Q3 2021 Informatica Inc Earnings Call
<unk> 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 IPO prospectus dated October 26 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 will be discussing certain non-GAAP financial measures. These non-GAAP financial measures are in addition to and not substitute for measures of financial performance prepared in accordance with GAAP are.
A reconciliation of these items to the nearest U S. GAAP measure can be found in this morning's press release and our slide deck available on our Investor Relations website.
With that it's my pleasure to turn the call over to Amit.
Victoria Good morning, everyone. It is definitely every morning deal for all of us on the West Coast.
We are excited to host our first earnings call on the heels of a strong third quarter and a very successful initial public offering.
I would like to thank our employees.
Customers strategic partners sponsors and investors all of whom helped us achieve this important milestone.
Now before I share our Q3 results.
I would like to provide an overview of the market opportunity and our unique position in the market driven by our product innovation.
<unk> is a leader in the cloud data management.
Purpose base for cloud native multi cloud and hybrid workloads.
Our vision is to be a cloud neutral single source of truth data.
Data management platform for the enterprise.
The rise of digital transformation.
We see the data volume data types data latency data fragmentation and the adoption of multi cloud and hybrid architectures has changed how organizations gather share and use speed up decision, making and driving their businesses.
Businesses today have tremendous fragmentation.
And complexity in a multi cloud hybrid world.
South Africa, Salesforce service, now Adobe and won't be cloud platform, such as AWS, Azure and DCP cloud data platform like Snowflake data bricks, and many cloud databases or all of you at all.
Many on premise legacy apps are still operational.
Ah Hi quoted on a limited single point solution simply cannot fulfill the needs of a modern digital enterprise that wants to move fast and XD.
<unk> digital transformation.
So five years ago, we had informatica undertook a product innovation led approach to solve these complexities of data management and set out an ambitious strategy to transform our business from an on Prem.
Single product centric software company.
Cloud native technology platform, supporting multi cloud and hybrid work environments.
We've re architected from ground up of modern medicine centric data management platform that.
That is cloud native.
AI enabled leverages, many open source technologies and users of micro services based architecture.
Which can be deployed on prem onto the public cloud.
We built our AI engine clear that is embedded in the platform to drive intelligence and automation at scale.
We call this platform deep intelligence data management cloud or in E&C.
As we've transformed our financial model from a perpetual license and maintenance revenue model to it.
Subscription based revenue model with cloud revenue was the fastest growing company.
These significant initiatives for all the detail ahead of the IPO.
With that as a backdrop I would like to now discuss how we provide ACA has emerged as a leader in data management and our strategies for continued growth.
I will provide an overview of five key unique attributes and discuss our business updates.
First and most important is product innovation.
We've always had this clarity to focus on data management category.
We have dedicated significant resources, including over $1 billion in cumulative R&D spending over the last five years.
These investments have resulted in best of breed solutions on the industry's only AI powered data management platform IBM Z for multi cloud and hybrid workloads.
We are a great software company that is a leader in every Gartner magic quadrant is completed.
And in 2021 marked the sixth straight year that <unk> was named a leader in all of our five data management Magic quadrant.
<unk> platform runs at a substantial scale.
We've processed over lengthy Tweed training.
Cloud transactions per month as of September quarter, right, but then on pattern pressed up over 50 pounds the metadata always connectors.
And our new product innovation represented 85% of our subscription <unk> in Q3.
Second is our vendor neutrality.
We call ourselves the Switzerland of data and we believe winning together with our partners.
Enterprises across the globe have invested in a heterogeneous infrastructure and expect vendor neutrality.
We sell our solutions to address global sales team, which is enhancement optimistic by our relationships in collaboration with strategic partners, including Hyperscale.
The global system integrators and channel partners.
A part of our strategy is focused on delivering a complete end to end solution for our customers driving general awareness of our platform and broadening our distribution and reach to new customers.
Todd.
We participate in a $44 billion addressable market with cloud increasingly growing faster than on Prem workloads.
Accelerated adoption of cloud.
Which direction expanded need for intelligent analytics and large scale disruption in data warehousing big data basis is fueling the demand for data management solutions that are cloud native and delivered on our platform versus Siloed best of breed farming.
Fourth.
He has a strong global customer base.
The effectiveness of our go to market strategy is evident with our 5000 plus customers in more than 100 countries and territories worldwide.
Our platform is used globally by organizations of all sizes.
A broad range of industries, including government agencies and high profile brands that trust us with their data management needs.
We are well represented in nine of the Fortune 10, and 84 of the Fortune 100.
Our net promoter score of 55, and we are honored to be recognized recently.
Outstanding customer service experience by J D power and certified Technology services support program 2021.
Finally, we have the additional opportunity to migrate our maintenance customers to cloud subscription revenue.
The majority of our $551 million of maintenance VR comes from traditional data aggregation products.
These three quarters ago.
We started our cloud migration program to support customers' migration efforts based on their demand cycles.
To date, only 1% of our installed basis migrate to the cloud and we believe this is a long big incremental opportunity for us.
With that as background.
Now, let me share a summary of our Q3 results.
In Q3.
Total annual recurring revenue or <unk> growth accelerated to 17% year over year to $1 3 billion.
This was fueled.
By subscription.
$736 million growing at 36% year over year.
Now as I said before 85% of this subscription.
Comes from net new products on <unk> CEO.
Cloudy at our growth accelerated to 44% year over year and.
Total revenue grew 11% year over year to $362 million driven by subscription revenue of $194 million growing at 31% year over year.
Next let me provide some business highlights from the third quarter to accentuate the numbers.
Starting with product innovation.
We extended our R&D platform with several product releases in Q3, we delivered a unified cloud media data governance, and Gaslog SaaS offering with integrated data governance and claim our AI engine powered intelligent automation.
