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spk06: Good afternoon, everyone, and welcome to the Informatica's fourth quarter and full year 2021 earnings conference call. My name is Tania, 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 keypad. Thank you. I would now like to introduce our host, Victoria Hyde-Dunn, Vice President, Investor Relations.
spk05: Thank you. Good afternoon. Good afternoon. And thank you for joining us to review Informatica's fourth quarter and full year 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 vary 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 10Q and upcoming 10K filing for the full year 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'll 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 U.S. GAAP measure can be found in today's press release and in our slide presentation available on Informatica's Investor Relations website. With that, it's my pleasure to turn the call over to Amit.
spk09: Thank you, Victoria. Good afternoon, everyone, and thank you for joining us as we review our fourth quarter and full year 2021 results and strategic priorities and guidance for 2022. We concluded our first year end as a public company, and I'm very pleased with the results that the team delivered. We met our commitments and established an all-time quarterly record for total revenue, supported by strong operational performance and profitability. Our success is driven by our strategy of cloud-first, cloud-native, with the secular tailwinds of digital transformation. Now we turn to business highlights from the fourth quarter. Total revenues grew 8% year-over-year to a record $407 million above the high end of guidance, driven by subscription revenue of $230 million, which grew 23% year-over-year. Total ARR grew 17% year-over-year to over $1.3 billion, with strong contributions from subscription ARR of $802 million, which grew 32% year-over-year, exceeding the high end of our guidance. Cloud ARR grew 40% year-over-year to $317 million, and now represents 23% of our total ARR, up three percentage points year-over-year on a growing base. Q4. was also an impressive quarter of sales execution with our ability to sell large multi-year deals to new and existing customers. Remaining performance obligations on RPO grew 26% year-over-year to $1.2 billion. Our growth drivers were customer demand for Informatica's intelligent data management cloud platform, strong sales execution, and robust engagement with our strategic partners. We focused on and generated strong new customer additions and continued expansion and upsell activity from our existing customers. Our cloud platform differentiation continues to result in strong enterprise performance. I'll give you some examples here. We added 26 subscription enterprise customers that spent $1 million or more in subscription ARR, ending the fourth quarter with a record 153 customers, an increase of 47% year-over-year and 20% sequential. At the end of Q4, we have 1,600 customers that spend greater than $100,000 in subscription ARR, and 22% increase year-over-year. 55% of subscription customers are net new, and our average subscription annual recurring revenue per customer in the fourth quarter group over $221,000, a 21% increase year-over-year on an active base of more than 3,600 subscription customers. By leveraging our sizable billion-dollar-plus investment in R&D over the last five years, now 85% of our subscription ARR comes from the net new products on IDMC. RAI Engine Clare is embedded in the IDMC platform to drive intelligence and automation at scale, enabling us to process 27.8 trillion cloud transactions per month as of December 2021. In summary, we are seeing great expansion across the board with our portfolio, both in large enterprises and an expanding commercial customer base. Now turning to go-to-market, let me highlight some customer wins to give you some color on our execution. Starting with North America, T-Mobile, which everybody knows is the second largest wireless carrier in the US and a longtime Informatica customer. We are excited to announce that we have signed a new multi-year agreement with them to use Informatica's MDM Customer 360 SaaS platform to support their initiatives around T-Mobile for business. Looking to the Asia-Pacific region, a new public sector deal is with Petronas, a Malaysian oil and gas company wholly owned by the government of Malaysia and ranked among the Fortune Global 500s. Petronas embarked upon a digital transformation initiative that had identified multiple new digital projects that required access to a single, complete, trusted view of technical master data within their upstream business. Because of this complexity, Petronas needed a master data management product designed for all architecture styles, including centralized, consolidated, and coexistence. Petronas chose Informatica as a long-term partner, beginning with an initial MDM implementation and growing globally across all Petronas Group companies. Another notable new deal in our EMEA region is with the Alshaya Group, a leading retail franchise operator for international brands, including H&M, B.S. Chang, Starbucks, The Body Shop, Cheesecake Factory, Victoria's Secret, and West Ham, to name a few. This Kuwait-based company operates more than 4,000 stores across the Middle East and North Africa, Russia, Turkey, Central and Eastern Europe, as well as scale online and digital businesses. Recognizing the depth of our intelligent data management cloud platform, Alshaya chose Informatica's end-to-end business 360 platform. Our partnership with Microsoft and our Azure marketplace presence added additional value to Alshaya in its long-term digital goals. Another great example of land and expand customer story is Rolls-Royce. I think everybody knows this 150-year-old company. They are four main operating companies, civil aerospace, defense, power systems, and electrical. Rolls-Royce is a long-time Informatica Power Center customer, and they also have a strategic partnership with Microsoft as a preferred cloud vendor. Rolls-Royce is an aggressive digital transformation where data is a key component to that digital transformation. They saw value in our IDNC cloud platform, selecting Informatic as a strategic partner with their initial investment in Axon, data quality, and the enterprise data catalog to solve their data challenges. Q4 was also highlighted by increased collaboration with our strategic partners. We had strong engagement with our ecosystem and global system integrated partners winning new deals, a reflection of our Switzerland of data management position in the market that customers really value. In the fourth quarter, the number of ecosystem co-sell wins grew over two and a half times year over year, and the marketplace transaction volume grew four times year over year, indicating excellent traction with key ecosystem partners. On the product innovation side, we extended our partnership reach where we were the launch partner for the Snowflake Governance Accelerated Program and earned Snowflake's Data Governance Ready badge, reflecting our ability to deliver data democratization, data protection, and data governance for the Snowflake Data Club. At AWS reInvent Conference, we announced new solutions for AWS in data governance and data democratization for Databricks's Delta Lake. We announced Cloud modernization programs with AWS, Microsoft, and GCP. We also announced an expansion of our strategic partnership with Google Cloud at Google Cloud Next. A great example of a