Informatica (INFA) - 2024 Q1 - Quarterly Report

Part I. Financial Information This section presents the company's financial statements, management's analysis, market risk disclosures, and internal controls Item 1. Financial Statements Total revenues increased 6% to $388.6 million, net income reached $9.3 million, and operating cash flow significantly improved Notes to Condensed Consolidated Financial Statements This section details segment operations, revenue disaggregation, long-term debt, and restructuring expenses - The company operates as a single reportable segment, with the CEO acting as the Chief Operating Decision-Maker (CODM)[32] Disaggregation of Revenue by Type (in thousands) | Revenue Type | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Cloud subscription | $151,438 | $111,778 | | Self-managed subscription license | $51,948 | $50,549 | | Maintenance | $117,678 | $125,375 | | Professional services | $18,931 | $25,328 | | Total Revenues | $388,607 | $365,431 | - As of March 31, 2024, the company had total long-term debt of $1.84 billion related to its dollar term loan facility, maturing in 2028[55][58] - In Q1 2024, the company recorded $4.3 million in restructuring expenses related to its November 2023 plan, which aimed to reduce its workforce by approximately 10% and reduce its real estate footprint[76] - Remaining performance obligations were $1.5 billion as of March 31, 2024, with approximately 66% expected to be recognized as revenue over the next twelve months[72] Condensed Consolidated Statements of Operations Highlights (in thousands) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Total Revenues | $388,607 | $365,431 | | Subscriptions | $251,977 | $213,922 | | Gross Profit | $306,852 | $283,534 | | Income (Loss) from Operations | $3,225 | $(29,947) | | Net Income (Loss) | $9,334 | $(116,354) | | Diluted EPS | $0.03 | $(0.41) | Condensed Consolidated Balance Sheets Highlights (in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $855,068 | $732,443 | | Total Current Assets | $1,700,036 | $1,752,586 | | Total Assets | $5,084,914 | $5,202,082 | | Total Current Liabilities | $896,681 | $1,053,381 | | Long-term debt, net | $1,802,033 | $1,805,960 | | Total Liabilities | $2,822,099 | $2,989,484 | | Total Stockholders' Equity | $2,262,815 | $2,212,598 | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $131,642 | $69,882 | | Net cash provided by investing activities | $4,430 | $48,979 | | Net cash (used in) / provided by financing activities | $(7,885) | $14,912 | | Net increase in cash and cash equivalents | $122,625 | $135,028 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Revenue grew 6% driven by cloud subscriptions, total ARR reached $1.64 billion, and Adjusted EBITDA increased Key Business Metrics and Non-GAAP Financial Measure This section details key business metrics like ARR and Cloud Subscription NRR, alongside Adjusted EBITDA reconciliation Key Business Metrics (in millions, as of March 31) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Cloud Subscription ARR | $652.5 | $483.3 | | Subscription ARR | $1,157.7 | $1,020.9 | | Total ARR | $1,636.5 | $1,533.4 | | Cloud Subscription NRR (Global Parent) | 124% | 124% | | Cloud Subscription NRR (End-user) | 119% | 118% | - The company had 258 customers with over $1 million in Subscription ARR as of March 31, 2024, up from 208 in the prior year[138] Adjusted EBITDA Reconciliation (in thousands) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | GAAP net income (loss) | $9,334 | $(116,354) | | Adjustments (Tax, Interest, D&A, etc.) | $102,140 | $205,367 | | Adjusted EBITDA | $111,474 | $89,013 | Results of Operations This section analyzes revenue performance by stream, cost of software revenues, and operating expense trends Revenue Performance (in thousands) | Revenue Stream | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Cloud subscription | $151,438 | $111,778 | 35% | | Subscriptions (Total) | $251,977 | $213,922 | 18% | | Maintenance | $117,678 | $125,375 | (6)% | | Professional services | $18,931 | $25,328 | (25)% | | Total Revenues | $388,607 | $365,431 | 6% | - The 6% increase in total revenues was primarily driven by a 35% increase in cloud subscription revenues, which now represent 39% of total revenues[184] - Cost of software revenues increased by 31% to $46.8 million, mainly due to higher fees for third-party hosting services and increased personnel-related expenses to support the growing cloud business[193] - Operating expenses as a percentage of revenue decreased from 86% to 78% year-over-year, largely due to a significant reduction in restructuring costs from $27.3 million in Q1 2023 to $4.4 million in Q1 2024[182][202] Liquidity and Capital Resources This section reviews cash position, operating cash flow, and long-term debt obligations and maturities - As of March 31, 2024, the company had $1.11 billion in cash, cash equivalents, and short-term investments, up from $992.3 million at the end of 2023[208] - Net cash provided by operating activities was $131.7 million, a significant increase from $69.9 million in the prior-year quarter, primarily driven by higher net income and favorable changes in working capital, particularly accounts receivable collections[213][214] - The company's Term Facility debt matures on October 29, 2028, and is repayable in quarterly installments of 0.25% of the initial principal