Second we accelerated our customers' MVM deployment with an enhanced no COVID-19 applications composer and clear our customer record matching recommendations that simplified and enhanced user experience and dramatically improve productivity.
And lastly in support of our data warehouse and data lake environments at our customer sites, we extended our Informatica cloud mass ingestion solution.
<unk> customers with a very simple approach to ingest data from SaaS and on Prem apps to support applications synchronization and analytics in the cloud.
We also introduced Informatica petabyte scale E&P processing that now delivers up to 10 times faster performance for Snowflake.
<unk> and DWP sequel.
Enabling users beyond IP to leverage the performance and scale of these cloud native iphones.
We have additional plans to expand <unk> capabilities in the fourth quarter and look forward to sharing future updates.
Now turning to our strategic partners.
Our partnership with cloud Hyperscale us, including AWS, Microsoft Azure, Google Cloud Snowflake and <unk> continues to grow.
In Q3, we observed a 60% sequential quarter over quarter growth in core segments.
<unk> is also available on AWS, Azure and Google cloud market basis.
And in Q3, we delivered or rather we achieved over 150% sequential quarter over quarter growth in marketplace transaction volume.
A very valued ecosystem partners snowflake.
In September we announced with an on Prem cloud modernization program to help our joint customers modernize our traditional power center with EPL at E&P workloads to the cloud 12 times faster than before with 90% accretive automation conversion to the snowflake data cloud.
What are the largest global pharmaceutical companies intends to migrate 20 by housing mappings powerful data mappings to EMC and viewpoint, the AWS <unk> datacom.
Turning to customers.
In Q3, we added 11, net new subscription customers that spend more than a million dollars in subscription CNR ending the quarter with a record 127 customers and 44% year over year growth.
But also introducing a new metric customer.
Customers are spending more than $100000 in subscription era, which totaled 1577 customers an increase of <unk>, 8% year over year.
Enterprise demand remained strong and we sell into accounts, we've been with our single technology cloud platform offering <unk>, 55% of subscription customers are net new with great results from our go to market strategy.
As customers see the value of our offering for the initial use cases, they often expand into additional use cases across the organization and we have seen that in our overall average via our customers roughly doubled over the last three years.
This expansion is also aided by our recent introduction of consumption based pricing, but our cloud products.
In fact, our average <unk> per customer was 208 our $1.
In Q3.
What it was two years ago with an active base of more than 3500 subscription customers.
I'll give you three customer accounts to enhance altice.
What are the new logo. This quarter was production financially, it's a fortune 500 cancer leader with more than $1 five trillion in assets under management across the globe.
Prudential chose Informatica data governance solution and cloud data quality to help build prudential's modern enterprise data platform hosted in the cloud.
Trusted data foundation will help them drive strategic initiatives around customer Centricity application modernization and cloud data and analytics.
<unk> was a critical component component of Prudential's Global data strategy. This partnership enables Prudential group discovered and government data analytics or sites accelerating cloud migration and unlocking new efficiencies across its high performing organization.
Now we also continue to observe great traction among our customers to land and expand model.
Two examples.
He has held a global fortune 100, healthcare leader and operate an integrated model or 10000 pharmacies.
Millions of Aetna health insurance members and a growing network of community health upticks.
As Cvs modernizes, its IP infrastructure in the cloud it needed a partner to help improve data quality and.
And accelerate the migration of legacy system with minimal impact on service times of business disruption.
And from Africa data quality replaces work done by 'twenty four time, good advantages using AI powered quality checks to reduce potential errors by 99% and accelerated client reporting from six months to complete these.
<unk> continues to invest in its partnership with Informatica. Most recently in Q3 to an expanded need for data as a service, which enriches address in the <unk> data.
And finally, another customer of ours is our international customer Gras Savoye.
A leading insurance brokerage from in France, and a subsidiary of <unk>.
Watson.
The key challenges included manually intensive data quality checks delayed delivery of reporting and analytics and missing connections between cloud on Prem and partner data stores.
<unk> jaws Informatica cloud integration solution as a central platform for all its data management needs to improve operational efficiency and its alignment with Willis towers Watson, eliminating layers of legacy tech deck and migrating essential services without business disruption.
<unk> recent subscription to our cloud solution, followed that existing business with 60 partnerships, we have with US which started in 2020, which help them launch their cable IC.
Loyal customer data foundation in less than five months.
While working remotely during the pandemic.
Now in terms of our board. We are also excited to appoint Betsy Rafael to our board of directors and as chair of our audit Committee met.
<unk> is a globally recognized finance executive with more than 30 years of experience of the technology industry and we are excited to welcome.
Betsy to award.
So as I summarize it.
I believe as dramatic as two years of the company.
We have fully completed our business model transformation to a recurring revenue business model.
Q3 subscription got out is growing at 36% year over year and cloudy at outgrowth accelerating with 44% year over year.
We have established ourselves as the clear leader of about $44 billion addressable market with a lot of innovation lead in the market processing over 23 trailing cloud transactions per month on our <unk> platform.
But we have a proven land and expand model with more than 5000 customers in up market focus on large enterprises.
And finally, we have solidified strong profitability through our innovation electrons formation and see strong momentum with multi cloud and hybrid deployments as it continue to help customers with their cloud migration journeys.
With that context, let me now turn the all over to Eric Eric.
Thank you Amit and good morning, everyone. We appreciate you joining us on our first earnings call. Following our October 27th IPO, Our third quarter results were better than what we initially forecasted were consistent with the midpoint of the preliminary ranges we filed in our final S. One last one.
We had an excellent third quarter with strong revenue growth, increasing mix shift to ratable revenue and subscription expense with cloud <unk> growth accelerating to 44% year over year.