strategic partner coordinated with the Bank of Montreal, the fourth largest bank in Canada and eighth in North America by assets, serving 12 million customers. BMO had a goal for all of their decisions to be data-driven and realized that they had to elevate their data management practices and use of data and analytics. Limited by existing technologies, BMO recognizes the need for a comprehensive end-to-end data management solution, and they are leveraging Informatica solutions including Axon Data Governance, Enterprise Data Clock, Data Catalog, and Informatica Data Quality. In addition, BMO has partnered with Deloitte during the evaluation and continues to collaborate wholesale on the delivery. The strategic partnership of Informatica and Deloitte will allow BMO to be a digitally powered bank that draws on actionable insights. Now let me turn to product innovation, where we continue to democratize data and enable data-driven decision-making for our customers through real-time analytics, data governance, data sharing, and data intelligence. Beginning with the launch of an industry-first informatics cloud data marketplace that provides self-service data sharing with a seamless data shopping experience for consumers of all skills across a hybrid, multi-platform enterprise. Powered by Clare, our AI engine, we enable customers to easily find and share real-time data and AI analytical models more broadly and effectively, and we automate memory tasks. Second, we added more Clare AI-powered automation, including self-integrating systems, automated app-to-app data synchronization, automated change data capture, automated MLOps and DataOps capabilities, automated inference for data quality rules, automated schema matching, and automated curation of data assets for improving customer productivity at scale. Third, we are helping data engineers and application developers accelerate development and increase the performance of data pipes for data warehouses, data lakes, and application modernization use cases. We extended our API management support for third-party APIs to enable customers to better govern, manage, and secure all of their enterprise data and business APIs. Next, as we noted earlier, we continue to see strong interest from our on-prem customers wanting to modernize to the cloud and leverage our cloud-native IDNC platform. We improved automation tools and expanded support for additional systems, including mainframe, enhancing feature support for Azure and AWS Redshift, real-time support, and handling of advanced transformation, including data quality transformations and configurations. Today, 2% of our installed bases migrated to the cloud at a 1.9x conversion rate from maintenance ARR to cloud ARR. And more recently, we achieved FedRAMP certification, meeting the most stringent global security standards and Fed regulations, giving our government customers peace of mind, and best-in-class cloud data management platform to help them modernize, drive efficiency, and deliver digital-first experiences for their employees and the citizens across the country. Lastly, Informatica's differentiated cloud technology platform is consistently recognized by industry analysts. Beginning with Gartner, we are proud once again to be named a leader in the Gartner Magic Quadrant for master data management solutions. This is the sixth time in a row and positions Informatica as one of the longest running leaders in the MDM Magic Quadrant. We recently received a strong rating in Gartner's 2021 vendor rating report in three categories, including strategy, products and technology. We are fortunate to be one of the 32 companies that Gartner covers in this vendor rating across the globe. We were also awarded the 2021 New Product of the Year by the Business Intelligence Group for Informatica's IDMC platform. And CRN recognized Informatica as a top 100 cloud company in 2022. We have strong momentum coming out of 2021. And we could not be more excited about the opportunities in front of us this year. Our strategic priorities and key areas of investment are threefold. It begins with product innovation to enhance capabilities and drive more use cases for our cloud IDNC platform. Second, continue to scale and expand our global enterprise sales motion. And third, strategic partnership expansion. Let me give you a brief explanation of all of them. First, around product innovation. The breadth of our IDNC platform is unparalleled and no other product in the market today provides a suite of seven best-in-class, best-in-breed solutions powered by Clare, our AI engine, and over 50,000-plus metadata-aware connectors. We look forward to sharing a lot more on product innovation at Informatica World in May, which is our user conference. Second, we continue to expand our global sales motion. Our core sales motion is twofold, landing new customers into the IDNC platform and expanding installed customer base through selling new cloud workloads across the seven best of the products I talked about. With maintenance renewal rates of 95% and subscription renewal rate of 92% on a growing customer base, we have ample opportunity for land and expand with new use cases. As we scale our go-to-market internally with strategic partners, we are amplifying the focus on industry-driven go-to-market sales motions. We will create new routes to market through a combination of sales team organized by verticals in top tier geographies and increased emphasis on industry-aligned use case-based selling across the board. Additionally, we'll be investing more and more in high-velocity selling motion for departmental buyers. And our new consumption-based pricing model continues to provide more flexibility and allows us to attract new customers and drive increased adoption of the IDMC platform within existing customers. Third, turning to our strategic partners. This past year, we deepened our strategic relationships with our hyperscalers and cloud ecosystem partners including AWS, Microsoft Azure, GCP, Snowflake, and Databricks. And this year, we will continue to expand our co-seller marketplace opportunities. With our GSI partners, we are doubling down even more on current engagements and forging new partnerships. Since 2020, when we launched a customer and partner certification program, today we have certified more than 17,000 individuals across GSIs and channel partners. We are introducing a new selling motion to accelerate the migration of on-prem workloads to cloud through our GSI partners. And some of our largest strategic partners have built migration centers of excellence with access to our migration factory tools to help customers migrate their on-prem workloads to the cloud seamlessly with less risk. We continue to deliver on our commitments. I'm proud of the execution from 5,500 plus informaticans across the globe to help us achieve a very strong 2021. And we recently welcomed Jim Kruger as a Chief Marketing Officer. Jim has more than 25 years of experience driving high-velocity sales motion within enterprise cloud software companies, including demand gen, brand, product, and solution market. We believe the resiliency of our recurring revenue model and strong cash flows will help us to achieve double-digit revenue growth this year. The operating health of the business is solid. And we are on track to deliver $1 billion in subscription ARR in 2022. Quite an impressive journey for Informatica, which when I think back in 2015, we were less than $100 million in subscription ARR. With that, let me hand the call over now to Eric. Eric.
