Earnings Transcript for INFA - Q4 Fiscal Year 2023

Operator: Good afternoon, ladies and gentlemen. Thank you for joining today's Informatica Fourth Quarter 2023 Earnings Conference Call. My name is Tia, and I will be your moderator for today's call. [Operator Instructions] It is now my pleasure to introduce your host, Victoria Hyde-Dunn, Vice President of Investor Relations. Please proceed.

Victoria Hyde-Dunn: Thank you. Good afternoon and thank you for joining Informatica's Fourth Quarter and Full Year 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'll 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 10-Q and 10-K filings 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 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 on our slide presentation available on Informatica's Investor Relations website. It is my pleasure to turn the call over to Amit.

Amit Walia: Well, thank you, Victoria, and thank you, everyone, for joining us today. I will start today's call by summarizing 3 key points. First, Informatica closed an outstanding fiscal 2023, outperforming all the top and bottom line guidance metrics for the fourth quarter and the full year. This was driven by a relentless focus on executing our cloud-only consumption-driven strategy, and strong customer momentum. These results are a testament to the power of AI-powered IDMC platform and category leadership in data management as a mission-critical component of the modern data stack. Second, at our December Investor Day, we shared Informatica's innovation journey to deliver the best data management product on the industry's only AI-powered data management platform in a multi-vendor, multi-cloud, hybrid approach. Last year, we executed very strongly against that strategy, and I believe we are entering Informatica most exciting year ahead. And third, our cloud-only consumption-driven strategy has multiple growth engines. Ongoing digital transformation, on-premise migration to Cloud and Gen-AI to fuel cloud growth and drive long-term value creation. Now let's discuss these topics in more detail. Turning to results. We exceeded the high end of all our guidance metrics. In the fourth quarter, Cloud subscription ARR grew 37% year-over-year to $617 million. Subscription ARR increased 14% year-over-year to $1.1 billion and total ARR rose 7% year-over-year to $1.6 billion. For the full year, total revenue grew 6% year-over-year to $1.6 billion. Non-GAAP operating income increased 32% year-over-year to $462 million and adjusted unlevered free cash flow after tax rose 56% year-over-year to $451 million. We are pleased to have delivered a net debt leverage ratio of less than 2x, which is ahead of our IPO commitment by one full year. We also achieved 2 new annual milestones. We grew subscription revenues to $1 billion and cloud subscription revenue to $0.5 billion. At our December Investor Day, we shared early thoughts on 2024 guidance. We are raising full year non-GAAP operating income margin expectations and reaffirming all remaining metrics including that we should expect cloud subscription ARR growth of 35% for the full year of 2024. Our level of engagement with enterprise customers is stronger than ever. Supported by our growing partner ecosystem, customer success initiatives and healthy cloud pipeline. In the full year, approximately 75% of cloud new bookings came from new cloud workloads and the expansion of existing cloud engagements. We are attracting new customers, expanding opportunities within existing customers and driving new workloads in G2K markets through our industry sales, enablement teams and partners. Customer spending more than $1 million in subscription ARR increased 17% year-over-year to 240 customers. We had a record number of customers spending more than $5 million in subscription ARR, which grew 57% year-over-year. We pride ourselves on being the Switzerland of data and have accelerated ecosystem co-selling with Microsoft Azure, AWS, GCP, Snowflake and Databricks and announced a new strategic partnership with MongoDB. We launched a Canada point of delivery on Microsoft Azure which enables access to IDMC as an Azure-native service purchase through Azure Marketplace. At Microsoft Ignite, as one of the first ISV design partners for Microsoft Fabric, we announced a new native app for Microsoft Fabric to seamlessly deliver data quality, data observability and data integration as well as multiple new connectors for Microsoft Fabric. At AWS re