Before discussing our Q3 earnings results and our financial outlook for the fourth quarter and full year 2021, I'd like to first review some important aspects of our financial model considering that some of you may be due to the dramatic story.
Let me start with the background of our revenue drivers.
Our subscription revenue is recognized ratably for our SaaS offerings.
We recognize upfront for our self managed offerings per ASC 606.
We provide guidance of disclosure on our metrics to provide an enhanced view of our business is <unk> closely tracks the recurring cash flow characteristics of our business.
Maintenance represents the ratable revenue and support contracts for pre existing installed base of perpetual license.
<unk> services revenue reflects typical consulting and education revenue, which is recognized as work is performed.
Finally, perpetual license revenue has now become an insignificant percent of our total revenue declined roughly $300 billion annually several years ago to around $45 million today on a trailing 12 months basis.
<unk>, we have largely stopped selling perpetual licenses, except for pre existing contractual commitments and smaller distributional led geographies like southeast Asia.
The majority of our product development and go to market efforts are focused on all things related to subscription and cloud as of today. For example, we estimate that over 80% of our R&D efforts are related to cloud products.
As a result of this focus subscription revenue grew 31% year over year and now with 92% of our GAAP revenue is recurring in Q3. This gives us P&L predictability and leverage at the bottom line. This is demonstrated by our non-GAAP operating income margin of 25% through the first nine months of 2021.
<unk>.
Our subscription products are sold with contracts, primarily with a one two or three year term with an average new contract term slightly over two years of duration that has been relatively constant over the last few years.
Now moving on to our third quarter financial results total revenues grew 11% year over year to $361 8 million. The increase in total revenue growth versus Q2 is driven by the strong growth in subscription revenue, increasing 31% year over year to $193 7 million and representing 54% of <unk>.
<unk> revenues.
Recurring revenues of $331 $3 billion is 92% of Q3 GAAP revenue.
As Amit mentioned earlier, we saw strong demand for <unk> cloud platform and continued execution of our land and expand strategy.
Maintenance and professional services revenues were flat year over year and represented 46% of total revenues in Q3.
Standalone maintenance revenue represented 38% of total Q3 revenues consulting and education revenue big of the difference to fluctuate based on customer requirements, representing 8% of total Q3 revenues.
Perpetual license revenue was down to $2 8 million in Q3 and represented less than 1% of total revenues and only 3% of total revenues on a trailing 12 month basis. Please keep in mind that we are not actively selling perpetual licenses to new customers and expect this to remain an insignificant percentage of total revenues. We also expected.
And this will gradually decline as we continue to emphasize net new business in the form of subscription and cloud.
From a growth standpoint, we believe the best way to think about our revenue growth is the trend in subscription revenue as customers move to the cloud we expect the current 58%, 42% mix between subscription and maintenance revenues will continue to improve overtime with subscription revenue growing faster as a percentage of total revenues.
We continue to see strong demand for our solution offerings internationally revenue from the U S grew 9% year over year to $228 8 million, representing 63% of total revenue.
From outside the U S grew 13% year over year to $132 9 million, representing 37% of total revenue.
We're still in the early stages of our international expansion of the cloud and we see a significant opportunity in front of us as countries outside the U S catch up in terms of cloud adoption.
We also focus on IRR is an important metric for understanding our business since attracts the annualized cash value collected over 12 months for all our recurring contracts irrespective of whether it is a maintenance contract a ratable cloud contract or a self managed term based subscription license.
<unk> expansion is a function of upsell cross sell and our large installed base of our sales to net new logos.
For the third quarter total <unk> increased 17% year over year to $1 3 billion subscription AOR increased 36% year over year to $735 7 million and represented 57% of total area.
Almost eight percentage points from a year ago and up two percentage points sequentially. This is a healthy growth rate for three quarters of $1 billion subscription business.
Cloud <unk> growth accelerated to 44% year over year to $287 2 million versus 39% year over year growth last quarter cloud <unk> now represents 39% of total subscription IRR up two percentage points from a year ago and up one percentage point sequentially, we intend to continue emphasizing.
Cloud in favor of South advantaged, new ASR bookings to drive more overall cloud mix over time.
As enterprise has extended their data management platform to the cloud. We believe we are well positioned to capitalize on the secular trend of cloud migration.
Lastly, maintenance AOR declined as expected, 1% year over year to $551 7 billion and represented 43% of total IRR. The decline is directly related to the fact that we have significantly reduced our perpetual license sales by design to $44 $6 million on a TTM basis spending Q2.
<unk> 2021, compared to $94 3 million a year ago, we're past peak maintenance <unk> as we have completed the shift to a recurring revenue model.
Another important metric of customer success. This is subscription net retention rate for subscription and in.
In Q3 subscription <unk> was 116% compared to 113% a year ago.
This improvement was driven by strong renewals and up sell across our expanded subscription offerings on the IBM Z platform, we've seen quarterly fluctuations and subscription in the past that we expect the fluctuation to continue due in part to the timing of large initial deal sizes expanding of the first year and the transition of our cloud business to usage.
Based billing notwithstanding that we are operationally focused on driving subscription MLR above 120% is a longer term goal.
Before moving to our profitability metrics I would like to point out that I'll be discussing non-GAAP results going forward unless otherwise stated Q3 gross margin was 82, 9% and consistent with our long term model between 82% to 84% operating income was 94 7 million, resulting in an operating margin of 26 two.
2% compared to 36% a year ago.
Year over year change is largely driven by the fact, we accelerated our investments in all functional areas to capture the significant momentum we're seeing in the market and we had increased expenses heading into our IPO.
Rounding out our profitability metrics adjusted EBITDA was $100 9 million net income was $57 1 million and net income per diluted share was 23 based.