spk10: Thank you, Amit, and good afternoon, everyone. Q4 was a strong finish to our first fiscal year end post-IPO, and we delivered a very good quarter. Let me provide some commentary on the results before discussing our expectations for Q1 and full year 2022. Turning to our Q4 results, we delivered $406.7 million in total revenues with 8% year-over-year growth, which was above the high end of our guidance range. Our results were driven by healthy expansion and upsell activity from our existing customers and new customer additions, including large enterprise deals. In fact, for the full year, we observed strong new customer momentum and grew new logo total contract value, or TCB, by 29% year-over-year. In terms of revenue contribution, 90% of total revenues are recurring and highlight the stability of our financial model. This drives the better-than-expected cash flow that we'll discuss later. Subscription revenues increased 23% year-over-year to $229.7 billion and were better than our internal expectations. Subscription revenues represented 56% of total revenues as compared to 49% a year ago, and reflects strong customer demand for our cloud solutions. Maintenance and professional services revenues were flat year over year, as expected, at $166.8 million and represented 41% of total revenues of the quarter. Stand-alone maintenance revenue represented 34% of total revenues. Consulting and education revenue made up the difference and fluctuates based on customer requirements, representing 7% of total revenues. And lastly, perpetual license revenue is 10.2 million in the quarter, down as expected 60% year over year, and represented about 2.5% of total revenues. As a reminder, we are not actively selling perpetual licenses to new customers, and expect perpetual licenses to remain an insignificant percentage of total revenues. Our shift to a recurring revenue model is effectively complete. As Ahmed mentioned earlier, we have strong global sales execution of the quarter, Revenue from the U.S. grew 8% year-over-year to $247.4 million, representing 61% of total revenue. International revenue grew 7% year-over-year to $159.3 million, representing 39% of total revenue and up two percentage points sequentially. We continue to see opportunities in front of us as countries outside the U.S. look to the cloud as part of their digital transformation. Now, turning to ARR. Total ARR increased 17% year-over-year to $1.36 billion in the fourth quarter. We added $200 million in net new ARR in 2021 versus the prior year. We are introducing total ARR as a new full-year guidance metric for 2022 and are on our way to over $1.5 billion in expected total ARR this year. Subscription ARR increased 32% year-over-year to $802.3 million in the fourth quarter, above the high end of guidance, and driven by new subscription customer growth and cross-sell from existing customers. Subscription ARR represented 59% of total ARR, up seven percentage points year-over-year, and up two percentage points sequentially. As we guide to one billion in expected subscription ARR in fiscal 2022, we note that today there are only about 30 other public technology companies currently at this one billion plus scale of subscription ARR. Cloud ARR increased 40% year-over-year to 317 million in the fourth quarter and was in line with expectations. Cloud ARR represented 40% of total subscription ARR, up three percentage points from a year ago, and up one percentage point sequentially. We added $90 million in net new cloud ARR in 2021 versus the prior year. And net new cloud ARR in 2021 increased 50% year over year in dollar terms as compared to 2020, indicating strong cloud momentum. We expect approximately 40% year-over-year cloud AR growth in each quarter in fiscal 2020, maintaining this high growth while scaling the business. Lastly, maintenance AR was flat year-over-year at $557.9 million with strong renewal rates and represented 41% of total AR down 7 percentage points from a year ago. As a reminder, we have significantly reduced sales of professional licenses in favor of cloud offerings. And this will naturally result in a gradual decline in maintenance ARR over time. As a result, we expect maintenance ARR of approximately 525 million for full year 2022. Subscription and retention rate or subscription NRR in Q4 was 114% flat year over year. As I mentioned last quarter, we expect to see fluctuations in this metric due to the mix of new bookings from new customers versus existing customers and the timing of large initial deal sizes expanding in their first year. We remain focused on driving subscription NRR above 120% as a longer-term goal. Now turning to consumption-based pricing, 2021 marks the first full year of our consumption-based pricing model featuring Informatica processing units, also known as IPUs. IPUs allow our customers to dynamically and seamlessly choose how they use any of our cloud solutions and services. In 2021, IPUs represented approximately 20% of cloud ARR, and this percentage increased by approximately three times compared to 2020. And in the fourth quarter, approximately 43% of our cloud net new bookings were IPU-based, indicating accelerating uptake of this offering. Before moving to our profitability metrics, I'd like to point out that I will be discussing non-GAAP results for the fourth quarter, unless otherwise stated. Our gross margin was 82.3%, and we maintained a stable level throughout the year, notwithstanding the mixed shift to cloud. Consistent with expectations, we accelerated investments in Q4 across all functional areas to capture the significant momentum we're seeing in the market as we continue to hire, make investments to support growth, and prepare for public company operations. We have several strategic priorities in 2022, and view this as an important year to continue investing in sales and marketing, research and development, and partner ecosystem initiatives. Q4 non-GAAP operating income was $95.1 million, slightly above our expectations. Adjusted EBITDA was $101.3 million, and in-income was $54 million. Net income per diluted share was 20 cents, based on 275.4 million diluted shares outstanding. The basic share count for Q4 was 267.5 million shares. Capital structure and cash flow updates. We ended the year in a strong cash position with cash for short-term investments of $496.4 million. Net debt was $1.38 billion, and with full-year adjusted EBITDA of $377.4 million, this resulted in a net leverage ratio of 3.7 times, down from 6.2 times last year. Looking ahead, we expect the business will naturally deliver due to our healthy cash margins, and we intend to steadily reduce our net leverage ratio over the next two to three years to approximately two times. Unlevered free cash flow after tax was 104.5 million in the fourth quarter, and for the full year, unlevered free cash flow after tax was 332.2 million, approximately $38 million above guidance midpoint. Operating cash flow in Q4 was 86.3 million, an improvement of 10%, and operating cash flow was 228.7 million for the full year, An increase of 36% year-over-year due to top-line revenue growth, strong renewals, and working capital efficiencies. RPO grew 