Informatica (INFA) - 2024 Q2 - Quarterly Results

Executive Summary & Q2 2024 Highlights CEO Statement The CEO expressed satisfaction with customer growth and strategic execution, raising guidance on key ARR and profitability metrics - The CEO is satisfied with customer growth and the execution of the cloud-first, consumption-driven strategy, raising guidance for cloud subscription ARR, total subscription ARR, and profitability[23] - The general availability of CLAIRE GPT in North America, combined with the IDMC platform, solidifies Informatica's leadership in enterprise AI-driven cloud data management[23] Q2 2024 Financial Highlights The company reported strong revenue growth, significant increases in Cloud and Total Subscription ARR, and positive operating income Key Financial Metrics for Q2 2024 | Metric | Q2 2024 (Millions) | YoY Growth | | :--- | :--- | :--- | | GAAP Total Revenues | $400.6 | 6.6% | | GAAP Subscription Revenues | $264.3 | 16% | | GAAP Cloud Subscription Revenue | $161.4 | 35% | | Total ARR | $1,670 | 7.8% | | Subscription ARR | $1,200 | 15% | | Cloud Subscription ARR | $703 | 37% | | GAAP Operating Income | $9.5 | N/A | | Non-GAAP Operating Income | $114.9 | N/A | | GAAP Operating Cash Flow | $24.9 | N/A | | Adjusted Unlevered Free Cash Flow (after-tax) | $71.2 | N/A | - Total revenues were negatively impacted by approximately $1.6 million from foreign currency exchange rates, with a constant currency growth of 7.0% YoY[46] Q2 2024 Business Highlights Key achievements include the CLAIRE GPT launch, expanded partnerships with major cloud providers, and growth in high-value subscription customers - Launched CLAIRE GPT in North America, the first generative AI-powered data management assistant leveraging the Informatica Intelligent Data Management Cloud (IDMC)[48] - Plans to expand global presence by opening an office in Saudi Arabia[48] - Processed 96.6 trillion cloud transactions per month as of June 30, 2024, a 59% increase YoY[18] Key Customer & Cloud Metrics (as of June 30, 2024) | Metric | Value | YoY Change | | :--- | :--- | :--- | | Customers spending >$1M in Subscription ARR | 272 | +28% | | Customers spending >$100K in Subscription ARR | 2,038 | +5% | | Cloud Subscription Net Retention Rate (End-user) | 119% | N/A | | Cloud Subscription Net Retention Rate (Global Parent) | 126% | N/A | Business & Product Updates Product Innovation Product advancements feature the launch of CLAIRE GPT and native SQL ELT capabilities for Databricks and Snowflake - Launched CLAIRE GPT in North America, enabling generative AI-powered data management using IDMC capabilities[48] - Introduced native SQL ELT capabilities for Databricks compute and Snowflake functions[13][48] - Made Informatica's Cloud Data Integration-Free (CDI-Free) service available through Databricks Partner Connect[13] Strategic Partnerships The company significantly expanded partnerships with Microsoft, Snowflake, Oracle, and Databricks to integrate its IDMC platform - Expanded partnership with Microsoft to launch a data quality native application for Microsoft Fabric, offer IDMC as an Azure Native ISV Service, and provide Cloud Data Access Management (CDAM) for Azure[48] - Expanded partnership with Snowflake to support native SQL ELT for over 250 Snowflake functions, launch a generative AI blueprint combining Snowflake Cortex AI with IDMC, and provide CDAM for Snowflake[48] - Expanded partnership with Databricks to achieve IDMC platform validation for Unity Catalog, provide a generative AI blueprint for DBRX customers, and launch native SQL ELT capabilities[13][48] - Expanded partnership with Oracle to natively launch Cloud Data Governance and Catalog services on Oracle Cloud Infrastructure (OCI)[13] Industry Recognition Informatica received multiple industry accolades, including partner of the year awards and recognition as a market share leader - Named 2024 Data Integration Partner of the Year by Databricks and 2024 Build with Partner of the Year by MongoDB[49] - Recognized by IDC as the market share leader in the worldwide Data Integration and Data Intelligence markets for 2023[49] - Named a "Champion" in Bloor Research's 2024 market update reports for Data Architecture, Data Quality, and Test Data Management[49] Debt Repricing The company repriced