Based on $249 3 million diluted shares outstanding the basic share count for Q3 was 244 7 million shares.
Turning to the balance sheet as of September 32021, we have cash and cash equivalents of $417 billion with another $34 8 million of short term investments.
After net proceeds from the IPO and the flux or size of the group ratio, we raised $915 $7 million net debt was used to pay down debt versus a net cash utilization of $30 2 million.
Pro forma basis as of September 32021, we had cash and cash equivalents of $386 8 million factoring in short term investments of $34 8 million net debt was 145 billion and with a trailing 12 months adjusted EBITDA of $401 3 million. This resulted a net leverage ratio.
Of three six times.
On a pro forma basis as of September 32021. This is a deleveraging of approximately two turns versus last year and in line with targets for post IPO deleveraging that we communicated on the IPO Roadshow going forward. We believe the business will naturally delever due to our healthy cash margins and we intend to steadily reduce our debt.
Leverage ratio over the next two to three years to approximately two times.
Unlevered free cash flow after tax was $62 9 million as of September 32021, and it was $227 7 million for the nine months ending period year to date GAAP operating cash flow is $142 4 million, an increase of 60% year over year due to top line growth and working capital management.
Now before guiding for the fourth quarter and full year 2021, I would like to provide some additional color on certain financial assumptions first let me provide an update on shares outstanding as I mentioned earlier in Q3, we reported a basic and fully diluted share count of $244 7 million and $249 3 million shares.
<unk> for the fourth quarter, we expect weighted average basic and fully diluted shares outstanding of $269 million and 278 million shares respectively, taking into account the post IPO brands, we made in mid Q4.
Looking at the full year 2021, we expect ending basic shares outstanding to be 278 million shares the year end increase in share Count includes Q4 post IPO, our suite grants for our global workforce as well as the IPO and the fully exercised the green shoe.
Second let me discuss our expectations for P&L tax rates, we reported Q3 2021, non-GAAP net income at a non-GAAP tax rate of 22% and expect to use the same 22% non-GAAP tax rate in Q4 2021 as we believe this is a good approximation for full year cash taxes. We are also present.
The 2020, non-GAAP P&L with the same 22% non-GAAP tax rate next year, we are estimating a 23% non-GAAP tax rate for the fiscal year 2022, and looking at fiscal 2023 and beyond we expect a long term steady state non-GAAP tax rate of 24% which reflects.
We expect cash taxes to so based on our structure and geographic distribution of operational activity.
Third we expect a sequential step down in GAAP net income due to the previously communicated branch employee stock options post IPO and debt refinancing activities in October in terms of Q4 charges, we expect GAAP only stock comp charges of approximately $30 million onetime GAAP only fees.
$31 million of the debt refinancing and $23 million of non-GAAP expense in the other income and expense line, consisting primarily of interest expense to assist with modeling for Q4, we expect non-GAAP net income in the range of 51, 7% to $56 7 million. This.
The 22% non-GAAP tax rate and excludes refinancing and stock comp charges and we expect a GAAP net loss range of approximately 63 to 68 million in Q4.
Now taking this altra account, we are establishing guidance for the fourth quarter of 2021, ending December 31, 2021 are as follows we expect GAAP total revenues in the range of 393 million to $398 5 million, representing approximately 5% year over year growth, we expect subscription <unk> in the rate.
<unk> of $795 5 million.
Two $805 million, representing approximately 31% year over year growth.
We expect cloud <unk> in the range of $314 five to $319 5 million, representing approximately 40% year over year growth and we expect non-GAAP operating income in the range of $90 million to $95 million.
Taking into account the over performance in Q3 and flowing through to the end of the year. The guidance for Q4 assumes a modest increase in our full year expectations for subscription IRR total IRR and GAAP revenue.
This translates into the following full year 2021 guidance assumptions, we expect GAAP total revenues in the range of $1 $438 million to $1 billion of $435 8 million, representing approximately 8% year over year growth.
We expect subscription <unk>, the range of $795 $5 million to $805 million, representing approximately 31% year over year growth. We expect cloud there are in the range of $314 5 billion to $319 5 million, representing approximately 40% year over year growth, we expect non-GAAP operating income in the range of three.
<unk> hundred 47, five to $352 5 million and we expect Unlevered free cash flow after tax in the range of $288 seven to $2 $98 7 million.
Please note that Q4 revenue and non-GAAP operating income part be dependent upon the mix of Q4, <unk> additions of cloud versus salt managed a lower relative mix on new self manage will lead to lower GAAP revenue and operating income.
In closing our strong third quarter results underscore our ability to execute against a large addressable market. We're excited to now be operating as a public company as we focus on building long term success for our customers strategic opportunities for our partners long term value for our shareholders and making informatica a great place to work for our global employees.
With that Amit and I are ready to take your questions.
Thank you.
If you would like to ask a question. Please press star.
<unk> fleet by one and your telephone keypad.
Have you changed your mind, please questions Jos Filippo.
We're preparing to ask your questions. Please ensure your oxide is on mute.
Our first question comes from the line of cash Ron Jon from Goldman Sachs. Please proceed.
Hi, good morning, and congratulations on the first quarter as a public company in this go round and nice to see that transition of the business model I had a question for you Amit when you look at the quarter are there good tangible proof points for customers that are moving their data warehouses to the cloud because I think the perception is that there is.
A significant amount of on Prem technology, but if you could just disabuse that perception that talk to proof points in the quarter and also your broader view.
As to how we should be looking at <unk> as it pertains to data warehouses move to the cloud and how specifically is informatica positioned for that opportunity and then secondly, if you do have the time the maintenance installed base.
It's a wonderful asset for the company how should we be thinking about how are you good.