26% year-over-year to $1.2 billion. We are pleased with the growth in RPO. However, we continue to believe ARR is the best metric to understand the business's performance as it removes variability associated with billings and contract duration. Now, key modeling assumptions. Before guiding for the first quarter and full year 2022, I would like to provide some additional color on certain financial model assumptions. First, let me discuss our expectations for non-GAAP operating income. As we mentioned last quarter, total revenues and non-GAAP operating income ranges are in part dependent upon the mix of ARR additions of cloud versus self-managed subscriptions. Self-managed subscriptions are subject to ASC 606 upfront revenue recognition, as opposed to cloud subscriptions, which are recognized randomly over time. Cloud ARR represents 40% of subscription ARR. As customers purchase more cloud offerings on the IDFC platform, we expect the mix of cloud ARR as a percentage of subscription ARR to gradually increase. And also, as Amit mentioned, we have ample high-quality business opportunities which require incremental expenses given the healthy cloud market environment. We are of the opinion that making these investments will position us even better to achieve our long-term non-GAAP operating income margin of 36% to 39% of total revenues. Second, let me discuss our expectations for P&L tax rates. We reported 2021 non-GAAP net income at a non-GAAP tax rate of 22%. For 2022, we were estimating a 23% non-GAAP tax rate. Looking at fiscal 2023 and beyond, we continue to expect a long-term steady-state non-GAAP tax rate of 24% which reflects where we expect cash taxes to settle based on our structure and geographic distribution of operational activity. Third, let me discuss our expectations for shares outstanding. For the first quarter of 2022, we expect basic weighted average shares outstanding to be approximately 280 million shares and diluted weighted average shares outstanding to be approximately 286 million shares. For the full year 2022, we expect basic weighted average shares outstanding to be approximately 284 million shares and diluted weighted average shares outstanding to be approximately 288 million shares. Our IPO lockup expires. Invested options and eligible shares can be traded starting February 28, 2022. We estimate that approximately 256 million shares of Class A common stock including approximately 11 million vested options, will become eligible for sale in the public market at the opening of the market on February 28th. Fourth, let me discuss our expectations for unlimited free cash flow after tax. Our outlook for full year 2022 takes into account three factors, improving net income, a discrete non-operational item, and an increase in investment in strategic growth initiatives. The one discrete non-operational item is higher expected cash taxes of approximately $23 million driven by U.S. federal tax requirements to capitalize R&D beginning in 2022 versus expensing those costs in period. While there's still a possibility that legislation will be enacted that defers the requirement to capitalize R&D, we are including higher cash taxes in our current outlook as will be required to make these payments unless the existing law is amended by legislation before the end of March. Guidance. Taking all this into account, we're establishing guidance for the first quarter of 2022 and the March 31st, 2022 as follows. We expect total revenues in the range of 357 to 367 million, representing approximately 8% year-over-year growth at the midpoint of the range. We expect subscription ARR in the range of 830 to 840 million, representing approximately 30% year-over-year growth at the midpoint of the range. We expect cloud ARR in the range of $333 to $339 million, representing approximately 40% year-over-year growth at the midpoint of the range. And we expect non-GAAP operating income in the range of $66.5 million to $73.5 million. We are establishing guidance for the full year of 2022 ending December 31, 2022, as follows. We expect total revenues in the range of $1,585,000,000 to 1,605,000,000 representing approximately 10% year-over-year growth at the midpoint of the range. We expect total ARR in the range of 1,510,000,000 to 1,540,000,000 representing approximately 12% year-over-year growth at the midpoint of the range. We expect subscription ARR in the range of 990,000,000 to 1,010,000,000 representing approximately 25% year-over-year growth at the midpoint of the range. We expect cloud ARR in the range of $438 to $448 million, representing approximately 40% year-over-year growth at the midpoint of the range. We expect non-GAAP operating income in the range of $325 million to $345 million. And we expect unlevered free cash flow after tax in the range of $323 to $343 million. And by the end of 2022, we expect to further deleverage to under three times on our net debt to adjusted EBITDA ratio. In summary, 2021 was an excellent year with 40% year-over-year cloud ARR growth, a quarterly record for net new cloud ARR dollar additions, better than expected total ARR growth, and predictable cash flow generation with proven unit economics. We believe we are well positioned to achieve our guidance of $1 billion in subscription ARR and $1.5 billion in total ARR by the end of 2022. And before closing, I'd like to note an upcoming event. As Amit mentioned, we are planning to host Informatica World, our annual user conference, the week of May 23rd in person and online. If you are interested in attending, please reach out to Investor Relations. Thank you very much for your continued support. And operator, you may now open the line for questions.
spk07: Thank you.
spk06: We will now begin the Q&A session. Please press star followed by 1 on your telephone keypad if for any reason you would like to remove a question. Please press star followed by 2. Again, to ask a question, press star 1. As a reminder, if you are using a speaker phone, please remember to pick up your hands up before asking your question. We will pause here briefly if questions are generated in queue. The first question is from the line of Cash Rangan with Goldman Sachs. Your line is now open.
spk15: Hello, guys. Congratulations on a really strong finish to the year. This is fantastic. You hear the cloud momentum and the cloud partnership summit that intrigued me greatly, your comments on AWS partnership and the others. Where are we in the cycle of these partnerships and the ability of these partners to bring in Informatica into the kind of seven-figure deals Informatica on its own could generate, but obviously with the help of these partnerships, their cloud their warehousing is taking off. I'm curious to see the kind of leverage you can get from these partnerships in addition to the technical stuff. Could this lead to more leverage in the business side? And then the second and final follow-up for me is the composition of your product family as it represents new ARR. So where are you seeing the changes happening with new ARR and the different product segments that you have on the core IDFC platform? What is showing up increasingly? That's it for me. Thank you so much.