its outstanding debt, reducing the applicable interest rate and expecting significant annual interest expense savings - Repriced its $1.8 billion of outstanding debt on June 11, 2024[13] - Reduced the applicable interest rate from 2.75% to 2.25% and eliminated the credit spread adjustment related to the LIBOR-to-SOFR transition[13] - Expected to save approximately $11 million in pre-tax interest expense annually[13] Financial Outlook & Guidance Q3 2024 Guidance The company provided Q3 2024 guidance with expected growth in revenues, ARR, and non-GAAP operating income Q3 2024 Financial Guidance (Midpoint) | Metric | Q3 2024 Guidance (Midpoint) | YoY Growth (Midpoint) | | :--- | :--- | :--- | | GAAP Total Revenues | $420 million | 2.8% | | Subscription ARR | $1.209 billion | 12.2% | | Cloud Subscription ARR | $743 million | 35.2% | | Non-GAAP Operating Income | $145 million | 13.2% | | Total ARR | $1.675 billion | 6.3% | - Expects cash interest payments of approximately $36 million in Q3 2024[54] - Expects basic weighted-average shares outstanding of approximately 304 million and diluted weighted-average shares of approximately 312 million for Q3 2024[55] Full-Year 2024 Guidance The company updated its full-year 2024 guidance, lowering total revenue expectations but raising ARR and profitability forecasts Full-Year 2024 Financial Guidance (Midpoint) | Metric | Full-Year 2024 Guidance (Midpoint) | YoY Growth (Midpoint) | | :--- | :--- | :--- | | GAAP Total Revenues | $1.670 billion | 4.7% | | Total ARR | $1.745 billion | 7.3% | | Subscription ARR | $1.282 billion | 13.2% | | Cloud Subscription ARR | $836 million | 35.5% | | Non-GAAP Operating Income | $548 million | 18.5% | | Adjusted Unlevered Free Cash Flow (after-tax) | $555 million | 23.0% | - GAAP Total Revenues guidance was lowered due to reduced professional services revenue, shorter average renewal duration for self-managed subscriptions, and an increased FX headwind of approximately $4 million[19] Estimated FX Impact in 2024 Guidance | Metric | Q3 2024 Impact (y/y) | Full-Year 2024 Impact (y/y) | | :--- | :--- | :--- | | Total Revenues | ~$3.5m negative | ~$7.0m negative | | Total ARR | ~$1.0m negative | ~$5.0m negative | | Subscription ARR | ~$1.0m negative | ~$3.0m negative | | Cloud Subscription ARR | $— | ~$2.0m negative | - Expects cash interest payments of approximately $146 million for the full year 2024[35][54] - Expects full-year 2024 basic weighted-average shares of approximately 302 million and diluted weighted-average shares of approximately 313 million[55] Guidance Assumptions & Cautionary Factors Financial guidance is based on current market conditions and fixed exchange rates, subject to various macroeconomic and business-specific risks - Guidance considers the impact of macroeconomic conditions and expected foreign exchange headwinds[24] - The company assumes exchange rates remain constant for the full year, based on rates at the beginning of the planning period[34] Assumed Exchange Rates for Full-Year 2024 | Currency | Planned Rate (as of 1/1/24) | Forecast Rate (as of 7/1/24) | | :--- | :--- | :--- | | EUR/$ | 1.10 | 1.07 | | GBP/$ | 1.27 | 1.26 | | $/CAD | 1.32 | 1.37 | | $/JPY | 141 | 161 | - A reconciliation of non-GAAP guidance to the most directly comparable GAAP measures is not available without unreasonable efforts due to the high variability and low visibility of certain items[25] Non-GAAP Financial Measures & Key Business Metrics Non-GAAP Financial Measures Definitions The company utilizes non-GAAP measures like Adjusted EBITDA and Non-GAAP Operating Income to evaluate its operational performance - Non-GAAP measures are used to evaluate ongoing operations, for internal planning and forecasting, and to provide consistency and comparability with past financial performance[38] - Beginning in Q2 FY2024, the company adjusted certain non-GAAP measures to exclude employer payroll tax expenses related to stock-based compensation plans[38][59][76] Adjusted EBITDA Adjusted EBITDA is calculated by adjusting GAAP net income for taxes, interest, and various non-cash or non-recurring items - Adjusted EBITDA is calculated by adjusting GAAP net income (loss) for various non-operating and non-cash items[2] - The metric helps assess relative profitability in