Informatica Inc.

Good afternoon, and thank you for joining the Informatica Inc. Fiscal Q4 2024 call. My name is Kate, and I will be the moderator for today's call. At this time, all lines are in a listen-only mode and will be until the question and answer portion of the call. If you would like to queue up for a question, you may do so by pressing star followed by a 1 on your telephone keypad. I will now turn the call over to Victoria Hajdan, Vice President of Investor Relations. Please proceed.

Thank you, Kate. Good afternoon. And thank you for joining Informatica's fourth quarter 2024 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, including in our most recent 10Q and 10K filing for the full year 2023. 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 an addition to and not a substitute for measures of financial performance prepared in accordance with GAAP. A reconciliation of these items to the nearest US 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 is my pleasure to turn the call over to Amit.

Thank you, Victoria, and welcome to everyone on the call. 2024 was a pivotal year for Informatica in our cloud-only consumption-driven strategy. While we experienced overall momentum throughout the year, the fourth quarter did not unfold as anticipated. I will briefly explain why and ask Mike to provide additional details. To begin with, renewal rates were lower than forecast. As we worked through the complexity of our business model transformation to cloud-only, Some execution issues related to renewals were identified and are underway to be addressed. We have allocated customer success resources to this initiative and expect to resolve it throughout 2025. Second, we saw a significant re-acceleration of cloud modernization deals this quarter and closed a record year for on-premises to cloud migrations. This development in itself is a very positive for the long term. as it creates more upsell and cross-sell opportunities for services on the IDMC platform. However, it has two short-term dynamics. Lower net new ARR due to the accounting treatment of the subscription credits we give customers during the migration period and the roll-off of migration-related self-managed subscription ARR and maintenance ARR, which was higher than expected. Finally, We saw a reduction in the renewal term length for self-managed subscription contracts. While this does not affect ARR, it negatively impacts GAAP revenue due to ASC 606. This mainly arises from customers eager to start their cloud journey with us more quickly. It is happening faster than we anticipated, which is a positive sign again in the long term for our cloud business, but it negatively impacts GAAP revenue due to ASC 606 in the short term. These factors, along with lower professional services and foreign exchange headwinds, led to outcomes that did not meet our forecast. As Mike will explain in greater detail when he provides 2025 guidance, we are adjusting our expectations to account for these factors and our growth and profitability projections. Before turning to results, I'd like to take a minute to frame Informatica in the broader context of where we've been and where we are going. For those who have been with us since Informatica went public, We are now in the final phase of a transformation. When Informatica became private in 2015, we set out to create the most innovative solutions on the industry's first and only cloud-native data management platform. We achieved this goal and started selling our IDMC platform alongside our on-prem solutions a few years later. At the beginning of 2023, we marked the start of the final phase of our transformation strategy by announcing the end of sale of our on-prem products, fully committing to a cloud-only consumption-driven future state. Navigating this third phase has been challenging at times. Sometimes the aforementioned factors, the underlying health of our cloud business and our cloud-only consumption-driven strategy remains very strong. Our large, high-growth cloud business is very healthy, even with our declining end-of-sale on-prem business. to give you a few examples. In Q4, cloud subscription ARR grew 34% year-over-year, representing nearly half of our total ARR. We expect cloud subscription ARR to hit the one billion mark in 2025, accounting for almost 60% of total ARR by the end of the year. In Q4, approximately 68% of cloud net new ARR in the trailing 12 months came from new cloud workloads and expansion, with approximately 40% of that growth coming from new customers to Informatica. We continue to expect the majority of our cloud growth to be net new wins for new cloud workloads amongst new and existing customers. Our cloud net retention rate was 124% in the quarter, and we continue to see a healthy cloud pipeline. Cloud customer count grew by 8% for the year, And the number of cloud ARR customers spending more than a million dollars with Informatica grew by 59% year-over-year. The average cloud ARR per customer was $335,000, growing 24% year-over-year. We closed a record year of on-prem to cloud migrations, which grew 42% year-over-year, with interim expansion sales of IPOs nearly doubling. net new cloud deployment with some of the world's largest customers, including a US-based financial services company and an online travel technology company, expansion opportunities with Takeda, Axis Bank, Lumen, and Yamaha, and modernization deals with the city of Austin, to name a few. All of this was accomplished while delivering strong profitability. Full year 2024 non-GAAP operating income grew 16% year-over-year, and adjusted non-labor-free cash flow after tax grew 28% year-over-year. We continue to remain the innovation leader in the data management market. We have built the best data management products on the only AI-powered data management platform, supporting extremely difficult operational complex workloads and use cases that are multi-vendor, multi-cloud, and hybrid. Our position as the customer platform of choice for cloud data management is supported by industry recognition, including being named a leader in the inaugural 2025 Gartner Magic Quadrant for Data and Analytics Governance Platforms report, And we named the leader in the 2024 Gartner Magic Quadrant for data integration tools for the 19th consecutive time. We deeply engage with our ecosystem and hyperscaler partners, including over 650 GSI partners, enhancing their practices on IDMC, issuing over 15,000 certifications in 2024, up from 12,000 the prior year. Lastly, we remain confident in pursuing a $62 billion addressable cloud market, according to IDMC, according to IDC, sorry, and in our ability to successfully capture this opportunity through product innovation with our comprehensive IDMC platform with clear AI and GenAI capabilities. At the end of 2024, the IDMC platform processed over 110 trillion cloud transactions per month, which grew over 29% year-over-year. With our enterprise customers, we empowered them to use AI for data readiness and simplify the data state with Informatica for GenAI and GenAI from Informatica. which are both available on the platform. With Informatica for Gen AI, we now have about 100 customers using Gen AI capabilities on IDMC. IDMC capabilities these customers use for Gen AI include data ingestion and processing, including unstructured data processing for RAG pipelines, connectivity to LLMs, and AI app orchestration. Informatica has previously announced AI blueprints for all hyperscalers plus Snowflake and Databricks. Over the last four months, these customers have executed 270,000 calls or prompts to LLMs, excluding Claire's GPT. Use cases we are seeing include business process optimization and automation, business insights and decision support, sentiment analysis, enterprise data retrieval and augmentation, to name a few. To give you some great real-life customer stories, One is a leading global biotech company which is building an AI agent framework with IDMC and Google Cloud, enabling users to quickly gain insights from internal systems. Utilizing IDMC's out-of-the-box recipes for rapid deployment or development, these accelerate access to data-driven insights, enhancing decision-making, and speeding up business outcomes. An insurance company is using our solutions for claim analysis and claim processing. A healthcare company is using Informatica products for patient engagement with a holistic health and program support. A California-based nonprofit is developing a RAG solution using local community data and resources powered by OpenAI and IDMC. This helps support center executives access relevant resources quickly, reducing cost and enhancing service quality. These are all pilot programs and will move to production over time. With GenAI from Informatica, we recently expanded Clare GPT services across EMEA, Asia Pacific, and Canada, and 10% of our customers are now using Clare GPT outside the United States. We are pleased to announce the extension of Clare GPT services at no additional cost throughout 2025. This continuation of our 2024 promotion demonstrates our commitment to providing advanced AI capabilities while maintaining cost-effective solutions for our customers. Our product innovations are expanding on the IDMC platform with AI and GenAI capabilities, and we look forward to sharing more at our Informatica World Customer Conference in May. In closing, we achieved significant progress in 2024. While we have much to execute in 2025, as we look to scale to a billion-dollar cloud ARR business, I am incredibly proud of the Informatica team. I would like to thank our partners, customers, and shareholders for their ongoing support. With that, let me turn the call over to Mike. Mike, please take it away.