Mike McLaughlin: Thank you, Amit, and good afternoon, everyone. Q4 was another solid financial quarter across the board with key growth and profitability metrics exceeding our expectations, delivering a strong close to 2023. I'll begin the review of our Q4 results by reminding everyone how to best understand Informatica's ARR and GAAP revenues. Our ARR and revenue fall into 3 major categories; cloud subscriptions, which delivered 37% ARR growth in FY '23 and self-managed subscriptions, which we no longer actively sell and are therefore gradually declining and maintenance on on-premise perpetual licenses, which is also in gradual decline. As I discussed at our December Investor Day, the trajectories of these 3 categories of ARR and revenue, that is the strong growth of our cloud business and the gradual decline of our self-managed subscriptions and maintenance are the direct result of our cloud-only strategy, and we expect more of the same in FY '24 and beyond. With that in mind, let's start with total ARR, which was $1.63 billion in Q4, an increase of 7% over the prior year. This was driven primarily by new cloud workloads, strong net expansion with existing customers and steady renewal rates. We added $109 million in net new total ARR versus the prior year. Foreign exchange negatively impacted total ARR by $7 million on a year-over-year basis. Cloud subscription ARR at the end of Q4 was $617 million, a 37% increase year-over-year and $8 million above the midpoint of our November guidance. Cloud subscription ARR now represents 38% of our total ARR, up from 30% a year ago. Foreign exchange negatively impacted cloud subscription ARR by approximately $2.3 million on a year-over-year basis. New cloud workloads, strong net expansion with existing customers and steady cloud renewal rates drove cloud subscription net new ARR of $166 million year-over-year and $67 million quarter-over-quarter. Approximately 75% of fiscal 2023's cloud net new ARR came from new cloud workloads and expansion of existing cloud engagements with the remaining 25% coming from on-premise customer migrations. Our cloud subscription net retention rate at the end user level was 119% in the fourth quarter, up 2 percentage points year-over-year and up 1 percentage point versus last quarter. As we discussed at our December Investor Day, this metric defines the customer cohort for NRR at the beginning of the year ago period at the end user customer level. If we instead define the measurement cohort at the global parent level, our Q4 NRR was 125%, up 2 percentage points year-over-year and 1% sequentially. Self-managed subscription ARR declined in the quarter as expected to $516 million, this was down 2% sequentially and down 5% year-over-year. This was a slightly slower decline than we forecast in November. Subscription ARR, which is simply the sum of cloud ARR and self-managed ARR grew by 14% year-over-year to $1.13 billion, which was $25 million above the midpoint of our November guidance. Foreign exchange negatively impacted subscription ARR by approximately $5.6 million on a year-over-year basis. We saw good growth in our average subscription ARR per customer, which reached over $298,000 in Q4, a 13% increase year-over-year. The third component of total ARR is maintenance for on-premise perpetual licenses sold in the past, which now represents about 30% of total ARR. Maintenance ARR was down approximately 6% year-over-year to $494 million, in line with expectations. As Amit discussed, the migration of our on-premise customer base to IDMC and the cloud is a large opportunity for us. The introduction of Power Center Cloud Edition in Q3 of last year has helped accelerate the volume of signed migrations of our power center maintenance space. We're also seeing momentum from our self-managed base migrating to our cloud, and our on-premise MDM customers are beginning to migrate their on-prem solutions. So as a result, we are updating our migration reporting metric to include our entire on-prem base, not just maintenance. As of the end of Q4, we have migrated 4.8% of our maintenance and self-managed ARR base to cloud, up from 3.7% last quarter. We have a life-to-date average 2

Operator: [Operator Instructions] The first question comes from the line of Matt Hedberg with RBC Capital Markets.

Matt Hedberg: Congrats on a really strong end of the year and a great outlook for '24. A lot of things to digest here. I guess maybe to start with, you made comments on growth in new cloud workload is really exciting to hear, and I feel like it's sort of powering a lot of people that you guys included. I guess I'm wondering, could you double click on that a little bit more? Where are you seeing that growth and workload in a particular customer segment? Is it digitally native customers? Is it more mainstream? Any more color on sort of, I don't know if there's any like Gen AI focus on some of the new workloads, but any additional color there would be helpful.

Amit Walia: Hi, everybody. I think we're back with you. Operator, you can go ahead and open the line to the questions.

Operator: [Operator Instructions] The first question comes from the line of Matt Hedberg with RBC Capital Markets.

