Informatica Inc.

Good afternoon, and thank you for attending today's Informatica Corporation Fiscal Fourth Quarter 2022 Financial Results Conference Call. My name is Don Neal, and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. It is now my pleasure to pass the conference over to our host, Victoria Hyde-Dunn, Vice President of Investor Relations. You may now proceed, Victoria.

Thank you. Good afternoon, and thank you for joining us to review Informatica's fourth quarter and full year 2022 earnings results. Joining me on today's call are Amit Walia, Chief Executive Officer, and Mike McLaughlin, 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 investor relations 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 included in our most recent 10Q and 10K that will be filed for the full year 2022. 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 this afternoon's press release and the slide presentation available on Informatica's Investor Relations website. It is my pleasure to turn the call over to Amit.

Well, thank you, Victoria. Good afternoon, everyone, and thank you for joining us today. Before I begin, I would like to welcome our new Chief Financial Officer, Mike McLaughlin, to his first earnings call with us. Mike brings 30 years of extensive financial leadership experience and a successful track record, recently serving as the CFO at FICO. Mike has been with us for about a month and has already proven himself to be an incredible addition to the team. And I couldn't be more excited to have him join the Informatica leadership team. So welcome Mike. Now I'll start with my reflection for 2022 and details on Q4 and the full year highlights for the year. I will then share my observations for 2023. So let's begin with 2022. 2022, as you all know, was our first full reporting year as a public company. While the year witnessed external fluctuations with an uncertain macro environment, we delivered against our commitment to balanced growth. We exceeded cloud ARR, subscription ARR, and non-GAAP operating income guidance for the fourth quarter and full year 2022. In fact, cloud ARR and non-GAAP operating results were also better than our initial expectations shared a year ago in our February 2022 earnings call. We achieved four new annual milestones. We grew cloud ARR to over $450 million, subscription ARR to almost $1 billion, and surpassed $1.5 billion for both total ARR and total revenues. These results highlight the resiliency and durability of a balanced growth business model. Our accelerated investments in the cloud continue to bear fruit. All products are now on the IBM C platform, and we accelerated our strategic cloud partnerships with AWS, Azure, GCP, Oracle, Snowflake, and Databricks. We also received many awards from our partners and industry experts over the course of the year. Our IBM C platform powered by our Clare AI engine, processed 53 trillion transactions, mission critical, may I say, cloud transactions per month in December, a 91% increase year-over-year, demonstrating strong customer usage. With our modern cloud architecture, 50,000 metadata-aware connections, and leveraging 18 terabytes of active metadata in the cloud, IDNC is the only platform at scale in the market with all the data management capabilities enterprises need to deliver measurable outcomes for data analysts, data scientists, data engineers, CIOs, and the CDOs. Our enterprise sales motion continues to strengthen as evidenced by 93% plus renewal rates, gross margins of 82%, and strong global wins with enterprise brands serving mission-critical workloads. Lastly, while cloud migration remains in its early innings, we ended the year with solid momentum. We have migrated 3.6% of our maintenance install base over to IDMC, up from 2.8% last quarter, with a 2.1 conversion ratio. GSI and channel partners continue to scale the Informatica migration practices and provided more trained resources to meet customer demands. Now turning to our strategic priorities and continued key areas of investment focus, let me share highlights from product innovation and then go to market. Beginning with innovation, we prioritized our R&D investments to support accelerating the cloud roadmap and strategic cloud partnerships critical for our long-term success. IDMC is now the platform of choice as customers build a modern data stack at scale versus stitching together many solutions, which takes time, is more risky, and definitely more expensive. Some innovation highlights amongst the many over the course of the year are here. In our data integration services, we recently announced the public preview of two new IDMC services, ModelServe and InfoCore. With Model Serve, you can put AI into action in minutes with a one-click serverless deployment of AI ML models with our IDMC. InfoCore extends IDMC platform capabilities to data engineers, developers, and data scientists directly in their own integrated development environment, making them more productive by turning