Informatica Inc. (NYSE:INFA) Q3 2023 Earnings Call Transcript

Informatica Inc. (NYSE:INFA) Q3 2023 Earnings Call Transcript November 1, 2023

Informatica Inc. beats earnings expectations. Reported EPS is $0.2673, expectations were $0.22.

Operator: Hello, and welcome to the Informatica Inc. Fiscal Q3 2023 Financial Results. My name is Elliot and I will be coordinating your call today. [Operator Instructions] I’d now like to hand over to Victoria Hyde-Dunn, Vice President of Investor Relations. The floor is yours. Please go ahead.

Victoria Hyde-Dunn: Good afternoon, and thank you for joining Informatica’s third quarter 2023 Earnings Conference Call. Joining me today are Amit Walia, Chief Executive Officer; and Mike McLaughlin, Chief Financial Officer. Before we begin, we have a couple of reminders. Our earnings press release and slide presentation are available on our Investor Relations website at investors.informatica.com. Our prepared remarks will be posted on the IR website after the conference call concludes. During the call, we will be making comments of a forward-looking nature. Actual results may differ materially from those expressed or implied as a result of various risks and uncertainties. For more information about some of these risks, please review the company’s SEC filings, including the section titled Risk Factors, included in our most recent 10-Q and 10-K filings for the full year 2022.

These forward-looking statements are based on information as of today, and we assume no obligation to publicly update or revise our forward-looking statements, except as required by law. Additionally, we will be discussing certain non-GAAP financial measures. These non-GAAP financial measures are in addition to and not a substitute for measures of financial performance prepared in accordance with GAAP. A reconciliation of these items to the nearest US GAAP measure can be found in this afternoon’s press release and our slide presentation available on Informatica’s Investor Relations website. It’s my pleasure to turn the call over to Amit.

Amit Walia: Thank you, Victoria. Thank you everyone for joining us today. I will start today’s call by summarizing three key points. First, we delivered a solid third quarter. We exceeded guidance across all top and bottom line metrics, driven again by strong customer momentum and execution from a cloud-only consumption-driven strategy. In addition to exceeding guidance in, Q3 based on our strong performance we are raising non-GAAP operating income and adjusted unlevered free cash flow after tax guidance for the full year. This is in addition to the raise we did on these metrics from our previous earnings call. Second we continue to accelerate our innovation-led cloud transformation to make IDMC powered by our AI engine player, the data management platform of choice for enterprises across the globe, as they build their modern data architecture to drive their AI-driven digital transformation.

Third, as we look ahead to next year, we remain committed to delivering balanced profitable growth, while continuing to build on our successful cloud-only consumption-driven strategy. As a part of this, we announced a restructuring today, which I will discuss in more detail at the end of my remarks. Now, let’s discuss these topics in more detail. Turning to Q3 sights, we exceeded the high end of guidance for ARR and revenue metrics. Cloud subscription ARR grew 37% year-over-year to a record $550 million. Our subscription ARR grew 15% year-over-year and total revenue grew 10% year-over-year. We strengthened our cash position and beat the high end of guidance for non-GAAP operating income and adjusted unlevered free cash flow after tax as well.

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Q&A Session

The macro environment remains stable for the third quarter, consistent with the prior quarter. We continue to be encouraged by the momentum of our cloud-only consumption-driven strategy as the sales mix shifts for self-managed to cloud subscription ARR, with cloud subscription ARR now representing 51% of subscription ARR up from 43% a year ago. Approximately, 85% of the quarter’s cloud new bookings came from new cloud workloads and expansion with the remaining 15% from on-prem cloud migration. Furthering the trend of accelerating migrations of our on-prem and maintenance Base to IDMC, at the end of Q3 we have now migrated 5% of that Base to Cloud compared to 4.5% at the end of Q2. Customers adopting the IDMC platform with new users and use cases across organizations, in the third quarter customers are spending more than $1 million in subscription ARR increased 17% year-over-year to 224 customers.

Customers spending more than $100,000 of subscription ARR increased 7% year-over-year to 1,978 customers. Let me share a few customer stories, highlighting our best to great solutions capabilities on the IDMC platform. Mercedes Benz France has been an Informatica customer for over two decades and has recently extended their partnership with us. IDMC will help them address evolutions of their data architecture and further enable use cases to Data Anonymization, Mass Ingestion, Data Quality and more to enhance their operations. Holland America Line is a leading cruise line company offering cruises throughout the world. An existing Cloud Data Integration and Mass Ingestion customer they recently expanded their IDMC footprint, accelerating their power center modernization to the Cloud and adding other platform capabilities.