Matt Hedberg: Hey, guys. I think I already asked the question, but maybe we lost you guys in that. Well done on the quarter and the guide, really good to see such a strong exit rate and a lot of opportunities in '24. A lot of things to think about on the call. You guys talked about growth in new Cloud workload, which is really good to hear. I'm wondering if you could double click on that. Like where is that coming from, is it particular verticals? Is it anything driving that comment because that's really exciting to see just from an overall industry perspective, and certainly feels like you guys are well positioned to monetize that.

Amit Walia: Matt, thanks for the question. Sorry, we lost the call and back. But look, I think here is what I think I saw as we exited the year and into the second half of the year. If we look at digital transformation is not done. And the beauty is that digital transformation transitioning to Gen AI transformation is all bleeding over. And what we are seeing is our top markets, enterprise customers have come back where they were in a lot more cut defense mode are back into while efficiency, automation, those things have not gone away, but they are basically going back into funding transformational initiatives and they all become data initiatives. So for example, and I talked about some of the customers in this call if taking out growth, how do you create customer loyalty programs? How do you think about making sure you can create better supply chain. So those transformation initiatives that I would say our view -- I would argue that when we ended last year, 2022 was somewhat on the backburner where people are a lot more on defense that come back on the offense, and we are seeing investment in those.

Matt Hedberg: Got it. That's helpful. And then the launch of Power Center Cloud in August felt like a real inflection point, I guess, I'd say, for the company in terms of really modernizing the base. And I think maybe, Mike, I don't know you pointed out that I think you said 60% of Cloud modernization deals were driven by Power Center Cloud. I'm wondering, is that an uplift to customer spend when they migrate to that? Just sort of curious on the kind of the economics of that because it feels like that's another big opportunity given your large base.

Amit Walia: Yes. So Matt, don't think of it as an uplift. The uplift has stayed consistent. Think of it just by increasing the velocity. So with Power Center Cloud edition, the time to migrate the workloads actually accelerates dramatically. And with that, also the customers can do that a lot more at their own pace, so it derisks their migration which allows more customers to enter their migration journeys with a lot less risk and a lot higher velocity. So that increases the velocity and conversions. Uplifts have stayed pretty consistent for us. So I would not look at it as uplift more as increasing the velocity and derisking that program.

Mike McLaughlin: And just to be super clear, every migration, whether it's the prior style migration that took up to 2 years in some cases, or [indiscernible] our cloud edition, which dramatically shortens that to 6 months or less. There's an uplift for every one of those migrations regardless of the sign. So we've historically seen about 2

Operator: The next question comes from the line of Brad Zelnick with Deutsche Bank.

Brad Zelnick: I'll echo my congrats for a strong finish to the year. Amit, I wouldn't ask about go-to-market. Coming out of sales kickoff. What were the key themes in the playbook for 2024 this year? And maybe specific just following Matt's question around Power Center Cloud edition, what specifically are you going to incentivize both direct sales and partners to sell that product? Because it just seems like such a tremendous opportunity to unlock and modernize the existing on-prem base?

Amit Walia: Brad, thanks for the question. I couldn't agree more. It's a great opportunity. I'll tell you the two words I used at that kick-off was focus and execution. I mean, in some ways, the pivot to cloud-only consumption driven that we started last year, as you see went very well. And this year, there is no change in strategy. We have to just kind of continue to scale, which is focus on execution. And so I think that those are the two words. I people are pretty excited, and what we've done is, first of all, on migration, Power Center Cloud edition is a tremendous accelerate. Everybody is super excited about that one, of course, as you know, we talked about the numbers in Q4, but you can imagine the pipeline build that's happening is all in the momentum of that one. We continue to incent our reps more than a normal deal for migrations because it takes a little bit of extra work. So that's always an extra incentive for our reps. And thirdly, all the hard work you've done with partners has started paying off now. Pretty much every migration deal goes to partners. We talked about our migration factory program. All of the large partners have built, by the way, migration factories within their Informatica practices to basically take these migrations and run it through their factories. And remember, for them, migration is one step to a larger end-to-end modernization journey that they can have in the practice to give them a higher multiple on that migration than a classic software project. So all of those things are basically bearing fruit right now.

