Informatica, an enterprise cloud data management leader, announced financial results for its third quarter 2023, ended September 30, 2023.
"Q3 represented another strong step forward as we accelerate our cloud-only, consumption-driven strategy. Our team delivered another quarter exceeding guidance for the top and bottom line as we help customers increase productivity, drive efficiency, and become AI-led, data-driven companies,” said Amit Walia, Chief Executive Officer at Informatica. “We continue to accelerate our innovation-led cloud transformation to make IDMC, powered by our AI engine CLAIRE, the data management platform of choice for enterprises across the globe as they build their modern data architecture to drive their AI-driven digital transformation.”
Third Quarter 2023 Financial Highlights:
- GAAP Total Revenues increased 10% year-over-year to $408.6 million. Third quarter total revenues included a positive impact of approximately $5.0 million from foreign currency exchange rates (FX) year-over-year.
- GAAP Subscription Revenues increased 22% year-over-year to $261.8 million.
- Total ARR increased 7% year-over-year to $1.58 billion. Third quarter total ARR included a negative impact of approximately $1.4 million from FX year-over-year.
- GAAP Operating Income of $32.1 million and Non-GAAP Operating Income of $128.1 million.
- GAAP Operating Cash Flow of $58.7 million.
- Adjusted Unlevered Free Cash Flow (after-tax) of $96.1 million. Cash paid for interest of $38.0 million.
A reconciliation of GAAP to non-GAAP financial measures has been provided in the tables included in this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”
Third Quarter 2023 Business Highlights:
- Processed 71.3 trillion cloud transactions per month for the quarter ended September 30, 2023, compared to 44.5 trillion cloud transactions per month in the same quarter last year, an increase of 60% year-over-year.
- Reported 224 customers that spend more than $1 million in subscription ARR at the end of September 30, 2023, an increase of 17% year-over-year.
- Reported 1,978 customers that spend more than $100,000 in subscription ARR at the end of September 30, 2023, an increase of 7% year-over-year.
- Achieved a Cloud Subscription net retention rate (NRR) of 118% at the end of September 30, 2023.
Product Innovation:
- Announced CLAIRE GPT, a generative AI-powered capability that will deliver the advancements of a natural language-based interface to Informatica’s Intelligent Data Management Cloud (IDMC), is available in private preview.
- Expanded partnership with Oracle: launched Oracle Cloud (OCI) Point of Delivery (POD) in North America to scale our market reach; expanded data governance capabilities with native scanners to collect metadata and profile data for insights on Oracle Autonomous Data and Oracle GoldenGate; and named launch partner for Private Offers on Oracle Cloud Marketplace.
- Expanded partnership with Google: launched a new solution combining SaaS Master Data Management on Google Cloud with Google Cloud's customer data platform based on Google BiqQuery.
Restructuring Plan:
- Today, the Company announced a plan to reduce its workforce by approximately 545 employees, representing 10% of the Company’s current global workforce, and to reduce its global real estate footprint (the “November Plan”). The November Plan is intended to further streamline the Company’s cost structure as a direct result of its cloud-only, consumption-driven (“CoCd”) strategy announced in January 2023. The increased focus and simplicity of the CoCd strategy enables the Company to deliver continued AI-powered product innovation and strong Cloud Subscription ARR growth with a lower expense base and higher operating margins. The Company estimates that it will incur non-recurring charges of approximately $35 million to $45 million in connection with the November Plan, primarily related to cash expenditures for employee transition, notice period and severance payments, employee benefits, real estate-related charges, and other costs. The Company expects that the majority of these charges will be incurred by the end of the first quarter of 2024 and that the implementation of the November Plan will be substantially complete by the end of the third quarter of 2024. The Company estimates the cost savings benefit of these actions to be approximately $84 million on a GAAP basis or approximately $70 million on a non-GAAP basis in fiscal 2024. Potential position eliminations in each country are subject to local law and consultation requirements, which may extend this process beyond the first quarter of 2024 in limited cases. The charges that the Company expects to incur are subject to a number of assumptions, including local law requirements in various jurisdictions, and actual expenses may differ materially from such estimates.
- Added Walia, "In January, we transitioned to a cloud-only, consumption-driven strategy, which is the final leg of our multi-year plan to drive profitable growth. We’ve already seen significant benefits of these initiatives undertaken throughout this year, including the strong momentum and execution reflected in today’s earnings results. Our next phase of growth allows us to further streamline our global cost structure without reducing our growth expectations. We intend to finish our transition to a cloud-only business model while maintaining sales capacity, best-in-class product innovation and customer satisfaction. We have strong momentum heading into the fourth quarter and look forward to sharing more about our strategy at Investor Day.”