Find ways to monetize that installed base and help those customers embark on a cloud journey. So you could achieve a lift to your subscription revenue is longer term. Thank you so much.
Thanks, Kash restock to you again.
So if I take the first question first of all.
All of the if you think about the modern data warehouses and a modern DWP.
All of our new products, which is 85% of the subscription AD hoc is all tied to the new workloads that are happening in the cloud, whether it's snowflake, whether it's big query whether it's.
On azure or whether it's direct share none of that is tied to any legacy Nols. The legacy data warehouse adapt was our legacy product power sector, so pretty much 100% of our new products on IV Mci cash towards that so there's none of that capacity and legacy.
Just one thing to clarify.
And in that obviously states not only in new workloads, which is what pretty much 100% of the growth was in the last couple of years.
Now stocks that judging from migration, which is what we talked about with these targets two quarters ago.
Very much in its infancy, and I think to your question look I think we've done a great job first of all making sure we.
Decorating.
We make sure that it's heavily automated I talked about 90% automation and make sure that as the risk profile of our customer has reduced time to migrations. So on and so forth. So the customers can because these are.
Creation of workloads that customers are moving.
So in that context, obviously, the up and making sure as we're working with the Hyperscale.
As well as Snowflake I gave you. The example of that pharmaceutical company that we move to Snowflake data cloud.
Our cloud data integration offering at the same time moving away from the legacy data warehouse and our legacy power Center that I think is in its infancy, and I think cash we're going to move everything to reduce the risk for our customers, but at the same time, we meet the customer where they are.
I continue to see accelerated momentum over there, but that's kind of a clean and medium to long term opportunity as a second with in a glide path to make sure that estimate.
Because it's not a AD hoc analytical workloads to operational workflow. So once again I think in the context of all of the work that we do with IBM Z and a new offering thats pretty much only tied to the nextgen data warehouses of Snowflake <unk> Macquarie Azure or AWS, none of that is tied to anything cases.
Great to clarify that thank you.
<unk> installed base and programs, where you could.
You could offer incentives for your customers to move to the subscription business model not to mention the cloud it's Bob Thank you.
Additional.
Additional questions.
Apologies Kash your line is now me Ted.
Okay.
Okay.
I'll ask a follow up question. Please press star one.
Our next question comes from the line of Mark Murphy from J P. Morgan Mark. Please proceed.
Yes, Thank you very much and I'll add my congrats on a great performance Amit first of all wondering if you could update us on the effectiveness of your AI and machine learning capabilities.
Which are embedded into your Clair product I'm wondering about the amount of automation that can handle right off the bat.
And how important is that as a differentiator for Informatica. When you are in competitive sales cycles recently.
Thanks for the question, Michael if youre doing well.
First of all I think a couple of dimensions. When we look I think as I mentioned, even during the roadshow. We conceived of many years of all women I think nobody even part of what <unk> could be the winner beta management, it's a huge differentiator for US I mean first of all I think again to levels that plan is our embedded AI technology and our platform embedded in every product in it.
Consulting differentiation upon for automation and intelligence and you know when I talked about.
Two different examples, but the castle asking the question about maintenance when we talk about 90% automation of migrating the traditional on Prem workloads to cloud that automation council, because classical agenda understands the metadata and understands all the complex business logic that sticking and which to be honest is the packaging part.
<unk>.
Our reported EBIT to keep opening when <unk> wanted to put in 5000 mapping example, I gave of a customer thats willing to the cloud and automates that migration to the cloud. So that's tremendous amount of automation tremendous amount of reducing the risk and so thats. One example.
On the other hand, but I gave you. The example of the customer example, if you look at what I've talked about whether it was <unk>.
Cvs health or whether it was prudential.
When we think about producing potential errors backing the origin is when you look at the rules based team and when it gets to what it was $85 90, or sometimes even less at 80% with can get able to get to 99% over there. So that's the that's.
That's the ability for plasma products scale across an enterprise and with massive amounts of intelligence to bottleneck Festival track things.
Fix it in the context of that particular use case.
That's the kind of key in and with what we see and when you see when I talk about the <unk> platform and a $23.
Trillium cloud transactions per month running all of them are basically get latest booking at a processing has been customers get better executed any engine. So those are the example that we see so it becomes a huge differentiator for us.
Our next stop customer deals.
Okay I see.
As a quick follow up for maybe for Eric and possibly Amit as well.
When we when we observed this hyper growth that you have in your cloud IRR and that also accelerated.
Curious to what extent do you see signs of the major size, such as Deloitte and Accenture are increasingly recommending and dramatic as part of their own standard digital transformation package or possibly advising that companies should be executing on a data transformation.
As a part of the digital transformation.
And kind of automatically calling in from Attica into those kinds of discussions is there much pull through there.
Yeah. So <unk>, let me add color on that one first of all as I mentioned before.
All of the key larger sizes have dedicated practices on informatica that utilities are tens of thousands of developers.
They have obviously added which obviously on all of our new technology and all of them have a nextgen reference architecture in which the IBM Z platform at its core confidence are part of that reference architecture agonistic of the extension to the Lloyd's which are obviously very very close strategic partners of ours. That's what it is but again talking to customers about that.
Data and digital transformation and they're having a strategic dialogue, we are part of that business and technical reference architecture.
And then obviously the other <unk> that the relationship because of the deep is as I mentioned EBIT. During the road show is that trifecta of us with a system integrator and hyper scanner large transformation initiatives customers want us to go together that reduces that risk that increases adapt reduces the time to value.
And Thats what also the <unk>.
<unk>.
The Hyperscale is at our deeper partnership as we go in together.
Understood. Thank you very much.
Sure.
Our next question comes from the line of Alex Zukin from Wolfe Research. Please proceed.
Okay.
