at Investor Day was absolutely the scale of cross-sell, up-sell opportunity that we have across all of our markets. We have a land and expand model, as we've talked about. For legal specifically and DeoCloud in legal or DeoCloud in professional services more broadly, it's a huge opportunity. The firms there have built a lot of in-house software or they have tried to use the horizontal platform. classic CRM systems for a business model that is entirely different than a Salesforce selling widgets from a price list, which is an excellent design if that's your business model, but for these professionals who sell their expertise and advisory services and each relationship is unique and each deal that they do, each engagement that they do is custom negotiated with a custom engagement letter and what they're going to deliver is unique. There's a totally different model that you need at the data level, at the process level, at the user perspective. And now with AI, how do you apply AI to really supercharge the way that these professional firms work? And they're some of the largest businesses on the planet. It's 3% of the global economy, these firms. So we think it's a massive opportunity to bring a purpose-built go-to-market system that supports growth for these firms, which is what they're facing now, now with an AI set of capabilities that should enable these professionals to network among themselves and bring the expertise of their partners, the full weight of the firm's knowledge and expertise to each engagement. So each client gets the full benefit of the firm's collective knowledge. That is not what a classic horizontal CRM is designed to do. And it is exactly what deal cloud is designed to do. So we're very excited. It took us a little while to get the early adopters and get the references and get the AI and, and get everybody understanding what the transformation opportunity was, but it's really starting to pick up. And so we were very excited to be able to list those names on the call.

Okay, great color. And then just to follow up to kind of Steve's question before, but on the improved bookings exiting December, is the comment you were trying to make that you're seeing productivity back at levels before the change is in place, or is there still some expectation that you can get productivity even higher from some of the changes around territories and more enterprise reps broadly as we kind of think about third quarter and fourth quarter? Thanks.

I think one point is that we're through the transformation, so we had that conversation. Another is that we did very well after that played through and actually paid off, so we're excited about that. I think we're setting up here for strong performance in 25 and 26 because we have such opportunity that we just talked about in the large accounts. We wanted to make sure that we were covering those. So productivity is good. Can we do more? I think as we continue to grow into those large accounts, the size of deals that you can do are very significant. And so that by itself should help us with productivity. I will say I'm very proud of the team's performance. They really did a ton of work here to bring in a very large pipeline and land a bunch of deals this quarter that we were excited to see. At the same time, there's a very good outlook here. So we've got a lot of optimism about where we're headed.

Okay, great. Thank you both.

Thank you. Our next question comes from Brian Schwartz with Oppenheimer and Company. You may proceed.

Yeah, hi. Thanks for taking my questions. John, just following up on the last question, are you seeing the linearity revert back to more historical trends, you know, here in fiscal 3Q, you know, versus what you saw in 2Q from the sales reorganization?

In terms of linearity per quarter, Dave, do you want to talk about the quarters and how we're describing them?

Yeah. So, if it's – Brian, if it's within the quarter, yeah, I mean, we're off to a good start. And so, you know, we're very confident in the prudent guide that we've given – you know, with respect to last quarter, there was just a lot of deal activity. And yes, we had a good start, but I'll tell you a lot of that came, you know, at the end of the year with everything else going on and everybody's, you know, daily life and whatnot. So, you know, I'm glad that the team executed and converted that pipe. Do we see kind of that plan at this level, no, we shouldn't be as back-end loaded in our March quarter versus where we were at last December.

Good. And then in terms of deal sizes, because it sounds like you're closing a lot of deals out there, are you seeing average deal sizes increase too?

You know, as we land some of the large accounts, that will drag up your average calculation. Now, we said over the quarters that the larger accounts are harder to predict which quarter they're going to land in. So there's some inherent lumpiness. And as we shift the business more and more towards the large TAM opportunity in the large end of the market, or at least proportionally so, you're going to see some variability from quarter to quarter in large deals landing. But yes, on average, if you step back and look over a year or so or more, you should see numbers tick up because that's where we're investing to put more people in deals, and that's where the TAM is really significant.

Last question for me. John, maybe just very high level here on just what you're seeing from hearing from customers in terms of the macro outlook. Is it your sense that people are more optimistic and does the macro feel better to you today than it did last time that we spoke three months ago? Thanks again for taking my questions.

Thanks, Brian. Well, I think the underlying trend for us is still digitalization for this underserved industry. These firms historically have not been successful with the classic horizontal systems And yet they have the same need for enterprise software and cloud solutions and AI as all the other businesses in the world. And they see it out there and they want it for themselves versus building a house. But they needed somebody built for them. So I think the general growth trend for us is that we're selling into a digitalizing market that actually is a little behind some of the other markets. But the people there are extremely highly compensated, highly valuable workers who are doing very important work. deal advisory, legal work for the large corporate clients around the world. And they benefit significantly when their work is better supported, better automated through technology. That being said, there are some secular trends in each of the end markets that have supported us, private capital in particular, being just a growth industry as more of the world's investment dollars shift to alternatives. That's really helping that whole market for us as a business. And then the advisory services that we sell to have some very strong growth trends. There's a lot of consolidation, actually. It's one of the fundamental drivers for us is the accounting industry, but also the legal industry. In order to serve the more significant corporate clients, they want to have a larger global footprint. So there's a natural incentive for these firms to form larger and larger enterprise class, become larger and larger enterprise class solution providers in and of themselves. And that drives natural demand for software to enable those firms and those partners to collaborate around the world. So there's a lot of reasons And then I think this more recent thing with optimism is also true. I mean, we've heard it from our own clients, and they're translating that from their clients flowing through to their business. So I think we're in a good spot here.

Thank you.

Thank you. I would now like to turn the call back over to John Hall for any closing remarks.

Okay. Okay. Well, thanks, everyone. We appreciate your attention and your questions. We have a great Q2 behind us, and we're excited about our continued momentum in fiscal 25. Thanks again for your time today, and we look forward to talking to you next quarter.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.