spk09: Thanks, Kash. I hope all is well. To the partnerships, look, we are extremely happy about where we are with the partnerships. I think as I said before, all of our, when we talk about the 85% of subscription era coming from new products, all of them and all of the data warehousing and the cloud workloads are all in the context of AWS Redshift or Synapse or GCP. most late data breaks. So all of them are already creating new workloads over there. As you know, customers in that case are now moving into more complex workloads. So we had done a fair bit of engineering work with these partners in the last many years to grow our business in that direction already. We are walking into more complex workloads and which is where we are doing many, many more technical work as we speak, including migrations of power center to cloud. with them and they're already seeing that traction as we go in together so give you an example there are many co-sell incentives that these partners have for their own sales people market-based seamlessness customers can actually buy us through their marketplaces so you all of those are being invested in as we see which is what I, even when I spoke at Google Next with Thomas. And as you, as we walk towards Informatica World, you expect to see many, many more of these announcements coming out, both on the product and Google market type. So we are seeing that tailwind. And in some of the customer examples I mentioned where each of these ecosystem partners was involved with us. And again, as you know, in the context of cloud and consumption, once we land in the expansion naturally takes over. So you will begin, we already shared with you how the ESP has grown and it has natural tailwinds to grow from there onwards. On the mix, I'll have Eric answer, but I'll thematically say, look, we talk about three journeys, data warehousing and data lakes, data governance and privacy, and business 360. In fact, this year, we've added a fourth journey, which is all around app modernization and hyperautomation. When I look at the other three journeys, it's Like I said, even in the roadshow process, 50% on the data warehouse, data lakes, and the remaining is the other 50%, both MDM and data governance combined, all of them are going. You saw so many examples of data governance deals, MDM deals, and data warehouse and data lake deals. We see tailwinds around all of them.
spk10: Yeah, in regards to your question about the product family trajectory, And again, I'll reference this, the high growers relative to the overall subscription error growth rate of 32%. So the call-out for the product family is growing well above that, that 32% year-over-year in terms of sub-ERR would be data quality and EDC. To Amit's point, any journey that one undertakes requires data quality in general, as well as cataloging. And so we continue to see really strong growth from the DQ and EDC family. And MDM is also was also very strong for us in the court as well. So those would be the three product family call-outs.
spk15: Brilliant. Thank you so much.
spk06: Thank you, Mr. Ronca. The next question is from the line of Mark Murphy with J.P. Morgan. Your line is now open.
spk16: Thank you very much, and I'll add my congrats on the heels of Cash's comments. So, Ahmed, what... We've heard from some infrastructure software companies that they're mentioning a little slower consumption at year end, and kind of tying that in with more companies being shut down around the holidays, more vacation, more company shutdowns. Did you find a way to buck that trend, or is consumption still too early for you to really be noticeable?
spk09: Great question. I think as Eric mentioned, we saw tremendous growth in consumption-based pricing this year. You see the progress that we made. I think to build on that, the beauty for us in consumption is because we have these seven big product families sitting on the IBM C portfolio. We provide customers the flexibility to not only use consumption for a particular use case where they may begin, but naturally grow from a use case to another use case very seamlessly. So that would give customers a peace of mind that they can, you know, a lot of times we find customers begin with a use case and discover that they want to do B, C, or they want to do C more than A than what they thought initially. And that's what we saw. So we didn't see any slowdown per se, to be honest, in Q4 on anything related to that. If anything, it just gave RV the feedback we kept hearing is that customers loved it, they like the transparency, they like the flexibility, and more importantly, they love the ability that it brings down the barriers across all of the capabilities in the platform across which they can use. And we continue to see a very healthy pipeline around cloud and consumption-based pricing in particular.
spk10: Yeah, the thing that I want to add on, one of the operational metrics that we've provided is the number of total IDMC platform transactions. transactions per month. And so we noted a 65% increase year over year. And I think that's one of the highest year over year increases we've seen. So into the year, we see accelerated use of our platform.
spk16: Okay. Okay. So it sounds like you completely bucked that trend in every way possible. So Eric, the question I wanted to ask you on the financials, is what would you say is the dynamic that is causing, I believe, a slightly higher expense load in 2022, while at the same time you're guiding above, at least above our model, on the unlevered free cash flow, especially with, you mentioned higher cash taxes, which would seem to make that tougher to accomplish. So is it possible to unpack that for us a little?
spk10: Sure, I'll start with cash flow. So first of all, we came off a really good 2021. So we noted just over 35% growth in operating cash flow. You're well ahead of ARR growth and revenue growth, etc. So the overall mechanics of the business are doing well. We've completely moved to a radical model and we've maintained very high renewal rates. In fact, our maintenance renewal rates continue to be higher than our own internal expectations, for example, and subscription is in line as well. So cash flow in general is working out quite well as we had planned. Against that, for 2022, Amit noted the areas where we're going to have increased spend. So it's the go-to-market specific industry verticalization is a good example there. And even more investment in the partner ecosystem. That's going to take the form of go-to-market investments and potentially also some R&D investments to bring us closer. So it all orients around the IDMC And so, despite the higher cash spending that we're expecting in 2022, we're doing well enough in the mechanics of the business to have the good opening guide on 2022 on levered free cash flow.
spk16: Okay, well said and very clear. Thank you for that.
spk06: Thank you, Mr. Murphy. The next question is from the line of Alex Zupkin with Wolf Research. Your line is now open.
spk02: Thanks, Operator, and congrats on a great quarter, guys. I guess maybe just the first one for me is I want to ask about the cloud consumption dynamics. Specifically, it was pretty impressive to hear there was 40% of new bookings for cloud coming from that motion in Q4. I guess I want to ask, what do you anticipate that percentage being for fiscal 22? of the cloud business specifically, and maybe exiting that year as well. And if you think about how much of that usage will be driven by new customers versus migrations.
spk09: So let me, Alex, talk to you again. Let me give you some color on new, existing, and then Eric will go through some of the more detailed numbers for you. Look, we are, you saw 55% of our subscription customers are new. We are focused on both customers. We are focused on existing customers where we have landed to grow more or existing customers who are, you know, using our maintenance legacy products to use our new subscription products as well as net new customers. And you saw the examples we gave you. So we are equally focused on both. One of the beauties of our stack is the renewal rates that I talked about is that once we land, it's a very sticky product. We basically drive a lot of operational workflows. So we are focused on both. white space as well as existing customers. So we'll continue to go, you'll see us talk about both. And then I'll let Eric talk about some of the details on the net new growth over there in the cloud era.