Hey, Thank you guys for that congrats on.
Great IPO in first quarter out of the box.
Maybe the first question you mentioned <unk> is being driven by broader product adoption across the entire <unk> platform and you saw that improved 20 basis points in the quarter. Your goal is to get that north of 120% can you talk to maybe which products are resonating the most with customers and how you expect platform adoption to trend over.
The next few years.
Let me take the first one.
And most of the growth that <unk> seen I think.
Good to talk to you first of all is the platform for US via key journey to talk about our analytics business 360, and data governance and privacy.
And as I've mentioned, even in the hotel customers getting designed in any journey and expand in that journey as they expand their use cases are expanding across Germany and pretty much every enterprise customers all of those three zones. So if you are moving out analytics to the cloud SaaS. This example, I gave you the large pharmaceutical company with us and Snowflake data.
Typically with one five months on some ability to do data governance on top of where net profit enterprise. So those become very natural so on expansion opportunities come from both increased use case of a particular use case, a customer stopped set limits on the <unk> or anything else, arguing from a use case to another without a dividend our goal is to help that.
Customers adopt the platform getting business value from it across multiple products of us. It is in that context also that we introduced consumption based pricing this year to reduce the barriers for the customers to adopt any of the technology of the platform. So that's how we see it given the customer examples I gave you a glass of oil.
We were a business with a key customer of last year, and the expanding into monetization and analytics this year.
How it goes.
I think I'd want to be a growth of NR.
Other thing I would point to is that its this is kind of broad based progress and so we highlight our $1 billion plus subscription they are our customers as a metric. We've also introduced 100 care better subscription they are our customers as a metric is just to punctuate. The fact that we have.
Our broad base of participation.
The other thing that I would point to is just the overall average subscription they are costly and stuck with higher installed base of 30, plus subscription customers. That's over 200, K 200, 8-K to be more precise it's basically doubled over the last several years. So it gives you an indication of that.
Ability of the items C platform damage point, we can land in one particular use case, but invariably people will get into data quality data governance and most everyone is now excited about the data catalog itself. So.
This advantage of having a best of breed products on one single integrated by BMC platform.
That's very helpful. And then I guess you touched on the consumption based pricing.
Talk to us a little bit about.
How.
How relevant is that motion today within your customer base, how fast do you expect that to scale, maybe which products or which skews.
Do you find that having the most residents on with customers.
Yes, and honestly that's a good question.
And so early days, we started this year.
From <unk> I think.
One of the big differentiator for us as we've become.
<unk> is coming back we are very.
Good.
We trained we try things we learned that we keep improving so philosophy and pricing is something to be starting this year a great early traction first of all it's across our platform against an effect I think over to say its agreement with a customer we all understand that they can begin from anything in modeling.
The other one is important for us is that it reduces the barriers to consume any technology in the platform.
So that customer you begin to some nominal and get some data from SaaS apps in July Vita Lake is an example of what I did diagnostics do you want to use and for that I use your modeling capabilities, but in all <unk> I wanted to go into any stock and are suddenly see like I said, good operational use case I wondered in some quantity.
By the way I did back by hang onto technology brought some more data from databases I want to use some database.
Integration of data integration capability, all suddenly I wanted to put some governance on top of it our catalog completely the NUCYNTA Magnus to use different technologies and of course drives more consumption because we have much more to offer on the platform for customers to use so great early traction we're learning from it and fully expect that to continue as can grow in the coming years.
So we've talked a lot about goodbye, so far great learning from our customers and good adoption.
Perfect. Thank you guys so much.
We now have a question from Andrew Nowinski from Wells Fargo. Please proceed.
Great. Thank you for taking the questions. So I wanted to start with a question on your announcement with Snowflake, where customers can use informatica to make the conversion to cloud trailing 12 times 12 times faster.
Snowflake, bringing informatica into deals where the customer is already considering snowflake, but since you make it easier to convert to the cloud based solution.
But also chooses Informatica I'm just wondering if that relationship is more of a pull versus push.
Or snowflake is pulling informatic into deals.
Okay.
We have a very deep strategic partnership with Snowflake.
<unk> added a couple of weeks ago, and I think in fact, we had a huge customer event, where their chief product Officer, Christian and Nike product officer initiated a joint Webinars for our joint customers.
The large pharmaceutical company as I talked about was showcased on that Ben.
I have two types of partners with them very strong lead product technical partnership and of course, a very strong market partnership and it's a <unk>.
<unk> won with jointly going into customers the slower what's happening in the field as we speak now.
<unk> customers Barnett at scale, and we see great traction with MVC protection and deduct. It is a very strong mutual product and order market collaborative partnership between the two companies.
And as I think the other let I'll add is that I keep saying I think the question about before and a lot of cases, it becomes a drift backup system integrators have practices on us and their practices on snowflake and they want to work with both of US because March is the transformation initiatives.
And mitigated while modernizing the data warehouse monetizing the data management infrastructure and larger system that processes that outage, so that makes it even more deeper.
<unk> four for us.
Okay. Thank you Amit.
Maybe just another question as it relates to probably more to competition.
I think you noted this morning that you added $23 three trillion transactions per month or the capability to process that many up from about $13 six last year.
As more customers join the platform and add more data to the platform.
I guess, we should assume that goes up every quarter.
But I guess the question is really is that does that metric important to prospective customers when they evaluate informatica as a potential solution or are they are there other factors that theyre looking at when they compare informatica to other competitors.
Multiple factors, obviously, the that metric and a good indicator of the usage of our platform.
Would we go understand because that's the scale at which it's not it's not going to be a semi automatic as customers are adopting and using big believers in customer success, and making sure customers get the styling artist technical value.
When customers evaluate that obviously that evaluating us on eight this is the only at scale cloud data management.