Brad Zelnick: Thanks for that Amit. Maybe just as a follow-up, I want to pull on that partner thread. A lot of new and exciting and expanded partnerships you talked about. But specific to the GSIs, I think you said I think was 33% of new booking source from GSIs, I could have that wrong. Is it unreasonable to think that we could get to 50 and maybe even this year. And what kind of commitments do you have from the lower just GSIs in terms of investing in certifications and capacity building even more around Informatica? Thank you.

Amit Walia: I think first of all 31% is a very good number. It was 31%. And I think they're we are in a good zip code. Think of it as a lot larger numbers. So I think I look at it like that. The place that I'll point to is and what makes me very excited is that all the large SIs. Pretty much if you look at it where the growth is coming from them, Data and AI practices for them are pretty much driving growth. And when you think of anybody's data in the high practice, they pretty much have largely 5 or 6 partners, they end up being the 3 hyperscalers, the 2 data warehouse and data like companies and us. And uniquely, we are the only one that works with all of them because in the world their customers are, they would be using 1 or 2 of those 5, but they end up using us for data management and we work with all of them. So that makes it very unique. And our platform being all the products best products makes it very easy for the GSIs to not have to both a lot of hard work. So we are part of their [FS] [ph] architecture. That momentum is bearing fruit. And large transformation projects, customers want somebody at scale like us, best products or platform and the ability to drive customer success and value creation for customers.

Mike McLaughlin: And let me just clarify the data a little bit, that 31% is deals that were brought to us by the partner. So they're sourced. If you look at the amount of our bookings that are co-sold with or where we're side-by-side with a partner in selling the deal regardless of who sourced it, that's roughly 70%, a little more than 70% as we disclosed at our Investor Day in December. So the partners source a lot of business for us. And more than a majority we're shoulder-to-shoulder with them delivering and selling it in the field.

Operator: The next question comes from the line of Alex Zukin with Wolfe Research.

Alex Zukin: The large deal activity, customers over 1 million really stood out this quarter. Can you maybe talk about, did you see evidence of some sort of a budget flush, competitive displacements, or are you seeing kind of now a return to a more normalized buying environment? And then, I've got a quick follow-up.

Amit Walia: Sure, Alex. Thanks. I think the way I would say that the buying environment, I would say we've seen the same for the last couple of months. I would not say that the buying environment has probably dramatically changed in a meaningful way, early days. I would say that what's happening is I'll put them into a couple of categories, Alex for you. Number one is the COCD strategy of having all the data management best products on one platform with consumption-based pricing makes it very easy for customers to make a variable decision of actually consolidating a lot of the bespoke to spend they were doing because that creates more risk. In fact, creates more spend for them. So that is definitely playing to our favor. Second is, we talked about partnerships. Most of the transformation deals and the big deals you're talking about, like I said, customers are definitely pivoting towards defense to more offense in a way, that we are still trying to conserve costs by automating efficiencies, but they are funding what I call growth initiatives. And in those transformation initiatives, our partnerships going hand-to-hand with the GSI or a Hyperscaler and us. This large auto company in U.K., massive EV project, it was literally 1 Hyperscaler, 1 Ecosystem player, 1 GSI and us because they needed that scale to give them the confidence that is coming to our benefit. And thirdly, which is a very uniqueness of our platform that, we can do a traditional digital transformation project, the same product and the same platform allows them to do Gen AI project. So they can fund their Gen AI initiatives on the same platform using IPUs and they can get going and experimenting and starting on that and not having to do 2 different things. So those are all playing to an advantage.

Alex Zukin: Perfect. And then maybe tying into that, I guess, maybe a little bit on Matt's question is, are you seeing the Gen AI initiative funding kind of migrate from the experimentation phase to the kind of production phase yet? If not, how many quarters do you think that takes when customers are ready to do that? And how durable or sustainable is this I would say, bump that a lot of companies are getting when partnering with one of the Hyperscalers and being able to offer customers multiple ways to retire their core consumption credits with those Hyperscalers on a plethora of services. How durable is that trend as well?