spk10: Yeah, I would say that, and again, Q4 is obviously, you know, a very active quarter in terms of overall net new bookings. And so, you know, we have 43% of the cloud new bookings in the form of IPUs, and it's the highest quarter ever. We also noted that the overall cloud ARR for the full year is about 20% IPUs. It's less like the average stat. I would expect you will see a quarter in the near future where IPUs are well north of 50%. It's really resonating with customers. But I wouldn't try to estimate an overall average 2022 stat for IPUs relative to total ARR. So I'll pass on that, but clearly we want to drive as much cloud sales to IPUs over time because we think the flexibility is really, really resonating. And the 43% stat is something we wanted to share with this group so you can understand kind of the upward inflection in this key cloud trend.
spk02: Super helpful. I guess just the other one for me would be around DB&E. Clearly, sequentially, you know, a solid number. but a little bit lower. And then you mentioned the volatility that that can jump around between quarters. Can you walk through kind of what maybe specifically was the tougher compare or anything else that kind of drove that number in the quarter? And how should we expect it to trend maybe into Q1 and maybe first half of the year?
spk10: I want to make sure I understand the question. You said D meaning we're referring to
spk02: Yes, sorry, NRR.
spk10: NRR, okay, sure. Yeah, no, no, it's fine. So it's a great question. So, you know, 114% is what we had in this year in Q4. It's basically identical to what we had in Q4 a year ago. And one of the things that is important to understand about NRR is that, you know, we don't have a precise model to know in any given quarter how much of the net new bookings are going to come from an existing customer. which would be additive to NRR, or whether the booking comes from a brand new logo. Because in that case, for example, in cloud migrations where customers have been maintenance only, they take on subscription for the first time, they make no contribution to the NRR staff for a full year. And so I think that for us is really more of a mix. of bookings from existing customers versus net new. We called out the fact that you had a significant increase in new logo TCB, you know, up 29% year over year. And so I think, in effect, what we're doing is more business with net new logos. And unfortunately, they don't add to the NRR stat in the current period. We have to wait 12 months.
spk02: Understood. Perfect. Thank you, guys.
spk07: Thank you, Mr. Zetkin.
spk06: The next question is from the line of Koji Ikeda with Bank of America. Your line is now open.
spk08: Hi, this is Lori Luo for Koji. So just actually a follow-up on NRR. You guys have mentioned this ICBM, the Cloud Data Marketplace, as a new product, and it's categorized as data as service. So I was wondering if that has any contribution to the decline of NRR.
spk09: So let me clarify. Data as a service is different from cloud marketplace. Totally different. So data as a service is a separate product category that, yes, you're right, we've talked about that, has a lower renewal rate, so it's always net dilutive to our NRR number. And we've always said that as the cloud business grows, that's one of those things that will stay constant, and naturally the NRR dynamics will grow. But data as a service and the data marketplace are two fundamentally very different things. Data market is a very strategic product that we launched. We're very excited about it. It actually is an offering that builds on top of our data governance acts on offering, allows large enterprises to have one space where in a very shopping cart experience, go fetch data for any kind of user, adhering to all kinds of governance and access policies of an enterprise. And that definitely has been very well received. But two very different products and very different dynamics.
spk08: Great. Thanks for clarifying that. I'm just follow up on that. So that is leveraging the AI, the clear as my understanding and how can can customers leveraging like use other alternatives for democratized data or just kind of a seamless synergy to to use the platform that you offer here?
spk09: Absolutely. So, Clare is embedded in every product and in the context of a marketplace, to give you an example of what Clare does. So, if you're a user, let's say you want access to a particular data and you go to the marketplace and like in an Amazon shopping cart experience, you drag and drop the data sets you want and you don't have access to it. Claire automatically knows that you don't have access to it, automatically knows under the cover who's the owner of that data, in an automatic way runs the workflow where it goes to the owner of the data to give you access or not and comes back to you and completes the workflow. Things like that that could have never been done before. And it integrates obviously with all kinds of governance, access management policies that exist within an enterprise. So it obviously, in a very big way, automates the process. In terms of that, working with other providers, look, our goal is that is used by a chief data officer as a holistic capability on top of every place where the data sits. It could be sitting in a Snowflake data store. It could be sitting in any Azure. It could be sitting in anything on-prem. They need that on top of that because data is dispersed and they don't want wrong people to get access to wrong data, causing them challenges. So that's how the value comes to bear.
spk08: Great. Thanks for the clarifying.
spk00: Thank you.
spk06: Thank you. Just as a reminder, please limit your questions to one per participant. Our next question is from the line of Matt Hedberg with RBC Capital Markets. Your line is now open.
spk03: Oh, hey, guys. Thanks for taking my question. I'll keep it to one here. You guys just delivered 40% cloud ARR growth, and you're guiding to 40% this year. So with no implied deceleration there, I guess I'm wondering, what kind of visibility do you have to that business? And maybe as sort of a question in conjunction with that, what sort of maintenance convergence does your guidance assume? Obviously, you saw 1.9x uplift this quarter. I believe that's even better than the 1.8 that you'd seen previously. But I'm just sort of wondering, What sort of assumptions you've made there for cloud ARR growth?
spk09: Matt, thanks for the question. Hopefully you're getting a warmer weather now where you are. We actually are seeing acceleration. I think the one thing that is a great question because I'd like to put it to this group. We may have a 40% ARR growth rate, but our underlying number is growing every quarter. So it is an accelerating number. We are not saying that the number was small so the growth rate is high and when the number gets big, the growth rate goes down. We are saying we're going to keep the same growth rate even as the underlying cloud ERR number is growing in size. So as Eric mentioned, when he guided to a cloud ERR number for this year, he's guiding to a 40% number of a much bigger base than where we closed out 2021. So from where we sit, we are absolutely accelerating growth because we are scaling to a much, much bigger number. I'll let Derek add on to more of that.