AI and have the full impact of all the offering the need for data management, which offer best of breed awesome I talked about the past much longer.
Product innovation, that's the one thing secondly is our huge focus on customer success.
We've we've not just we just don't want to focus on that clinical value.
<unk> 90 accretion that's a big.
Shift at the company that we made in the last many years and the partners partnerships I think ethanol that before deep partnerships with the Hyperscale SaaS because customers want these are complex <unk> hundred one.
And they wanted to make sure we can get to that cluster lastly, new planning customers, adding a multi cloud.
David will be and that is getting more and more complex over them. They expect us wanted us to be the vendor neutral player and we haven't been speculation that they can manage this complex environment, that's what video capsule.
Got it thank you.
Okay.
Our next question comes from <unk>.
Key Jeff from Bank of America. Please proceed.
Oh, Hey, Matt Harris, Congrats on the journey back to the public markets.
Nice results here, just a couple of questions from me.
First one I recently saw a press release about this cloud data marketplace solution announcement.
So interesting it seem.
Like it helps to unlock customer data even further so so so a couple of questions on it.
One.
How does <unk> and declare AI engine help carry what data appears in that marketplace and then number two.
Or was this a customer driven product innovation and then I guess lastly on on the cloud data marketplace.
Should we be thinking about pricing or maybe an <unk> uplift potential there.
So it's a great innovation from the team Tomorrow I think when we talked about even in the north shore that we want to make sure we can help democratize data.
One of the biggest challenges we heard from large enterprises that COVID-19.
With regards to modest data yesterday, you can make a good business decision today. So we wanted to democratize data, but the challenge what enterprises are democratizing gains that you Couldnt nicotinamide west so our boiler theme there.
We've been working on that for the past many years actually I see a question actually for both of these customer driven as well as us.
And then so market is division as a simple economic marketplace, you would've marketplace and basically you can get access to any data across an enterprise and in the UI and UX that you see it as we need consumer access its main par a user like you and I have told you. We can go down it just literally shop for data and not shopping card you can dragon.
Dropdown dynamic, but the beauty is under $1 six all kinds of clear and all kinds of governance, because it knows what data access provision or not and if youre not getting asked for that access and community outreach operation worked through all of that completely automating and authentic experience is extremely simplify.
So to us in fact, I was talking to a large bank.
Last week and there have been literally this is the biggest theme once they have them.
Looking forward to adopting this one as soon as possible. So these are capabilities that are extensions of our overall data governance and privacy.
Hot mindset, because that's another last mind doing that covered we are provisioning data. So expect more growth to come from these new capability I mean I go back again, we have 44 billion Tam across the seven product market categories. When you keep adding more capability tremendous udo continue to drive our growth to market the abilities of our platform.
And if you talk about AI last question to you under the covers what we have today is understanding the social graph of data like a Facebook or Linkedin understanding the full relationship of the AWS coming from critical in understanding.
So getting our beta is sitting in different databases order differently. So when you ask for customer data volumes type anything in English using natural language processing. It can go back and convert that into the technical languages. All of those things gets amplified in a very <unk> UI for the marketplace.
Got it got it thanks Amit.
And just one follow up here for either Eric or Matt you mentioned longer term and our our goal of 120% just trying to understand maybe I guess, how should we think about the newer consumption base.
Pricing model playing out the driver towards that target. Thank you so much.
Right, yes, so we're at a 116% today.
And under the covers.
Self managed we have this interesting product category called das or data as a service, which is oftentimes used just for discrete projects and so as much as wed like to renew it and definitely it tends to have a kind of a.
12, or 24 months discrete project base term and that represents $50 million to $60 million of total IRR. If we extract as overall subscription mix and then re compute NRI, we're already at approximately 120% and so we know that our plans call for adding.
More net new Cloud award at New self managed in areas other than that and so I think naturally over time, just given the characteristics of the higher <unk> rates on everything other than that we'll get to that 120.
Got it thanks, Eric Thanks, so much.
As a reminder, please limit yourself to one question next.
Next question comes from the line of call Keith Scott from UBS. Carl Please go ahead.
Thanks, a lot Hey, Eric a question on your subscription <unk> guide for <unk> 801 at the high end that implies sequential growth.
Growth of $65 million.
That's in fact exactly what you did in <unk> last year. Despite the greater scale. So at first blush that strikes me as a bit.
Conservative so perhaps you could just talk through that and maybe there are some factors impacting that compare that you'd like to highlight thanks a lot.
Yes, I think that look we're taking a kind of a realistic measured view, we're feeling good about the quarter, we feel like we have a better overall product portfolio.
The year over year.
And I would say that.
Fact that it's sequentially about the same as last year is read too much into that one way or the other.
But we're looking for is to increase the mix cloud relative to the overall subscription <unk> at and I think we've been making progress there.
One point of mix sequentially, two percentage points year over year, and so we look as much to the cloud competition inside of a subscription IRR as the overall kind of guide for total subscription IRR.
Yeah, Okay, that's clear I'll keep it to one question. Thanks a lot.
Yes.
Our next question comes from the line of Patrick Colville from Deutsche Bank. Patrick. Please go ahead.
Hey, Matt. Thank you for squeezing me in I, just wanted to double click on the cloud AOR growth coming but.
No doubt to agree it was appropriate to Scarborough, sorry, this quarter, 44% growth is pretty impressive.
If I am right, it's a five point acceleration sequentially on growth.
Mid teens year over year, just kind of understand versus last quarter or putting more positively versus a year ago, what isn't that SaaS line.
Accordingly, the acceleration in 2021.
The product suite broader.
Then you have a year ago.
If the customer demand.
Yes.
Now, whereas a year ago. They want that just help me understand that.
