Informatica Inc.

Greetings and welcome to the Informatica second quarter 2023 earnings call. It is now my pleasure to introduce your host, Victoria Hyde-Dunn, Vice President of Investor Relations.

Good afternoon and thank you for joining Informatica's second quarter 2023 earnings conference call. Joining me today 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 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, included in our most recent 10Q and 10K filing 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 will 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. With that, it's my pleasure to turn the call over to Amit.

Well, thank you, Victoria. Thank you, everyone, for joining us today. I will start today's call by summarizing three key points. First, we exceeded Q2 guidance across top and bottom line metrics driven by strong customer momentum from our cloud only consumption driven strategy. Second, we are expanding our cloud native AI powered IDMC platform capabilities to be the enterprise standard for data management. Through our own product innovation and with the integration of our recent acquisition of Privatar, which is all about data access management and privacy solutions, we believe that IDMC is becoming the most comprehensive and unique platform for data management and enterprises globally. This is especially important with the rise of AI driving further democratization of data and its informatics differentiation in the market. Simply put, there is no AI without holistic data, quality data, and governed data. and thirdly given a strong execution in the first half of the year we are raising our non-gap operating income and adjusted unlevered free cash flow after attack guidance after tax guidance for the full year we remain committed to delivering balanced profitable growth while driving forward with our strategic initiatives with that now let me discuss these topics in more detail turning to q2 results total revenue grew one percent year over year with subscription ERR growing 16% year-over-year and cloud subscription ERR growing 37% year-over-year. We delivered a record $530 million in cloud subscription ERR. I'm really proud of that one because that exceeded the half a billion dollar cloud mark for the first time. We strengthened our cash position and beat the high end of guidance for non-GAAP operating income. The macro environment remains stable in the second quarter versus the prior quarter. The sales mix shift from self-managed to cloud subscription ARR is tracking as expected, as cloud subscription ARR now represents 49% of subscription ARR, up from 42% a year ago. Approximately 85% of the quarter's cloud new bookings came from new cloud workloads and expansion, with the remainder from on-prem customer migration, which saw a nice uplift in the quarter. Our customers are adopting the IDMC platform for new users and new use cases across organizations. In the second quarter, customers spending more than $1 million in subscription ARR increased by 22% year-over-year to over 213 customers. Customers spending more than $100,000 in subscription ARR increased 8% year-over-year to 1,940 customers. Now we have customized IDMC to deliver industry specific needs and recently launched IDMC for ESG sustainability to support environmental, social, and governance use cases. This follows previous launches of IDMC for state and local government, financial services, insurance, life sciences, and retail and CPG verticals. Let me share with you a few customer stories. PNN Group, represented by PNN Bank in Western Australia and BCU Bank in New South Wales and Southeast Queensland, has created a digital transformation strategy that aims to deliver more personalized banking for their customers across Australia, while at the same time ensuring the protection and integrity of customer data. In partnership with Snowflake, they selected Informatica's IDMC platform for data ingestion, data integration, data governance, and catalog and data quality solutions to complement their digital transformation strategy as they modernize their analytics to the cloud. Jaguar Land Rover is at the forefront of the rapidly changing automotive industry with a focus on electrification, digital services, and data. Range Rover, Discovery, and Defender collections will each have a pure electric model, while Jaguar will be entire electric. The company is undergoing a digital transformation that will see its operations, including manufacturing and supply chain, strengthened by becoming more data driven. They selected Informatica's IDMC platform for data discovery, curation, and catalog use cases, including data quality, data and application integration, together with master data management, SAS. Holiday Inn Club Vacations Incorporated is a resort, real estate, travel, and vacation ownership company with the mission to be the most loved brand in family travel. They are undergoing total digital transformation, which includes tech modernization, digital strategies for sales and marketing, tech consolidation efforts, and data rationalization. In a joint partnership with Deloitte, they selected Informatica's master data management SaaS and cloud data governance and catalog solutions to implement their digital transformation strategy. And Informatica will be working with UK's Ministry of Defense to provide data governance and cataloging solutions. These customer success stories highlight the impressive adoption of IDMC cloud solutions across the globe. Next, We continue accelerating product innovation on IDMC's cloud-native AI-powered platform to improve productivity and deliver trusted data to our customers and partners. We hosted thousands of global customers, prospects, and partners at our Informatica World User Conference in May earlier this year. It was an incredible opportunity to engage with our community and see firsthand how Informatica is helping democratize data as part of an organization's digital transformation journey. I had discussions with many CIOs, CDOs, and CTOs looking to standardize on IDMC. They all want fewer point solutions. They want to reduce the data complexity and simplify the operations within the data architecture to deliver immediate ROI and lower TCO. We also unveiled many industry-leading capabilities on IDMC. Now, let me share some thoughts on AI, which I know remains top of mind in every conversation today. Let me begin by saying, I firmly believe that there is no value in AI without holistic, clean, usable data that can be managed and governed at scale. Look, to get data into AI to create value, we need data management. Bringing all of the fragmented data across an enterprise in one place. Making sure it's of high quality. Garbage in gives us garbage out. Making sure there is governance and so on and so forth. That's what IDMC is all about. In fact, our journey with AI is not new. We launched our AI Claire back in 2017 at Informatica World that year. AI is already embedded in all our