Amit Walia: So two different questions, Alex. I'll go to the second one first. I think I don't look at it from a durability point of view. The thing is that, that was excess capacity sold by the Hyperscalers that customers had to draw down. In our case, they need the stuff we bring to them because these are mission-critical workloads. So they were able to allocate those dollars over here. We end up always being in mission-critical must-have workloads. So the customers' over a period of time, always end up with us doing things that they want to do and have to do and must do, which is why, look, you've seen we've never gone belly-up or belly-down. They've been very steady. So I would look at it like that. I don't look at it as it's something that will go away over a period of time. We don't see anything like that.

Mike McLaughlin: Yes. You should not think of our growth or our sales is being driven to any material degree by excess commits at the hyperscalers that the customers have to spend, and therefore, they figure. Let's just spend it on Informatica even though we don't need it. That's not what's driving it.

Amit Walia: And then to your first question on Gen AI. Look, I think this is a year where I would say more in the second half, you will see the workloads turning into first production go-lives to some extent. And I can remember, when I say production goes live for G2K kind of customers, these are nonmaterial very critical go-lives. It's not like you can just run a data science experiment, and if it goes wrong, it goes wrong. That's how I define our production go live. I do expect those to happen. I think a lot of work is happening right now. First is, experimenting on a small scale and trying to take it to a bigger scale than trying to make sure you can truly run it without a destination, wrong inferences. You can't -- if you're owning it, if you're running it customer [indiscernible] and environment, you can't get that wrong. So I do see some of them going into production in the second half of this year. And of course, as it goes over there, customers start thinking about the governance and other things that become very important, especially if the regulated industries, so we see that. A lot of work going on in that area with our customers. I see that in CLAIRE GPT Private Preview, the kind of stuff we are doing. I feel pretty good about it.

Operator: The next question comes from the line of Kash Rangan with Goldman Sachs.

Kash Rangan: So tailor-made. It's so difficult to go after Zelnick and Zukin because they ask such good questions, but I'm going to try. I'm going to try. So first of all, congrats on the quarter and the finish of the year. Yes, it is tough to go after Zelnick and Zukin, but I'm going to try. So when you look at the cloud business, I mean you're on track to finishing up close to $1 billion run rate somewhere in calendar '24 or early '25. And you got there in a relatively short period of time or is the on-prem, I fondly remember the founding of Informatica in 1994, and I was sitting with the dais. So congratulations on your 30th anniversary. It took 30 years to get the on-prem business to a certain scale, right? When you look at the cloud, if the cloud does extend the growth path to a greater level of durability and longer level of growth versus the on-premise took 30 years to get here. What are the things that will enable the cloud journey to be a longer journey. And if you could offer some proof points, Amit and Mike on why you are, if you are underrepresented with respect to your cloud wallet share as you look in this journey, that would be great. And then finally, not to be out then. As you look at the existential risks of this category, not at the company, how do you think about framing the risk posed by the cloud data warehousing companies that have their own native ETL tools are in a world that promises maybe to be no ETL or ETL-like. How does Informatica thrive on that? Thank you so much once again and congratulations.

Amit Walia: Thanks, Kash. I think I'll comment on the first one first. I couldn't agree more. I said that at the Investor Day that the pace of the innovation to get us to $1 billion of subscription and now getting towards the $1 billion of cloud, it has happened in less than 1/3 of the time frame that the company took to reach $1 billion of license and so couldn't agree more that we are definitely firing on all cylinders and the platform strategy is working. To your second question, I mean, I'll break it into a couple of parts. First of all, Kash, I will respectfully remind everybody that Informatica is not an ETL-only company. I think this goes back re-into the question that I think we'll have to maybe continue to remind, ETL is a very small component of what we do. We have 7 product categories, data integration and data engineering, data quality, app integration and API management, data catalog, MDM apps, data governance, data marketplace. In data integration sits ETL, ELT, mass ingestion, I can go on and on and on. Actually, ETL is a very, very small component of the world. And in fact, when we gave out a free services, we actually genuinely believe that the small companies who came out with just ingestion only capabilities will basically run out of business. We are not an ETL company anymore. We do larger data management, in which no data warehouse. By the way, all these data warehouse, you can have 10 connectors, which creates a simple ETL. But when you think of the metadata, when you think of quality, when you think of governance, when you think of the broader elastic, when you think of ELT at scale pushed down performance, when you talk about SAP, when you talk about those complex, it's a whole different world. We just don't see that that part is where Informatica's size and grows. ETL, it's immaterial to Informatica's growth today and has zero bearing on how we will grow tomorrow. We have moved beyond that in a significant way. So I think I'll just kind of almost echo that for the larger group and you, that's not what I worry about where Informatica is and where Informatica is going.

