Informatica Inc.

Welcome to Informatica's fiscal third quarter 2022 call. My name is Drew and I'll be coordinating your call today. If you would like to ask a question during the presentation, you may do so by pressing star one on your telephone keypad. If you change your mind, please press star followed by two. I'm now going to hand over to Victoria Hyde-Dunn, Vice President of Investor Relations to begin. Please go ahead.

Good afternoon and thank you for joining us to review Informatica's third quarter 2022 earnings results. Joining me on today's call 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. Our prepared remarks will be posted on the IR website after the conference call concludes. During the call, we will be making comments of a forward-looking nature. Actual results may differ materially from those expressed or implied as a result of various risks and uncertainties. For more information about some of these risks, please review the company's SEC filings, including the section titled Risk Factors, including our most recent 10-Q and 10-K filing for the full year 2021. These forward-looking statements are based on our 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 this afternoon's press release and our slide presentation available on Informatica's Investor Relations website. It is my pleasure to turn the call over to Amit.

Thank you, Victoria. Good afternoon, everyone, and thank you for joining us today. Let me share business insights from the third quarter and observations for the fourth quarter before turning the call over to Eric to recap Q3 financial results and provide full year and Q4 guidance. Now turning to results. Q3 was highlighted by solid ARR growth and bottom line performance. We exceeded the high end of our guidance range for subscription ARR, growing at 27% year-over-year. Cloud ARR grew 39% year-over-year, and total revenues increased 3% year-over-year. The quarter was primarily impacted by broader macroeconomic environment, including FX headwinds from the US dollar strengthening, and elongated sales cycles that required higher level approvals for new deals. We are pleased to deliver non-GAAP operating income at the high end of our guidance range at $84 million. Now, in the past few weeks, I have traveled extensively and met with customers, partners, prospects, and our employees across the globe, US, Europe, and Asia. Three common themes remain top of mind throughout my conversations. First, Demand for data-driven digital transformation remains amongst the top priorities for IT spending in the coming year. Secondly, however, the macroeconomic environment remains at the forefront of business planning, and customers are adjusting to the changing environment in real time. And lastly, while cloud adoption remains healthy, customers have become more measured in how they purchase. Sales cycles have stretched, new deals are being inspected with more scrutiny, but deals are still closing. Taking this all in, we expect the macroeconomic headwinds and customer behavior trends to continue in Q4. We're also reviewing internally how we can be more effective as we move to a cloud-only selling motion. For example, we're making a leadership change in our Asia-Pacific region to drive further cloud acceleration. We have factored this into our guidance as we continue to take a prudent approach for the remainder of the year. As a result, we are lowering full year 2022 guidance for total revenues and ARR metrics. However, we are reiterating non-GAAP operating income and unlevered free cash flow midpoint guidance, demonstrating strong profitability and proving the resilience and durability of our business in this economic environment. Now turning to our strategic priorities and continued key areas of investment focus, let me share highlights from product innovation, strategic partnership expansion, and go-to-market. Now, we prioritized our R&D investments supporting accelerating the cloud roadmap and strategic cloud partnerships critical for our long-term success. Let me share details for our four distinct customer journeys. Beginning with analytics, we added new capabilities such as bulk replication from SAP, Zendesk, NetSuite, and ServiceNow into Databricks as a target via our wizard-based application ingestion. At runtime, we improved the performance of many of our cloud data warehouse connectors, along with enhancing the ELT functionalities of our overall Databricks capabilities. Turning to the second customer journey, MDM and Business 360 apps, we delivered MDM SaaS for Azure, bi-directional integration between customers 360 SaaS and SAP ECC and S4 HANA, and clear similar record recommendations natively in Salesforce. We enhanced our healthcare extension with pre-built integrations and a new insurance extension to manage customer, policy, and agent master data. We also delivered integrated capabilities of MDM scanners for cloud data catalog and governance to simplify the cataloging of master data and mapping lineage. You can see how different products on the IDFC platform are cross-functioning with each other. In the third customer journey, data governance and privacy, we delivered deeper integration with Snowflake enabling customers to secure their data with automated tagging of sensitive data elements. Our cloud data governance and catalog service enabled comprehensive data discovery and lineage for the SAP ecosystem, spanning apps, databases, business warehouses, and BI tools. In our cloud data marketplace service, we enabled support for real-time contextual messaging between data producers and data consumers, and also automated approval and delivery of data requests to accelerate time to value. And our data quality suite has enhanced rule automation based on NLP, natural language processing, and algorithms for automated anomaly detection. And lastly, in our fourth customer journey, which is app integration and hyperautomation, we're integrating and connecting apps to automate end-to-end business processes and announced our beta program for API central. These journeys are made possible by our Intelligent Data Management Cloud, IDMC platform, powered by Clare, our AI engine, with over 50,000 metadata with connections and now leveraging 17 petabytes of active metadata in the cloud. IDMC continues to deliver mission-critical solutions and operates at a significant scale, processing 44.5 trillion cloud transactions per month as of September, an increase of 91% year-over-year reflecting the continued growth in usage of the idmc platform our differentiated cloud technology platform idmc has been widely recognized by marketplace and reflects our ongoing commitment to delivering product-led innovation globally we are again proud to be recognized as a leader in the 2022 gartner magic quadrant for data integration tools This marks 17 consecutive years of being a leader and Informatica has