Informatica Inc.

Good morning, everyone, and welcome to Informatica's third quarter 2021 earnings conference call. My name is Lauren and I'll be your event specialist today. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypads. I would now like to introduce our host, Victoria Hyde-Dunn, Vice President of Investor Relations. Victoria, please go ahead.

Thank you, Lauren. Good morning, and thank you for joining us to review Informatica's third quarter 2021 earnings results. With me on the call today are Amit Walia, Chief Executive Officer, and Eric Brown, 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. During this 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 IPO perspective dated October 26, 2021. 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 substitute for measures of financial performance prepared in accordance with GAAP. A reconciliation of these items to the nearest U.S. GAAP measure can be found in this morning's press release and on our slide deck available on our investor relations website. With that, it's my pleasure to turn the call over to Amit.

Thank you, Victoria. Good morning, everyone. It is definitely early morning here for all of us on the West Coast. We are excited to host our first earnings call on the heels of a strong third quarter and a very successful initial public offering. I would like to thank our employees, customers, strategic partners, sponsors, and investors, all of whom helped us achieve this important milestone. Now, before I share our Q3 results, I would like to provide an overview of the market opportunity and our unique position in the market driven by our product-led innovation. Informatica is a leader in the cloud data management, purpose-built for cloud-native, multi-cloud, and hybrid workloads. Our vision is to be a cloud-neutral, single source of truth data management platform for the enterprise. The rise of digital transformation, the increase in data volume, data types, data latency, data fragmentation, and the adoption of multi-cloud and hybrid architectures have changed how organizations gather, share, and use data for decision making and running their businesses. Businesses today have tremendous fragmentation and complexity in a multi-cloud hybrid world. SaaS apps such as Salesforce, ServiceNow, Adobe, and Workday, cloud platforms such as AWS, Azure, and GCP, cloud data platforms like Snowflake and Databricks, and many cloud databases are all being adopted. But many on-prem legacy apps are still operational. A hand coded or a limited single point solution simply cannot fulfill the needs of a modern digital enterprise that wants to move fast in its data led digital transformation. So five years ago, we at Informatica undertook a product innovation-led approach to solve these complexities of data management and set out an ambitious strategy to transform our business from an on-prem, single product-centric software company to a cloud-native technology platform supporting multi-cloud and hybrid work environments. We re-architected from ground up a modern, metadata-centric data management platform that is cloud-native, API-enabled, leverages many open-source technologies, and uses a microservices-based architecture which can be deployed on-prem or in the public cloud. We built our AI engine, Clare, that is embedded in the platform to drive intelligence and automation at scale. We call this platform the Intelligent Data Management Cloud, or IDMC. As we transformed our financial model from a perpetual license and maintenance revenue model to a subscription-based revenue model with cloud revenue as the fastest-growing component, these significant initiatives were all completed ahead of the IPO. With that as background, I would like to now discuss how Informatica has emerged as a leader in data management and our strategies for continued growth. I will provide an overview of five key unique attributes and discuss our business updates. First and most important, it's product innovation. We've always had the clarity to focus on data management category and have dedicated significant resources, including over $1 billion in cumulative R&D spending over the last five years. These investments have resulted in best of these solutions on the industry's only AI-powered data management platform, IDMC, for multi-cloud and hybrid workloads. We are a rare software company that is the leader in every Gartner magic quadrant it competes in. And in 2021, it marked the sixth straight year that Informatica was named a leader in all of our five data management magic quadrants. IDNC platform runs at a substantial scale. We processed over 23 trillion cloud transactions per month as of September quarter end, with an unparalleled breadth of over 50,000 metadata-aware connectors. And our new product innovation represented 85% of our subscription ARR in Q3. Second, it's our vendor neutrality. We call ourselves the Switzerland of data, and we believe in winning together with our partners. Enterprises across the globe have invested in a heterogeneous infrastructure and expect vendor neutrality. We sell our solutions to a direct global sales team, which is enhanced and complemented by our relationships and collaboration with strategic partners, including hyperscalers. global system integrators, and channel partners. Our partner strategy is focused on delivering a complete end-to-end solution for our customers, driving general awareness of our platform, and broadening our distribution and reach to new customers. Third, we participate in a $44 billion addressable market with cloud increasingly growing faster than on-prem workloads. accelerated adoption of cloud, digitization, expanded need for intelligent analytics, and large-scale disruption in data warehouses and databases is fueling the demand for data management solutions that are cloud-needed and delivered on a platform versus siloed, best-of-breed format. Fourth is our strong global customer base. The effectiveness of our go-to-market strategy is evident with our 5,000 plus customers in more than 100 countries and territories worldwide. Our platform is used globally by organizations of all sizes across a broad range of industries including government agencies and high profile brands that trust us with their data management needs. We are well represented in 9 of the Fortune 10 and 84 of the Fortune 100. Our Net Promoter Score is 55 and we are honored to be recognized recently for an outstanding customer service experience by JD Power in Certified Technology Service and Support Program 2021. Finally, we have the additional opportunity to migrate our maintenance customers to cloud subscription revenue. The majority of our 551 million of maintenance PRR comes from traditional data integration products. These three quarters ago, we started a cloud migration program to support customers' migration efforts based on their demand cycles. Today, only 1% of our installed bases migrated to the cloud, and we believe this is a long-tail incremental opportunity for us. With that as background, now let me share the summary of our Q3 results. In Q3, total annual recurring revenue or ARR growth accelerated 17% year-over-year to $1.3 billion. This was fueled by subscription ARR of $736 million, growing at 36% year-over-year. Now, as I said before, 85% of this subscription ARR comes from our net new products on