relation to balance sheet debt levels[2] Non-GAAP Operating Income & Net Income These measures exclude items like stock-based compensation and amortization to facilitate operational analysis and comparison across periods - Non-cash or non-recurring items are excluded to provide useful supplemental information and facilitate analysis of operating results[70] - Adjustments include stock-based compensation, amortization of intangibles, restructuring, acquisition-related costs, and sponsor-related costs, considering the income tax effect[70] Adjusted Unlevered Free Cash Flow (after-tax) This metric measures long-term liquidity by adjusting operating cash flow for capital expenditures and other specific items - Represents operating cash flow adjusted for capital expenditures, interest payments, equity compensation payments, and costs related to sponsors, acquisitions, and restructuring[39] - Provides a measure of long-term liquidity for core business operations[39] Key Business Metrics Definitions The company uses key metrics such as ARR and NRR to assess recurring revenue performance and customer retention Annual Recurring Revenue (ARR) ARR represents the expected annual billings from all active maintenance and subscription agreements, tracking the total recurring contract value - Represents the expected annual billings from all active maintenance and subscription agreements[26] - Calculated by multiplying contractual monthly recurring revenue (MRR) by 12, including contracts in renewal negotiations for up to six months[26] - Important for understanding the business as it tracks the annual cash value of all recurring contracts[26] Subscription Annual Recurring Revenue (Subscription ARR) Subscription ARR is the portion of ARR attributable only to subscription contracts, excluding perpetual license maintenance - Represents the portion of ARR attributable only to subscription contracts, including cloud and self-managed subscription ARR[40] - Excludes maintenance contracts on perpetual licenses[40] - Helps in understanding the annual cash value of recurring subscription contracts[40] Cloud Subscription Annual Recurring Revenue (Cloud Subscription ARR) Cloud Subscription ARR is a subset of Subscription ARR representing the annual cash value from hosted cloud contracts - Represents the portion of ARR attributable to hosted cloud contracts[60] - A subset of total Subscription ARR that provides visibility into the growth of the cloud subscription business[60] Subscription Net Retention Rate (NRR) Subscription NRR compares the subscription ARR from the same cohort of customers at the end of a period to the prior year - Compares the subscription ARR contract value from the same cohort of customers at period-end to the prior year[4] - Growth is driven by price increases, increased consumption, and new product sales to existing customers, offset by losses from price decreases, reduced usage, and cancellations[4] - Cloud Subscription NRR continues to outperform Total Subscription NRR as self-managed customers transition to cloud offerings[4] Cloud Subscription Net Retention Rate (Cloud Subscription NRR) Cloud Subscription NRR measures the ability to sell additional products to the cloud customer base over a year - Compares the cloud subscription ARR from the same cohort of customers (at both end-user and global parent levels) at period-end to the prior year[61] - Measures the company's ability to sell additional products to its cloud subscription customer base[61] Maintenance Annual Recurring Revenue (Maintenance ARR) Maintenance ARR represents the portion of ARR from maintenance contracts supporting perpetual licenses, which is expected to decline - Represents the portion of ARR attributable only to maintenance contracts, including those supporting perpetual licenses[72] - Expected to decline in future quarters as the company shifts focus from perpetual licenses to cloud offerings[72] Revenue Disaggregation Definitions This section defines the components of subscription revenue, including self-managed license, support, and cloud subscription revenues - Self-managed subscription license revenue: From customers and partners using the company's self-managed software over the subscription term[21] - Self-managed subscription support and other