once again positioned furthest on the axis for completers of vision and highest on the ability to execute access. We also scored highest in all four data integration tool use cases in the 2022 Gartner Critical Capabilities for Data Integration Tools report and was named a 2022 Gartner Peer Insights Customer Choice for Data Masking. but also pleased to be recognized as a leader in the IDC marketscape worldwide data catalog software 22 vendor assessment report. This is the second consecutive time Informatica was named a leader. And the TSIA, or Technology and Services Industry Association, the leading association for today's technology and services organizations, awarded Informatica with the 2022 Star Award for innovation and excellence in three key categories, customer growth and renewal, customer success, and support services automation all in one year. Informatica enters the PSIA Hall of Fame as a winner of five PSIA Star Award categories since 2020, highlighting our commitment to customer success. Now turning to our next priority, where we strive to make Informatica the easiest to do business with and win together with our partners. Co-selling with our ecosystem partners continues to prove to be successful, as reflected in our continued acceleration of cloud marketplace transactions, which grew 63% year over year. We engaged with a community of customers, partners, and prospects at various Informatica World Tours across the globe in various cities. We were named an initial premier partner for the Microsoft Intelligent Data Platform Initiative, and we launched Data Loader for Azure Synapse at Microsoft Ignite. We also highlighted our strengthening partnership with Oracle Cloud at CloudWorld. And in the JITEX Global 2022 event in Dubai, We signed a multi-year strategic framework agreement with Abu Dhabi Digital Authority to enable enterprise data management services to 76 government entities in Abu Dhabi. Turning to our global system integrator partners, we saw good progress last quarter with Accenture, Deloitte, Wipro, Capgemini, and Cognizant, all involved in maintenance to cloud migrations. Several GSIs and boutique partners embedded in the migration factory into broader enterprise modernization programs that will be delivered using the centers of excellence that our partners built during 2022 to meet the demand for maintenance to cloud migrations. And now turning to our go-to-market. Our sales motion and customer relationships remain strong, as highlighted by the number of customers spending more than a million dollars in subscription ERR that increased by 50% year-over-year to 191 customers. Customers spending more than 100,000 in subscription ARR increased 17% year-over-year to 1,852 customers. This demonstrates our ability to win new workloads with large organizations and drive ARR growth across customers of all sizes. Our focus on global 2,000 customers, Fortune 500 customers, and vertical industries such as retail, FinServ, healthcare, and life sciences remains unabated. Let me give you a few examples. We added many new market customers, and I'll begin with a few names. including Uber technologies. Continuing on, GM Financial, a global provider of auto finance solutions with operations in North America, South America, and Asia, selected our IDMC platform to modernize its data and analytics program and provide a 360-degree view of customers amongst many other data capability enhancements. Blue Cross Blue Shield of Kansas City, or Blue KC, is a not-for-profit health insurer providing health coverage services to millions of customers. BlueKC sought a unified source for the provider data to enable streamlined transactions and reporting and selected our MDM solution for that. Banco Nacional de Costa Rica is the largest commercial bank in Costa Rica and the second largest in Central America by assets. Informatica's Customer 360 SaaS solution will serve as a central platform to address the data challenges and needs to move to cloud. And finally, a great cloud migration story is with Dana-Farber Cancer Institute, located in Boston, and one of the world's leading cancer research and treatment centers. Dana-Farber was looking for a new platform to keep up with surging demand from clinical, research, and business users, and to modernize a cloud data warehouse. They selected IDMC as the single platform for data integration needs. We continue to expand the IDMC platform and make it more accessible to customers, industries, and vertical use cases. Just yesterday, we announced the availability of IDMC for higher education. We worked with educational institutions such as Old Dominion University and Australia's La Trobe University to help them improve customer student recruitment, retention, and alum outreach with accurate data management and analysis. As we continue to accelerate our transition to cloud-only company, our P&L remains strong, demonstrating profitability and free cash flow generation. To expand on this, Firstly, we are fortunate to have long-standing customer and partner relationships. Our customers comprise of a high-profile brand across the leading G2K companies. Customers choose Informatica for a breadth of data management use cases as a single platform and best-of-breed solutions. Their commitment to us is reflected in our best-in-class mid-90s renewal rates. Additionally, our swindling of data management position with ecosystem partners is something that customers value. Our broad partnerships with hyperscalers and GSIs are also competitive between traders. Secondly, as mission-critical workloads expand, we've scaled our platform to process over 44 cloud transactions per month, up from 23 trillion cloud transactions a month a year ago, with seven best-in-class product suites to become the industry's only AI-powered data management platform. Next. As we continue to invest in R&D to further our cloud roadmap and strategic partnerships, we've done that with the resiliency and durability of financial model. We've continued to maintain non-gap operating income guidance range and gross margin profile at 80% throughout the year. We will continue to be good stewards of capital. And finally, while there is continued uncertainty, the momentum towards multi-cloud workloads remains strong. We have demonstrated growth across our subscription business with our ability to adjust to different environments through decades of experience. We will stay flexible and agile. We are fortunate to have this resilient business with significant momentum and extraordinary long term growth opportunities. Now, none of this would have been possible without the support and execution from amazing informaticians across the globe. And I'd like to thank each and every one of them. And of course, I'd like to thank all of our customers, partners and shareholders for their support. With that, let me hand the call over now to Eric.