solutions, leveraging ML algorithms and NLP on metadata to drive intelligence and productivity, accessing 50,000 metadata-aware connections, now leveraging 35 terabytes of active metadata in the cloud, and processing 61 trillion mission-critical cloud transactions as of June. Our metadata system of record platform IDMC has the foundation to realize AI-powered digital transformation. and the exponential impact it can have on all our customers and their organizations. And now we are amplifying and taking forward our AI journey with Clare Copilot and Clare GPT, allowing us to take a significant step forward with GenAI. Informatica's AI differentiation in this market comes from three factors. First, it's an understanding of the enterprise data ecosystem. Very few vendors can claim an understanding of an enterprise's data ecosystem, which comes from being able to have a metadata inventory. But beyond that, being an independent and neutral and at scale vendor in this space. The second is training LLMs on metadata from thousands of data management projects. Again, only a handful of vendors, if any, can do that at scale. And third is comprehensive data management capabilities. When enterprises think of data management, they just don't think of ELT pipelines, or ETL pipelines, or just data catalogs, or just data quality in isolation. An enterprise data management project requires all these capabilities working in tandem and on top of a metadata-powered platform, which is only available with IDMC. Clare Copilot is available now, and Clare GPT will be available in private preview this quarter. as a native IDMC service utilizing Informatica's processing units to drive usage and help customers democratize and simplify the data management. Our consistent focus and commitment to delivering product differentiation and innovation have won us recognition from industry analysts and thought leaders. In IDC's worldwide data integration and intelligence software market share 2022 report, Informatica ranked number one for the seventh consecutive year. Our consistent performance and track record has been recognized in five sub-markets. Data ingestion and transformation, data quality, data intelligence, master data management, and dynamic data movement. We are pleased to be named a leader in the Forrester Wave for Master Data Management Q2 2023 for the fifth consecutive time. Now, as our product innovation capabilities increase, our partnerships have grown and continue to grow and deepen with hyperscaler and ecosystem partners such as Microsoft, AWS, GCP, Snowflake, and Databricks. Let me give you a glimpse of some of those. With Microsoft, we announced IDMC as an Azure native ISV service, which will provide Azure customers with advanced capabilities, seamless access, and data management normally reserved for first-party Azure services. We announced the availability of a cloud data governance and catalog native in Azure as well. We also announced a private preview of seamless integrations with Microsoft Fabric as one of the first ISV design partners for this offering. With AWS, we announced the availability of a cloud data integration free service directly from Amazon Redshift user console. Informatica is the only ISV partner with this native integration. We also launched Informatica Secure Agent Private Link in AWS and launched a pod in Japan to scale our market reach in that region. With GCP, we announced the availability of a SaaS MDM service and the expansion of our footprint with a pod in EMEA. At the Snowflake Summit, we announced the public previews of SuperPy and a native application for enterprise data integration. Our new cloud data integration free service via Snowflake Partner Connect and added support for Apache Iceberg Tables. At the Databricks Data and AI Summit, we added support for Unity Catalog, Databricks Connect, and Databricks SQL. We added support for Databricks Delta Lake for a power center to IDMC migration program. Turning to our GSI partners, we had record attendance levels at our partner summit at Informatica World earlier this year. We expanded our partnership with ZS, a global management consulting firm, to embed IDMC with ZS's cloud-native Zedon platform for life sciences. We launched a brand new partner portal to make it easier for partners to find the critical content needed for sales enablement. We also made all our enablement bootcamps free on the portal and since launch, more than 7,000 people have become certified to our cloud data integration bootcamp and MDM SaaS champions bootcamp. And this will only grow from here. We see enterprises moving ahead with multi additional transformation projects to improve data intelligence and achieve better business outcomes. We have migrated 4.5% of our legacy maintenance base over to IDMC, up from 4% last quarter at a 2.1 conversion ratio. We saw continued progress with our migration factory program, with many of our GSI partners helping our customers to modernize and move to IDMC. We're excited about a cloud modernization program, which we will make generally available this quarter. This new program gives customers the ability to accelerate modernizing on-prem power center assets to IDMC with significantly lower migration time, lower cost, and lower risk. Now let me discuss Privatar. Well, we welcome the Privatar team to Informatica family earlier in July. Privatar brings deep industry skills and expertise in security, access, privacy, and policy management to strengthen our cloud capabilities. Our shared vision to offer customers the ability to create new mission-critical workloads and use cases in IDMC across data governance, data catalog, data privacy, data quality, and MDM offerings. This will enable customers to allow data sharing and management while maintaining control and security through trusted and secure data. We're making good progress on our integration plans, and once fully integrated, we believe the IDMC platform will become the most comprehensive and differentiated cloud data management platform in the market, expanding the product innovation lead over legacy and single point solution vendors because of its scalability, efficiency, and unique offerings. Now, as I wrap up, I'm thrilled and pleased to raise our non-GAAP operating income and adjusted unlevered free cash flow after tax guide for the year. We are managing the business for long-term, durable growth and continued profitability while focusing on executing on a cloud-only, consumption-driven strategy. We are building a best-in-class, AI-powered platform at scale and see a long runway ahead in displacing legacy and single-point solution vendors. I am excited about our future opportunities for cloud growth. I want to thank all of my Informatica colleagues for their hard work and continued commitment. I would also like to thank our partners customers, and shareholders are supporting us. With that, let me turn over the call to Mike to take you through more details. Mike, take it away.