revenue: Primarily from license support contracts sold with self-managed subscription licenses[5] - Cloud subscription revenue: From cloud subscription offerings where the company develops, hosts, manages, and supports the application and infrastructure[62] Reconciliations of GAAP to Non-GAAP This section provides detailed reconciliation tables bridging GAAP financial measures to their non-GAAP counterparts Non-GAAP Income from Operations Reconciliation This table reconciles GAAP operating income to non-GAAP operating income, showing a significant year-over-year increase GAAP to Non-GAAP Income from Operations Reconciliation (Six Months Ended June 30) | Metric | 2024 (Thousands) | 2023 (Thousands) | | :--- | :--- | :--- | | GAAP income (loss) from operations | $12,689 | $(35,333) | | Stock-based compensation-related charges | 132,677 | 105,550 | | Amortization of intangibles | 65,518 | 74,402 | | Restructuring | 5,254 | 27,724 | | Acquisition-related costs | 7,205 | — | | Sponsor-related costs | 773 | — | | Non-GAAP income from operations | $224,116 | $172,343 | | Non-GAAP operating margin (% of total revenue) | 28.4% | 23.2% | Non-GAAP Net Income Reconciliation This table details adjustments from GAAP net income to non-GAAP net income, which grew substantially from the prior year GAAP to Non-GAAP Net Income Reconciliation (Six Months Ended June 30) | Metric | 2024 (Thousands) | 2023 (Thousands) | | :--- | :--- | :--- | | GAAP net income (loss) | $14,162 | $(268,820) | | Stock-based compensation-related charges (1) | 132,677 | 105,550 | | Amortization of intangibles | 65,518 | 74,402 | | Restructuring | 5,254 | 27,724 | | Debt refinancing costs | 1,366 | — | | Acquisition-related costs | 7,205 | — | | Sponsor-related costs | 773 | — | | Income tax effect | (86,499) | 153,922 | | Non-GAAP net income | $140,456 | $92,778 | Non-GAAP Net Income Per Share (Six Months Ended June 30) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Non-GAAP net income per share—basic | $0.47 | $0.32 | | Non-GAAP net income per share—diluted | $0.45 | $0.32 | Adjusted EBITDA Reconciliation This table reconciles GAAP net income to Adjusted EBITDA, which increased compared to the same period last year GAAP Net Income (Loss) to Adjusted EBITDA (Six Months Ended June 30) | Metric | 2024 (Thousands) | 2023 (Thousands) | | :--- | :--- | :--- | | GAAP net income (loss) | $14,162 | $(268,820) | | Income tax (benefit) expense | (44,545) | 181,634 | | Interest income | (27,172) | (17,503) | | Interest expense | 77,430 | 72,517 | | Debt refinancing costs | 1,366 | — | | Other income, net | (8,552) | (3,161) | | Stock-based compensation-related charges | 132,677 | 105,550 | | Amortization of intangibles | 65,518 | 74,402 | | Restructuring | 5,254 | 27,724 | | Acquisition-related costs | 7,205 | — | | Sponsor-related costs | 773 | — | | Depreciation | 6,071 | 8,408 | | Adjusted EBITDA | $230,187 | $180,751 | Adjusted Unlevered Free Cash Flow Reconciliation This table reconciles net cash from operating activities to adjusted unlevered free cash flow, showing strong year-over-year growth Adjusted Unlevered Free Cash Flow (Six Months Ended June 30) | Metric | 2024 (Thousands) | 2023 (Thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $156,494 | $106,587 | | Less: Purchases of property, plant, and equipment | (1,565) | (3,115) | | Add: Equity compensation payments | — | 121 | | Add: Restructuring costs | 16,473 | 25,620 | | Add: Acquisition related costs | 6,682 | — | | Add: Sponsor-related costs | 429 | — | | Adjusted Free Cash Flow (after-tax) | $178,513 | $129,213 | | Add: Cash paid for interest | 75,704 | 71,062 | | Adjusted Unlevered Free Cash Flow (after-tax) | $254,217 | $200,275 | | Adjusted Unlevered Free Cash Flow (after-tax) margin | 32% | 27% | - Cash taxes paid were $31.8 million for the six months ended June 30, 2024, compared to $48.9 million in the prior year period[10] Key Business Metrics Data This section presents data for key business metrics, including ARR breakdowns, NRR, customer counts, and cloud transaction volume ARR and NRR Metrics The company reported strong growth in Cloud Subscription ARR and maintained healthy NRR figures as of Q2 2024 Annual Recurring Revenue (ARR) (as of June 30) | Metric | 2024 (Thousands) | 2023 (Thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Cloud Subscription Annual Recurring Revenue | $702,600 | $512,615 | +37.1% | | Self-managed Subscription Annual Recurring Revenue | $493,935 | $529,723 | -6.8% | | Subscription Annual Recurring Revenue | $1,196,535 | $1,042,338 | +14.8% | | Maintenance Annual Recurring Revenue on Perpetual Licenses | $471,697 | $505,186 | -6.6% | | Total Annual Recurring Revenue | $1,668,232 | $1,547,524 | +7.8% | Net Retention Rate (as of June 30) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Subscription Net Retention Rate (End-user level) | 106% | 107% | | Cloud Subscription Net Retention Rate (End-user level) | 119% | 116% | | Cloud Subscription Net Retention Rate (Global Parent level) | 126% | 122% | Customer Metrics The number of customers with subscription ARR over $1 million and $100,000 both increased year-over-year Subscription ARR Customer Count (as of June 30) | Metric | 2024 | 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Customers spending >$1M in Subscription ARR | 272 | 213 | +28% | | Customers spending >$100K in Subscription ARR | 2,038 | 1,940 | +5% | Cloud Transaction Volume The volume of monthly cloud transactions processed by the company saw a significant 59% year-over-year increase Cloud Transactions Processed Per Month (Trillions) | Period | 2024 | 2023 | YoY Change | | :--- | :--- | :--- | :--- | | June 30, 2024 (monthly) | 96.6 | 60.7 | +59% | Net Debt Reconciliation The company's total net debt decreased from the end of 2023, reflecting an improved cash position Net Debt Reconciliation (in millions) | Metric | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Dollar Term Loan | $1,833 | $1,842 | | Less: Cash, cash equivalents, and short-term investments | $(1,129) | $(992) | | Total net debt | $704 | $850 | Disaggregation of Subscription Revenues Cloud subscription revenue showed strong growth, while self-managed subscription components saw a slight decline Subscription Revenue Disaggregation (Three Months Ended June 30, in thousands) | Revenue Type | 2024 | 2023 | | :--- | :--- | :--- | | Cloud subscription | $161,422 | $119,244 | | Self-managed subscription license | $53,976 | $56,878 | | Self-managed subscription support and other | $48,908 | $51,467 | | Subscription revenues | $264,306| $227,589| Subscription Revenue Disaggregation (Six Months Ended June 30, in thousands) | Revenue Type | 2024 | 2023 | | :--- | :--- | :--- | | Cloud subscription | $312,860 | $231,022 | | Self-managed subscription license | $105,924 | $107,427 | | Self-managed subscription support and other | $97,499 | $103,062 | | Subscription revenues | $516,283| $441,511| Consolidated Financial Statements Consolidated Balance Sheets The balance sheet shows a decrease in total liabilities and an increase in stockholders' equity as of June 30, 2024 Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $798,465 | $732,443 | | Total current assets | $1,783,137 | $1,752,586 | | Total assets | $5,121,805 | $5,202,082 | | Total current liabilities | $878,873 | $1,053,381 | | Total liabilities | $2,795,989 | $2,989,484 | | Total stockholders' equity | $2,325,816 | $2,212,598 | - Accounts receivable, net decreased to $318.7 million as of June 30, 2024, from $500.1 million as of December 31, 2023[7] - Deferred revenue (current and non-current) decreased to $697.5 million as of June 30, 2024, from $786.7 million as of December 31, 2023[7] Consolidated Statements of Operations The company's total revenues increased, and it reported net income for the quarter, a significant improvement from the prior year's net loss Consolidated Statements of Operations Highlights (Three Months Ended June 30, in thousands) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Total revenues | $400,625 | $375,988 | | Subscriptions revenue | $264,306 | $227,589 | | Gross profit | $317,730 | $290,396 | | Income (loss) from operations | $9,464 | $(5,386) | | Net income (loss) | $4,828 | $(152,466)| | Income tax (benefit) expense | $(19,081) | $122,065 | Consolidated Statements of Operations Highlights (Six Months Ended June 30, in thousands) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Total revenues | $789,232 | $741,419 | | Subscriptions revenue | $516,283 | $441,511 | | Gross profit | $624,582 | $573,930 | | Income (loss) from operations | $12,689 | $(35,333) | | Net income (loss) | $14,162 | $(268,820)| | Income tax (benefit) expense | $(44,545) | $181,634 | - Research and development expenses decreased to $79.2 million in Q2 2024 from $87.7 million in Q2 2023[64] Consolidated Statements of Cash Flows Net cash from operating activities increased significantly, contributing to a net increase in cash and cash equivalents for the period Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30, in thousands) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $156,494 | $106,587 | | Net cash (used in) provided by investing activities | $(67,210) | $24,458 | | Net cash (used in) provided by financing activities | $(15,910) | $3,296 | | Net increase in cash and cash equivalents | $66,022 | $134,924 | | Cash and cash equivalents at end of period | $798,465 | $632,803 | - Cash paid for interest was $75.7 million for the six months ended June 30, 2024, up from $71.1 million in the prior year period[75] - Cash paid for income taxes, net of refunds, was $31.8 million for the six months ended June 30, 2024, down from $48.9 million in the prior year period[75] Forward-Looking Statements & Disclaimers Forward-Looking Statements The press release contains forward-looking statements subject to various risks and uncertainties detailed in SEC filings - Forward-looking statements relate to future operating results, financial performance, guidance, foreign exchange rates, macroeconomic conditions, management plans, product development, and partnerships[57] - These statements are subject to risks and uncertainties, including adverse global macroeconomic conditions, geopolitical uncertainty, public health crises, and the ability to attract and retain customers, develop new products, and manage growth[20][57] - Further details on risks are included in the company's Annual Report on Form 10-K for the year ended December 31, 2023, and its Quarterly Report on Form 10-Q for the quarter ended June 30, 2024[37] Non-GAAP Measures Disclaimer Non-GAAP financial measures are supplemental and should not be considered a substitute for GAAP information - Non-GAAP measures are for supplemental purposes only, have limitations, and should not be used as a substitute for GAAP financial information[38] - Comparability may be reduced as other companies in the industry may calculate similarly titled non-GAAP measures differently[38] - Investors are encouraged to review the relevant GAAP financial measures and the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures[38] Company Information & Contacts About Informatica Informatica is a leader in enterprise AI-driven cloud data management, serving a global customer base with its IDMC platform - Informatica is a leader in enterprise AI-driven cloud data management[73] - Developed the Informatica Intelligent Data Management Cloud (IDMC), an end-to-end data management platform powered by CLAIRE AI[73] - Serves customers in approximately 100 countries, including over 80 of the Fortune 100[73] Investor & Public Relations Contacts This section provides contact information for the company's investor relations and public relations departments - Investor Relations Contact: Victoria Hyde-Dunn (vhydedunn@informatica.com)[6] - Public Relations Contact: prteam@informatica.com[16] Webcast and Conference Call Details Details for the Q2 2024 earnings call, including dial-in numbers and webcast information, are provided - The conference call to discuss Q2 2024 financial results and Q3/full-year 2024 outlook is scheduled for July 30, 2024, at 2:00 p.m. Pacific Time[56] - Dial-in details: 1-833-470-1428 (U.S.) or 1-404-975-4839 (International), with conference code 653349[56] - A live webcast and replay will be available at investors.informatica.com[56] Upcoming Events The company will participate in several investor conferences and events in August and September 2024 - Investor meetings are scheduled at the KeyBanc Technology Leadership Forum (August 5, 2024) and the Wolfe Research TMT Conference (September 11, 2024)[50] - Fireside chats are scheduled at the Deutsche Bank Technology Conference (August 28, 2024), Citi's Global TMT Conference (September 4, 2024), and the Goldman Sachs Communacopia & Technology Conference (September 10, 2024)[50]