spk10: Yeah, maybe we just put three numbers against that. So the following number is 60 million, 90 million, and approximately 125 million. So what does that represent? That's the net new ARR additions in 2020 actual, 60 million. 90 million is 2021 actual. And 125 is what we're expecting to add. So if you take our midpoint guide cloud ARR, subtract that from any ARR, end of 2021 actual, that's 125 million. So to Ahmed's point, we're accelerating, plus 60, plus 90, plus 125.
spk09: And then to your other question also, I'll come back to that on migration versus not migration. Look, we've always said that, you heard me talk about, we are fundamentally focused on driving cloud AR growth from both net new workloads and migration workloads. And you see that all of our subscription growth, all of our cloud growth has come 100% from net new workloads. None of the 85% of the workloads of subscription ARR are coming from new workloads. None of them is tied to the old legacy data warehousing also, if I may. So we've been maniacally focused on driving new workloads to make sure we get a piece of that pie wherever customers are going for to the cloud. And migrations, early innings, you saw, I think last year we talked about 1% of maintenance has migrated, now 2% has migrated. It's a big number, of course, maintenance, overall half a billion dollars. We expect to see more and more momentum there. You saw I talked about more and more automation, more and more GSIs leveraging Migration Factory, going together with the ecosystem players. Expect that to grow also. We are going to drive both to drive cloud data.
spk12: Thanks, guys.
spk07: Thank you, Mr. Hedberg.
spk06: The next question is from the line of Andrew Nowinski with Wells Fargo. Your line is now open.
spk13: All right. Thank you. Good afternoon. I just had a question on your FedRAMP certification that you mentioned. I was just wondering if you could provide any color around maybe the federal contribution in 2021 and what you're assuming or what kind of contribution you think the Fed could have as it relates to your guidance for 2022 now that you have that high-level certification? Thanks.
spk09: Hey, Andrew, how are you? I mean, we don't guide to a particular mixed breakup by how big is Fed, but I can tell you that Fed and the whole public sector is a big area of focus for us across the globe. U.S. Fed business, obviously, so much to spend. Our goal was to make sure FedRAMP was a very critical part to make sure our federal customers who want to go to the cloud, a lot of them are existing customers, they want to start new workloads, and you see a lot of modernization in very early in there, they needed that for them to be comfortable. And you know, we serve the data layer which becomes extremely important. So I fully expect FedRAMP to be a great tailwind for us for this year, and obviously we'll continue to put all of our portfolio over there, so that should drive more involvement. So we are expecting more from there, natural area for us to invest with many customers. And, you know, we also have many flavors. There's FedRAMP overall, and each state has different flavors. So, for example, the state of Texas has a flavor of FedRAMP that we got certified. California has another one. All of those states have big spend, and we expect it to come from a select point of view as well this year.
spk13: Okay, good. Thank you.
spk06: Thank you, Mr. Nowinski. The next question is from Carl Kirste with UPS. Your line is now open.
spk04: Thank you. Maybe to Eric. Eric, I'd love to press on your guidance for 10% revenue growth in calendar 22. It's not that different than the 9% you just put up in 21, despite the progress you've made on diversifying the portfolio, despite the mixed shift to higher growth subscription, despite the fact that you're lapping the decline in perpetual license sales. So clearly there's an offset. My guess is that Maybe the maintenance roll-off is accelerating in 2022, but maybe you could unpack that for us. Thank you.
spk10: Yeah, that's a great question. And, yeah, maintenance is part of it. So we have, as of Q4 2021, we have achieved what I'll call peak maintenance, right? So with the level of professional license that we have, next year, 2022, is the first year where, you know, we're going to have kind of a flat. So we've arrested the decline and perpetually hit the bottom. And as a result, there's not enough net new ads of new maintenance to keep maintenance flat. So that's why we gave the total ARR guide metric for the first time. So you can very explicitly see the maintenance ARR assumption of about 525 at the midpoint. So with that decline there, you know, it drives the decline of overall gap revenue as well. And the other thing, too, of course, is that we're expecting a higher relative mix of our net new bookings in cloud versus self-managed. And again, as we all know, the self-managed gets that 606 revenue acceleration. So with more net new business going into radical cloud versus self-managed and now the expected decline past peak maintenance, those are what causes the gap revenue growth year over year to be at that, you know, 10% level.
spk04: Got it. And just as a follow-up to that, I would imagine that as these trends continue into the following years and your mix of cloud goes up, that we should see this at least modest growth acceleration continue beyond 22. Are you willing to go there, Eric?
spk10: Yeah, the fullness of time over several years, we expect. gap revenue to eventually catch up to a pure radical cloud model it's just that you have to flush through the decline you have to find the national bottom in perpetual and then you have to kind of complete your big shift on that new to cloud away from you know from 606 and so uh we've completed the first we're still again increasing year over year our expected ads of cloud versus versus self-managed once we get through that then You know, the gap revenue year-over-year growth, we believe, can accelerate from where it is. I won't be specific, but it can be north of 10% year-over-year.
spk04: Yeah, okay, great answer. Thanks a lot, Eric.
spk06: Thank you, Mr. Kirstead. The next question is from the line of Patrick Colville with GoToBank. Your line is now open.
spk11: Hey, thank you so much for taking my question. I actually just want to do a little follow-on from Carl's just then, because as I crunched the numbers for the quarter and then also for the guide, I guess where I lifted estimates most in my model was maintenance ARR, and where I didn't lift estimates quite as much was kind of a subscription ARR piece, inclusive of the cloud ARR bit. So I guess, could you unpack that for us? Because the comments you just made just now kind of suggest that fiscal 21 kind of peak maintenance. But as I unpack the guidance, to me, it looks like actually maintenance kind of holds up pretty strong versus what we may be expecting three months ago in fiscal 22.