IDLC. Cloud ARR growth accelerated to 44% year-over-year. and total revenue grew 11% year-over-year to $362 million, driven by subscription revenue of $194 million, growing at 31% year-over-year. Next, let me provide some business highlights from the third quarter to accentuate the numbers. Starting with product innovation, we extended our IDMC platform with several product releases. In Q3, we delivered a unified, cloud-native data governance and catalog SaaS offering with integrated data and AI governance and Clare, our AI engine, powered intelligent automation. Second, we accelerated our customers' MDM deployment with an enhanced no-code application composer and Clare-powered customer record matching recommendations that simplify and enhance user experience and dramatically improve productivity. And lastly, in support of our data warehouse and data-like environments at our customer sites, we extended our Informatica cloud mass ingestion solution, providing customers with a very simple wizard approach to ingest data from SaaS and on-prem apps to support application synchronization and analytics in the cloud. We also introduced Informatica's petabyte-scale ELT processing that now delivers up to 10 times faster performance for Snowflake, BigQuery, and Databricks SQL, enabling users beyond IT to leverage the performance and scale of these cloud data platforms. We have additional plans to expand IDMC capabilities in the fourth quarter and look forward to sharing future updates. Now turning to our strategic partners, our partnership with cloud hyperscalers, including AWS, Microsoft Azure, Google Cloud, Snowflake, and Databricks continues to grow. In Q3, we observed a 60% sequential quarter-over-quarter growth in core solutions. ID&C is also available on AWS, Azure, and Google Cloud marketplaces. And in Q3, we delivered over, rather we achieved over 150% sequential quarter-over-quarter growth in marketplace transaction volume. A very valued ecosystem partner is Snowflake. In September, we announced with an on-prem cloud modernization program to help our joint customers modernize our traditional power-centered ETL and ENT workloads to the cloud 12 times faster than before, with 90% of greater automation conversion to the Snowflake Data Cloud. One of the largest global pharmaceutical companies intends to migrate 25,000 power center data mappings to IDNC and repoint the data flows to Stoflex Data Club. Turning to customers. In Q3, we added 11 net new subscription customers that spent more than a million dollars in subscription ARR. ending the quarter with a record 127 customers and 44% year-over-year growth. We're also introducing a new metric. Customers have spent more than $100,000 in subscription ARR, which totaled 1,577 customers, an increase of 28% year-over-year. Enterprise demand remains strong and we sell into accounts. We win with our single technology cloud platform offering IDMC. 55% of subscription customers are net new, with great results from our go-to-market strategy. As customers see the value of our offering for their initial use cases, they often expand into additional use cases across the organization, as we have seen that in our overall average ARR per customer roughly doubled over the last three years. This expansion is also aided by our recent introduction of consumption-based pricing for our cloud products. In fact, our average ERR per customer was $208,000 in Q3, double what it was three years ago with an active base of more than 3,500 subscription customers. Let me give you three customer examples to enhance on these. One of the new logos this quarter was production financial. It's a Fortune 500 FinServ leader with more than 1.5 trillion in assets under management across the globe. Prudential chose Informatica's data governance solution and cloud data quality to help build Prudential's modern enterprise data platform hosted in the cloud. The trusted data foundation will help them drive strategic initiatives around customer centricity, application modernization, and cloud data analytics. Informatica was a critical component of Prudential's global data strategy. This partnership enables Prudential to discover and govern data wherever it resides, accelerating its cloud migration and unlocking new efficiencies across its high-performing organization. Now, we also continue to observe great traction among our customers through the land and expand model. I'll give you two examples. CVS Health, a global Fortune 100 healthcare leader that operates an integrated model, over 10,000 pharmacies, tens of millions of Aetna health insurance members, and a growing network of community health hub clinics. As CVS modernizes its IT infrastructure in the cloud, it needed a partner to help improve data quality and accelerate the migration of legacy systems with minimal impact on service times or business disruption. Informatica's data quality replaces work done by 20 full-time data managers using AI-powered quality checks to reduce potential errors by 99% and accelerate client reporting from six months to two to three days. CDS continues to invest in its partnership with Informatica, most recently in Q3 going through an expanded deal for data as a service, which enriches address and geocoding data. And finally, another customer of ours is our international customer, Graz Savoy, a leading insurance brokerage firm in France and a subsidiary of Vils, Towers, Watson. Their key challenges included manually intensive data quality checks, delayed delivery of reporting and analytics, and missing connections between cloud, on-prem, and partner data stores. Graz Savoy chose Informatica's cloud integration solution as a central platform for all its data management needs, to improve operational efficiency, and its alignment with Willis Towers Watson, eliminating layers of legacy tech debt and migrating essential services without business disruption. Now, GrantsAway's recent subscription to our cloud solution follows their existing Business 360 partnership they have with us, which started in 2020, which helped them launch their KYC or Know Your Customer data foundation in less than five months while working remotely during the pandemic. Now in terms of our board, we are also excited to appoint Betsy Raphael to our board of directors and the chair of our audit committee. Betsy is a globally recognized finance executive with more than 30 years of experience in the technology industry and we are excited to welcome Betsy to our board. So as I summarize, I believe Informatica is truly a unique company. We have fully completed our business model transformation to our recurring revenue business model. Q3 subscription ERR is growing at 36% year-over-year, and cloud ERR growth accelerating to 44% year-over-year. We have established ourselves as a clear leader of a $44 billion addressable market with a large innovation lead in the market, processing over 23 trillion cloud transactions per month on our IDMC platform. We have a proven land and expand model with more than 5,000 customers and upmarket focus on large enterprises. And finally, we have solidified strong profitability through our innovation-led transformation and see strong momentum with multi-cloud and hybrid deployments as we continue to help customers with their cloud migration journeys. With that context, let me now turn the call over to Eric.