Whataburger is an American regional fast food restaurant chain headquartered in San Antonio Texas. As an existing Informatica customer they selected the IDMC platform to lay their cloud platform foundation as they seek to scale their number of locations, to increase revenue and improve customer experiences in their restaurants. As the higher education industry is moving to cloud, Clemson University in South Carolina, sought to partner with us to accelerate the enterprise transformation initiatives. Recognizing our test to beat IDMC platform to selected our Cloud Data Innovation, Master Data Management and Cloud Data Governance & Catalog to create a single source of truth for the data-driven strategy. Next, we added product innovation to IDMC’s cloud-native AI-powered platform to improve productivity for our customers and partners.

In our Cloud Data Governance & Catalo service we added rest APIs to extend the reach of rich Metadata for our third-party apps, expanded data classification capabilities for Databricks, Kafka and Microsoft Power BI and expanded breadth and depth of Metadata’s connectivity with new scanners for Microsoft Synapse SQL script, Apache Hive, urban Data Modelur, Purview for AWS CLI and Microsoft Purview. Our focus on IDMC becoming the Metadata System of record for enterprises continues to accelerate. In our MDM and 360 App Services, we added many innovations for Data Stewards for their productivity, including bulk edits to the change management process and dynamic modeling experience to capture context-sensitive attributes, a very important feature for them.

Our investment towards faster time to value continues, as we launched a new material master extension designed for centralized ordering and mastering of material data. This when combined with Supply360 and Product360, can manage the entire value chain of an item as it moves from raw material to finished product which you can see is critical in terms of product innovation, shipping and profitability for companies. Turning to Privitar, we continue to make good progress integrating the technology capabilities into the IDMC platform and we should be done by the end of Q1 of 2024, including the ability to use IPUs to consume Privitar capabilities. Next our AI CLAIRE is embedded in all our solutions, leveraging ML algorithms and NLP on Metadata to drive intelligence and productivity accessing 50,000 metadata-aware connections now leveraging 36 petabytes of active Metadata in the cloud and the platform processing over 71 trillion mission-critical out transactions as of September 30 growing 60% year-over-year.

We continue to accelerate our progress in AI with CLAIRE GPT now available in private preview as a native IDMC service. We will utilize IPUs to drive usage and help customers democratize and simplify their data. In the beta, we have enabled data discovery and metadata exploration use cases. Over the next few months, we will enable data exploration ELT pipeline creation and content generation. As for CLAIRE copilot, which is already available to our customers we released CLAIRE generated pipeline capability that allows customers to utilize AI to AutoMap sources to master data management targets. Additionally, we added CLAIRE-powered FinOps capabilities that help users set detailed runtime data management job parameters based on desired performance and cost SLAs. Our commitment to delivering product differentiation and innovation has won us a recognition from industry analysts.

Dresner Advisory Services ranked us as the number one in its 2023 Dresser advisory services master data management market study. For the third consecutive year Blue Research named us a champion in its market update for Master Data Management 2022 report. And for the fourth consecutive year Constellation Research has named Informatica to its consolation shortlist Metadata management data cataloging and data covenants. As for our commitment to customer centricity and ensuring our customers get value from a market-leading product in IDMC that has also won us a recognition from thought leaders. Our focus on our customers and their success was recognized by JD Power for delivering an outstanding customer service experience, to customers globally, under its certified assisted technical support program.

This is the third consecutive year, Informatica earned the certification and met the current software benchmark for customers at excellence. The TSIA or Technology and Services Industry Association named Informatica a winner in the 2023 innovation in customer portals that improved digital customer experience category. Turning to partners. In Q3, we furthered co-selling activities with our ecosystem partners and announced new partnerships with Oracle Cloud and Google Cloud above and beyond the many existing partnerships that we have. At Oracle Cloud World, we announced the launch of our North America point of delivery on Oracle Cloud which is now live and the expansion of our cloud data governance capabilities with the autonomous database and Golden Gate.

We’re also a launch partner for Oracle’s Cloud Marketplace private offer program. At Google Next we announced a new solution combining our SaaS MDL on Google Cloud the Google Cloud’s customer data platform based on Google base. With our GSI partners we’ve seen a significant increase in GSI partners doubling down with us and building their data and AI growth plans with IDMC as the standard solution. During the last quarter we launched a joint strategic growth plan with LTI Mindtree to help customers accelerate cloud monetization and bring their data and AI to life across the 12,000 strong data and AI practice employees. We also became a launch partner for Randstad [ph] digital while building a data and AI practice consisting of informatic IDMC scale people.

Cap Gemini launched an ESG solution built on IDMC to help customers define an ESG data strategy and build a data management hub. In August, towards the middle of the month we launched Power Center Cloud Edition our new cloud modernization program that significantly lowers the migration time from on-prem power center to IDMC. In addition, it allows power center users more flexibility to manage the migration of individual workloads over time, once the initial implementation of Power Center Cloud Edition is live. In the first quarter of its availability and as I said it was middle of the quarter, we saw one-third of our migration deals using this new technology. Going forward, we expect the vast majority of our migration to use Power Center Cloud Edition which has the potential to accelerate Power Center maintenance migrations in future periods.