Ithaca L.P. Update:
- As disclosed in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, Ithaca L.P. (“Ithaca”), a limited partnership affiliated with the funds advised by Permira Advisors LLC, had an obligation to distribute its Class A Common Stock to its limited partners as soon as practicable after October 29, 2023, the two-year anniversary of the closing of the Company’s initial public offering. We have been advised that on or about November 3, 2023, Ithaca plans to distribute approximately 8.6 million shares of the Company’s Class A Common Stock to four of its limited partners. Following this distribution, approximately 51.4 million shares of Class A Common Stock will continue to be held in Ithaca for approximately one year, unless otherwise sold by Ithaca or distributed to Ithaca’s limited partners prior to such time. Permira will continue to retain voting and investment power over the shares held by Ithaca. The Company’s Class A Common Stock to be distributed by Ithaca to its limited partners will be available for immediate resale in the public market at the discretion of the applicable limited partner.
Share Repurchase Authorization:
- On October 31, 2023, the Company's Board of Directors (the "Board") approved a new share repurchase authorization which enables the Company to repurchase up to $200 million of its Class A Common Stock through privately-negotiated purchases with individual holders or in the open market. A committee of the Board will determine the timing, amount and terms of any repurchase.
Upcoming Events:
- On December 5, 2023, the Company will host its 2023 Investor Day in San Francisco at 1:00 p.m. PT. A live webcast and replay will be available on the Company's Investor Relations website.
- On December 7, 2023, the Company is scheduled to participate in a fireside discussion at the Barclays Global Technology Conference at 2:30 p.m. PT. A live webcast and replay will be available on the Company's Investor Relations website.
Fourth Quarter and Full-Year 2023 Financial Outlook
The Company provides the financial guidance below based on current market conditions and expectations and it is subject to various important cautionary factors described below. Guidance includes the impact from macroeconomic conditions and expected foreign exchange headwinds versus the prior year comparable periods.
Based on information available as of November 1, 2023, guidance for the full-year 2023 is as follows:
Full-Year 2023 Ending December 31, 2023:
- GAAP Total Revenues are expected to be in the range of $1,570 million to $1,590 million, representing approximately 5% year-over-year growth at the midpoint of the range.
- Total ARR is expected to be in the range of $1,585 million to $1,615 million, representing approximately 5% year-over-year growth at the midpoint of the range.
- Subscription ARR is expected to be in the range of $1,098 million to $1,118 million, representing approximately 11% year-over-year growth at the midpoint of the range.
- Cloud Subscription ARR is expected to be in the range of $604 million to $614 million, representing approximately 35% year-over-year growth at the midpoint of the range.
- Raising Non-GAAP Operating Income from $420 million to $440 million to a range of $430 million to $450 million, representing approximately 25% year-over-year growth at the midpoint of the range.
- Raising Adjusted Unlevered Free Cash Flow (after-tax) from $370 million to $390 million to a range of $410 million to $430 million, representing approximately 46% year-over-year growth at the midpoint of the range.
Based on information available as of November 1, 2023, guidance for the fourth quarter 2023 is as follows:
Fourth Quarter 2023 Ending December 31, 2023:
- GAAP Total Revenues are expected to be in the range of $420 million to $440 million, representing approximately 8% year-over-year growth at the midpoint of the range.
- Subscription ARR is expected to be in the range of $1,098 million to $1,118 million, representing approximately 11% year-over-year growth at the midpoint of the range.
- Cloud Subscription ARR is expected to be in the range of $604 million to $614 million, representing approximately 35% year-over-year growth at the midpoint of the range.
- Non-GAAP Operating Income is expected to be in the range of $130 million to $150 million, representing approximately 23% year-over-year growth at the midpoint of the range.
Webcast and Conference Call
A conference call to discuss Informatica’s third quarter 2023 financial results and financial outlook for the fourth quarter and full-year 2023 is scheduled for 2:00 p.m. Pacific Time today. To participate, please dial 1-833-470-1428 from the U.S. or 1-404-975-4839 from international locations. The conference passcode is 513620. A live webcast of the conference call will be available on the Investor Relations section of Informatica’s website at investors.informatica.com where presentation materials will also be posted prior to the conference call. A replay will be available online approximately two hours following the live call for a period of 30 days.