Acceleration of dynamic thank you.
Yes, let me take that all.
All of the above as you mentioned, so clearly I think as we even mentioned it in the chalk.
We have been aggressively scaling our SaaS offerings on the IBM Z platform. So obviously majority of back end more offerings on the SaaS platform SaaS version of ICSC, and then customer demand.
We serve enterprise customers they are cloud first.
I think you covered it all for hybrid and so customers are also getting more and more.
Unless he went to the cloud all of that is playing into that growth number and going forward. That's what we're looking at basically investing modern cloud we absolutely.
Allow me to first our audit measures, but at the same time, obviously customers are going to meet the 90 million estimate is which is.
So we're going to be cloud first but health customers and I think that'll just talking to a large bank last weekend that I can't we want to do leasing in the cloud they're going to be hybrid so make sure that we can get it into hybrid way, we're just not going to be leading.
If I want a catalog everything I'm not going to gaslog in the public cloud Tomorrow I'll get that Olivia at a time and that's what we see in our business cloud first with.
With hybrid workloads support, but you see accelerating momentum what's Opex, obviously, everyone has got a clean modern model product innovation center towards occupancy all announcements all of those things I think we're just driving more conviction and accelerated option.
Offerings for their customers.
Excellent. Thank you so much for taking my question.
Okay.
Our next question comes from Matt Hedberg from RBC capital markets. Please go ahead.
Hey, guys. Thanks for taking my question and I'll offer my congrats on the IPO as well.
There's been some questions on the maintenance program here and obviously it seems like one of the one of your biggest sort of call options, let's say converting maintenance to cloud.
Do you foresee a time in the future, where you might get more aggressive with incentives or or or.
Investor education, or whatever it might be to sort of drive faster conversion of that maintenance base.
Let me take that.
Keeping tenants.
So we are absolutely going.
<unk> has been our customers move to the cloud and in that context, <unk> maintenance and cloud.
Yes.
Having said that I think the biggest thing I remind everybody that the virtual is that these are operationally markets. Some of these learning and keep a coupon that is an example.
Some of you at <unk>.
These are really running a proper business on that so that our customers things that might be being back <unk>.
We wanted to make sure that we continue to make sure our bag, we can de risk and reduced the time by automating cell migration.
Great out there in the last few quarters, and we have not only seen great traction in selling but also traction in implementing making sure. We learn from that we're going to work with GSI is like we've talked a lot about to then accelerate that program.
The announcement that has not been working with the Hyperscale is to activate those that those so absolutely from our side. Our goal is to accelerate the adoption of cloud from maintenance, having said that I think it is deep and it can I have been thoughtful and cautious about it because we want to make sure that we learn and we help the customers get them.
The embedded business, so making mistake on this one we have an idled focus has opened up continue to find every lever to accelerate back down.
Maybe that is maybe a gentleman expressly but there are no speed speed limit dining at some point.
I would just add two things one what kind of incentives can we create is really to cloud based product innovation. So every quarter. There's more features that makes it that much more attractive for our customer is consider that modernization.
Opportunity itself. The other thing too is that in terms of our long range planning since we can't predict the rate at which customers will want to volunteer we're engaged with US we would take an eight.
Prudent view, what the conversion ratio is over time, one of the things we've reported as the conversion ratio one eight acts in other words to dollar maintenance converts to a $1 80, a cloud and our internal modeling we're closer to a $1 three X assumption, which is pretty close to net margin neutrality.
Because if we can't forecast that right accurate, we don't want to be surprised in terms of margin impact and so that's the way. We're looking at this internally over the next three to five years.
Thanks, a lot guys.
Okay.
Next question comes from the line of Tyler Radke from Citi. Please proceed.
Okay.
Hey, Thank you. Good morning, Thanks for taking my question I wanted to just ask you about the hiring environment. Obviously, there's a lot of headlines just around the challenges out there it looks like operating expenses grew pretty nicely here in the quarter.
Curious if that if that's a good barometer for head count growth and just what youre seeing on the hiring environment. Thank you.
I think environment and if you can touch on the.
The economic impact.
We are hiring across the board we're growing in every function across the company and I think youll get it because all of those environments are integrated.
Ill take enough.
Innovative market beyond Monaco Caribbean. So I think we are.
Obviously, you've seen participating in of any aggressive hiring in Latin for sure.
I think in some as we've been able to manage and execute well because we are quite well.
First across the globe.
For example, take engineering, we have a global centers of excellence.
None of them are across the globe.
Southern Europe or India.
India, and so we've been able to manage it but yes. It is definitely ICU and I talked to my peers across different companies everybody is looking at that so far we've been able to manage it quite well and keep our fingers crossed.
Makes sense, if we keep executing and growing across the board.
Yes, I'd say that the one kind of an improvement or opportunity. We now have as a public company is twofold, we touched upon the fact that we've done.
Broad based equity grants.
Cros.
Almost the entire organization at a 100% but.
Pretty close to complete and so that's something we have available to us not that we didn't have previously as a private company. We've also rolled out <unk>, which again is again, a big big positive change for us So I think we've.
Quarter over quarter, we've improved our posture as far as that goes not withstanding that.
In tech.
There's a lot of competition for high grade talent.
Yeah.
We now have a follow up question from cash.
Ron Goldman Sachs. Please proceed.
My questions were answered. Thank you very much I'll say at the time.
We currently have no further questions I'll now hand back over to Amit for any closing remarks.
Thank you.
Thank you everyone for your time today.
Im pleased with Amazon as the team delivered and believe we are very well positioned for future growth, but off to a great start post IPO and a huge thank you to our team here, our customers and our shareholders for their support.
Good day, everyone. Thank you again.
Okay.
This concludes today's call. Thank you for joining us.