thousands of lines of code into a single function. In our MDM and 360 application services, we improved data modeling to allow more flexibility while managing multi-domain relationships, introduced a new real-time data enrichment framework, and tracked detailed usage and consumption metrics that accelerate cross-sell and upsell opportunities for our customers with their end customers. In our cloud data governance and catalog service, We enable data entity classification, which uses metadata intelligence to automate the labeling and categorization of data assets, helping improve data discovery, understanding, and governance of data assets. Now, I want to talk a little bit about our AI engine, Clare, that has continued to scale and power all our products on IDMC. Now, we have been big believers in the potential of AI to drive intelligence and automation. In fact, way back, we launched Clare in 2018, and since then, we have been refining it, growing it, and it has now grown to some serious operational scale. I'll give you two examples of Clare in action, operational action. One, organizing customer data. Clare can automatically classify, label, and relate data sets, saving users thousands of hours of tedious and manual work. An American health insurance provider saves $1 million monthly using these advanced AI capabilities. Another one is generating data pipelines. Clare automates data pipeline generation by providing AI-based pair programmer like GitHub Copilot. This improves data engineer productivity by accelerating development, automating repetitive tasks, and enabling more users to connect and integrate data quickly. Additionally, Clare is intelligent, so it becomes more and more accurate with each utilization, providing more targeted recommendations. More than 85% of IDMC cloud developers tell us that they use this capability daily. Now, as a pioneer in cloud data management, we are honored to be recognized for our commitment to product innovation. Informatica is recognized as a leader in the 2022 Gartner Magic Quadrant for data quality solutions. This makes 15 consecutive times of being a leader and Informatica is once again positioned highest on the ability to execute access. Informatica also scored highest in three data quality use cases in the 2022 Gartner Critical Capabilities for Data Quality Solutions report and received a strong rating by Gartner in products and services and support and account management in the 2022 Gartner Vendor Ratings report. Lastly, Informatica won the 2022 Digital Innovator Award from industry analyst, Intellix. Now let me turn to our go-to-market. where our Switzerland of data partner position and our scaled platform with best-of-breed solution position plays a very important role in customer engagement. This has allowed us to serve customers of all sizes across all geographies who are choosing the IDMC platform to enable their digital transformations in the cloud. Momentum continued in Q4 from customers spending more than a million dollars in subscription ARR increasing by 35% year-over-year to 206 customers. We more than tripled the number of customers spending more than $5 million in subscription ARR. Customers spending more than $100,000 in subscription ARR increased by 15% year-over-year to 1,916 customers. We also closed over 80 cloud modernization deals in 2022, our highest ever in a single year, and more than doubling the number of modernization deals lifetime today. Customer success is an important priority for us. For the second consecutive year, Informatica has earned an outstanding customer service experience from J.D. Power in the Certified Technology Service and Support Program 2022. We also announced an assurance service to optimize and advance the customer experience on IDMC platform with risk mitigation and observability at its core. Now, co-selling with our ecosystem partners has proven very successful as reflected in our continued acceleration of cloud marketplace transactions, which grew 43% year over year. We were honored with two Partner of the Year awards from AWS, including the 2022 Global Design Partner of the Year and the 2022 North America Data and Analytics Partner of the Year. We also announced a set of new integrations with AWS services to democratize access to data and expand IDMC to new user personas such as data scientists and data developers. These integrations include native integration of Informatica's data loader for AWS Redshift into the Redshift user experience and a new plugin providing access to IDMC capabilities to data scientists and data developers directly from AWS SageMaker. We also saw substantial progress with our GSIs and platinum channel partners. More than 20 partners have now been certified as a part of our cloud migration program and have built centers of excellence to deliver the work, including eight GSIs. We saw a significant increase in the amount of work that will be delivered by partners and from the migration factory deals that closed in Q4. We