amount[223] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces interest rate and foreign currency risks, with hedging strategies for Indian Rupee exposure - The company's primary market risks are interest rate sensitivity on its variable-rate debt and foreign currency exchange risk on international operations[230][232] - A hypothetical 0.25% change in interest rates would alter the company's annual interest expense by approximately $4.6 million[231] - A hypothetical 10% adverse movement in foreign currency exchange rates would have negatively impacted operating income by about $12.3 million in Q1 2024[233] - The company utilizes foreign exchange forward contracts to hedge against volatility in the Indian Rupee, with notional amounts to buy $93.9 million of the currency as of March 31, 2024[235] Item 4. Controls and Procedures Management concluded disclosure controls were effective, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[238] - No changes occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[239] Part II. Other Information This section addresses legal proceedings, risk factors, equity sales, defaults, and other required disclosures Item 1. Legal Proceedings The company is not party to any legal proceedings that would materially adversely affect its business or financials - The company is not presently a party to any legal proceedings that management believes would have a material adverse effect on its business[242] Item 1A. Risk Factors The company faces risks from customer retention, macroeconomic factors, security, business model transition, and indebtedness Risks Related to Our Business and Industry This section details risks from customer retention, macroeconomic factors, security breaches, business model transition, competition, and key personnel - The business could be harmed by an inability to attract and retain customers, adverse macroeconomic factors (inflation, geopolitical disruptions), and security breaches[248][250][254] - Failure to successfully manage the transition to a cloud- and subscription-based model, including a consumption-based pricing model, could adversely affect results[270] - The market for the company's products is highly competitive, with competition from custom-built solutions, point solution vendors, cloud service providers, and large stack vendors[287][289] - The loss of key personnel or an unexpected turnover in the sales force could negatively impact growth and operational results[274] Risks Related to Regulation This section addresses risks from evolving privacy laws, tax law changes, AI technology, and export and import controls - The company is subject to complex and evolving laws related to privacy, data protection, and security (e.g., GDPR, CCPA), which could impose substantial costs and inhibit sales[359][360] - The company's effective tax rate is difficult to project and could be adversely affected by changes in tax laws, such as the OECD's global minimum corporate tax, or adverse results of tax examinations[352][353] - The development and use of AI technologies present new regulatory, ethical, and security risks that could result in reputational harm or liability[366] - The business is subject to U.S. and international export and import controls, which could impair the ability to compete in international markets[369] Risks Related to Our Indebtedness This section highlights risks from substantial indebtedness, restrictive covenants, and variable interest rate exposure - The company has substantial indebtedness of approximately $1.82 billion as of March 31, 2024, which could make it difficult to satisfy obligations and limit financial flexibility[415] - The Credit Agreement contains restrictive covenants that limit the ability to incur additional debt, pay dividends, make acquisitions, and sell assets[416][424] - Borrowings under the Credit Facilities are at variable interest rates, exposing the company to interest rate risk, especially as prior interest rate swaps have matured[428] Risks Related to Ownership of Our Class A Common Stock and Our Capitalization Structure This section discusses risks from private equity sponsor control, 'controlled company' status, and potential future stock sales - The company's private equity sponsors (Permira and CPP Investments) control approximately 78% of the combined voting power, giving them controlling influence over matters requiring stockholder approval[436][451] - As a "controlled company" under NYSE rules, Informatica is exempt from certain corporate governance requirements, such as having a majority of independent directors[450] - Substantial future sales of Class A common stock by the sponsors could depress the market price of the stock[433][434] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[464] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - None[465] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[466] Item 5. Other Information The company reported no other information for this item - None[467] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including officer certifications and XBRL data files - The exhibits filed include certifications from the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act of 2002, along with Inline XBRL documents[469] Signatures The report was duly signed on May 2, 2024, by the company's CEO and CFO - The report was duly signed on May 2, 2024, by the company's CEO and CFO[472]