spk12: Yeah, I think it's a question of the decline that we're calling.
spk10: And again, we're giving you the midpoint for Q1 at, you know, at 530. A little bit of variability, obviously. So, you know, the midpoint is meaningful, but as is the range there since, you know, it's a large number that we're working off of the 558. So, again, the point is we're at the point where it's going to decline. We've clearly articulated that with the goalpost of 525. And beyond that, you've got Q1, and then you'll just have to kind of fill in the other assumptions for Q2 and Q3. We would emphasize, of course, we're expecting flat perpetual license year-over-year, and so I just want to make sure you have that point. There's obviously no additional maintenance first year going into offset the expected maintenance decline.
spk11: I mean, just very quickly, I mean, is this an area where there might be upside risk in fiscal 22 or not really in maintenance, that is?
spk10: We're very comfortable with the 525 midpoint of maintenance at the end of the year.
spk11: Great. Thank you so much.
spk06: Thank you, Mr. Colville. The next question is from the line of Bill Winslow with Credit Suisse. Your line is open.
spk01: Hey, thanks guys for taking my question. I just wanted to unpack the net retention number, the 114, obviously, that's jumped around between 114 and 116. But why don't you talk through just the gross retention trends that you're seeing with that, and then also in terms of upsell. Is there anything that you've seen a trend in terms of contribution there over the past year that's driving the upsell component of that, and then how you think about that into the coming year? Thanks.
spk10: Yeah, again, I just want to emphasize a really important point. The NRR statistic is very dependent upon, very sensitive to the bookings mix of net new versus existing customers. And one of the things we were very clearly called out was the fact that in Q4 2021 of our overall net new bookings, much more came from brand new customers, new logos. those make zero contribution to the NRR statistic. And so as we look back over the trend lines, we had 114% in Q4 last year, 114% in Q4 this year. Q4, as you know, seasonally, in terms of net new bookings, A, it's the most activity for net new. And so therefore, it's going to have the most variability in terms of the mix of Q4 activity that comes from new customers versus existing sub-customers, which would be additive to NRR.
spk07: Thank you, Mr. Winslow.
spk06: The next question is from Tyler Radke with Citi. Your line is open.
spk14: Hey, thanks for taking my question. I wanted to ask you just about kind of your new logo performance. You've talked about some of the strength there, particularly on ACV, but could you just give us a total customer number, how that's trending, and how should we just think about the pace of kind of new logos versus maybe some real legacy maintenance customers moving off, just the dynamic that impacts total customer count? Thank you.
spk10: Yeah, I'll maybe take the first part of that and then pass it on for comments. Yeah, we reported the number of sub-AR customers greater than a million. So 153 versus 104 in Q4 last year. So that's an excellent growth rate in large enterprise customers. Just as important and as interesting is the breadth of the greater than 100K sub-AR customers. So we have 1,660 greater than 100K sub-AR customers as of the end of Q4 2021 compared to 1,361. a year ago and then also the average ARR per customer is again up very nicely year over year to 221,000 versus 183,000. So what we're seeing is great success with very large customers continuing to purchase either more as an existing customer or we're adding new $1 million sub customers as well. but the breadth of participation as well. So the cohort behavior is very good as evidenced by that band of greater than 100K in the average ARR stat.
spk09: And I think I'll just build on what Eric said. Our goal has been to continue to drive the penetration of our IDMC platform. And as much as important it is for us, existing customers expanding, which we are maniacally focused on, we talk about our renewal rates, our focus on customer success. But, you know, all the new selling motions we've done, you know, high-velocity selling, going to broader than the top end of the enterprise allows us to penetrate new customers also, which is equally very important. And we're going to stay focused on both because we, again, I go back to what I said before, we know our products solve very high value operational use cases, very sticky, very high renewal rates. We land, we naturally expand. So we're going to go focused on new customers as much as existing customer expansion.
spk14: Great. Thank you. And I guess just on, as you think about, you know, the planning process for 2022, Are there any tweaks you're making to the go-to-market organization, either from a structure or incentive perspective to accelerate cloud?
spk09: Yeah, I think I mentioned that, look, we're at... from what we were doing already we're adding industry motion so we are absolutely going to go focus down in terms of focused on key industry verticals content around that go-to-market motions and so that that's definitely an area where we're investing in bringing in new leaders as well The other one is for us high velocity selling. You know, obviously cloud allows us the ability to now start small, very easy for departmental buyers, business buyers who want to buy small. And in fact, as Jim comes or has come on board, his experiences are going to help us accelerate that. And lastly, tying the industry also with our GSIs and our hyperscalers partners. And you see a lot of industry-related discussions happening from Accenture or Deloitte or Azure or Snowflake, bringing it all together. And then, of course, lastly is continuing to make sure we can make the whole migration of our maintenance based to the cloud a lot more seamless, bringing in more and more GSI partners in the mix so they can take that over with our customers. So those are the areas where we are investing and doing more this year.
spk06: Thank you. Thank you, Mr. Radke. There are no additional questions waiting at this time. I will now turn the conference over to Amit for any additional remarks.
spk09: Thank you. Well, thank you all for joining today. We, as you can hear from us, we're very excited about the future of Informatica. We have an opportunity and we are delivering on our commitments. And also, we are differentiating ourselves in the marketplace with our IDMC platform, our best of breed products, our upmarket enterprise focus, and these multiple growth opportunities that I talked about in a $44 billion camp. We're a unique company. We know how to run a business at scale. We're talking about a billion-dollar subscription ARR this year with great unit economics, great cash flows, and great profitability. We know what running a business at scale is across the globe. And again, I'm extremely thankful to our employees across the globe, our customers, our partners, and our shareholders for their continued support. So all of you have a great afternoon.
spk12: Thank you very much.
spk06: That concludes the Informatica's fourth quarter and full year 2021 earnings conference call. Thank you for your participation. You may now disconnect your line.
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