expect more to be delivered by our trained and certified partners, giving us the additional scale and faster time to value for our customers. We recognized a few of our esteemed partners that our sales kickoff held earlier this year in January. Global Partner of the Year was Deloitte. Global Innovation Partner of the Year was KPMG. Global Growth Partner of the Year was TCS. And Global Cloud Modernization Partner of the Year was Capgemini. We also saw continued strong growth of the channel partner program, which incentivizes our partners to source new opportunities and provides rewards when those opportunities close. Many of our partners doubled in their efforts to position Informatica in their customer base. We continue to win opportunities with new and existing customers. Let me give you a few examples. Beva RE is a leading global renewable energy developer, service distributor, and energy solutions provider. Facing new supply chains, they selected Informatica's IDMC cloud native platform with MDM Supplier 360 to keep in step with emerging requirements as they remain focused on actively shaping the future of energy. Another one, founded in 1945, Kaiser Permanente, is recognized as one of America's leading healthcare providers and nonprofit health plans. This past quarter, we expanded our existing partnership with them, supporting the enterprise migration to the cloud, as well as analytics tools that support this work. Federated Cooperatives Limited is Canada's largest cooperative across 3,000 retail locations in 500 communities throughout Western Canada. FCL was looking for a better way to enhance insights, profitability, provide a differentiating customer experience, and drive sustainable organizational growth. A longtime Informatica Power Center customer, they selected Informatica's IDMC platform to modernize its critical business systems, centrally manage the data, and help them scale for the future. So hopefully that gives you a good perspective of 2022 and Q4. Now, let me turn to 2023 strategy. Well, as I step back, over the past 25 years, Informatica has pioneered many categories in data management. from ETL at its inception to data quality, to master data management, to data catalog, to data marketplace, and now the most comprehensive at-scale cloud-native AI-powered data management platform, ITMC, Intelligent Data Management Cloud. In my many conversations with customers, CIOs, CDOs, and business buyers across the globe, our partners, and even as I look at market trends, including Informatica's annual CDO Insights Report, all clearly state that data management and digital transformation led by data is enabled by a cloud delivery model will continue to be a top priority of IT spending in 2023 and beyond. So through thoughtful planning, we are now transitioning to a cloud-only, consumption-driven strategy. We're looking to achieve three primary strategic objectives for long-term value creation. First, we will drive cloud-only organic growth for next new business on the foundation of our continued investments in innovation for IDMC. As you all know, all of our IDMC suite of solutions are cloud-based. Cloud is already growing faster than self-managed, and most of our new business pipeline opportunities are cloud-only. IDMC offers a consumption-based pricing model that enables higher NRR for the cloud business. Customer interest in Informatica processing units, or IPUs as we call it, is continuously growing. Expanding on the success we have observed with IPUs, we will launch FlexIPUs later this quarter to meet our customers' seasonal usage patterns so that IPUs can be pre-purchased and consumed for 12 months. This is additive to our current IPO model, which is pre-purchased and consumed monthly, thus enabling greater choice and flexibility for our customers. Second, we will continue accelerating cloud migration opportunities from existing maintenance customers while maintaining best-in-class renewal rates. Lastly, and most importantly, a cloud-only consumption-driven strategy is part of a multi-year plan to drive balanced growth by managing the top line as well as significantly improving operating leverage. Focusing on this new model allows us to simplify our organization from hybrid to cloud only, create operational efficiencies and synergies, and improve the speed of execution by being focused. This will enable us to create better operating leverage in our multi-year plan. Our 2023 guidance in that context is also appropriately prudent as we navigate an uncertain macro environment while transitioning to a cloud-focused sales motion. We are committed to balance growth, creating operating leverage, investing in cloud product innovation and cloud-driven growth, and delivering a durable and sustainable business. I'd like to thank all Informatica for delivering great results, and I'd also like to thank our partners, customers, and shareholders for their continued support of Informatica. With that, let me turn the call over to Mike. Mike.