Mike McLaughlin: And I'll go back to the first part of your question where you're talking a little bit about wallet share and so forth. The data management market is still very fragmented. And if you remember back to Investor Day, we showed the IDC TAM growing at 27% through 2027. And getting to north of [$60 million] [ph] and our cloud right now on a revenue basis is only $500 million as we disclosed for the first time in our release today. So we don't have a big share of that TAM, although we are the leading provider. But we think that because we have the best data management products delivered on the industry's only platform that serves multivendor, multicloud and hybrid workloads that we at least will maintain our market share, and we think we're going to grow it. And the buildup to the 35% growth that we think we're going to deliver in '24 between net new expansion, net new customers and expansion of existing workloads and migrations. It's just not heroic based on what the TAM is growing by and our share of that TAM.

Operator: The next question comes from the line of Patrick Colville with Scotiabank.

Patrick Colville: I want to go back to generative AI. I mean you touched on it in the prepared remarks, and you touched on it in the Q&A. But can you just give us, I guess, the 1-0-1 like how does Informatica benefit from generative AI. When do you see this Gen AI benefit hitting the financial model?

Amit Walia: Yes. So I think two-part question. So I think, think about it this way, what is Gen AI. First of all, in the Gen AI world, as we all know, right now, the models are being put out there and everyone wants to train the models to do something of value, very simplistic put. And I think in that world, there is no value in the model without good data going in and good influence coming out, a little bit like you all live in the world of Excel. And Excel by itself doesn't deliver any value when you basically create a good model and put good data in that Excel model in this conversation, you get data from us, puts out a big inference. The biggest opportunity in front of us, and we are seeing that is that customers have relied, in fact, data management or data is becoming a business process in itself, they need to make sure that they have good data, holistic data, clean data. They understand the context of that data, which is lineage. They understand the governance of that data. We can make sure that in that context, democratization happens in being much more governed way. All of those things are basically what we do. and we see that is happening as we speak. The new stack, everybody don't want to get that in order as the experiments on the side become more and more and more operational. And there's a lot of other stuff that's happening using the Internet data that's different. When you have to use your company data to do all that stuff you talked about, and that's where we are. In fact, the CLAIRE GPT Preview that's going on, we see some of the great things, customers data discovery, classifying data, automating data quality. We see classifications improve by 60%. Quality of data improving by 100x, think of that is what is automation and what CLAIRE is being able to do. That's where we come into play. And the other one is that it's a complex part of the data stack [indiscernible] things customers don't want to have 20, 30 bespoke tools doing it because then you can't figure out what's happening where basically consolidating it on a platform, which again, gives them consumption base price makes it a time easier. So that's where we are seeing a lot of value. And I think this year, we are going to see the early tailwinds of that. It's kind of baked into our model. And I think I do see that basically in the next few years, digital transformation will become nothing else, but Gen AI driven digital transformation.

Patrick Colville: Yes, exciting times. And I guess the CLAIRE AI GPT, the kind of, the Informatica Copilot's. Is that Informatica's charges for? Or will that be kind of part of the core product offering?

Amit Walia: Part of the core product offering, it's IPO consumption. So we want. They are basically driving more IPO consumption, no separate SKUs out there, basically, it is going to be part and part and parcel of what the individual products are and what customers are going to do with them, and they will basically draw down IPU usage and an increase IPU due consumption.

Operator: [Operator Instructions] Our next question comes from the line of Koji Ikeda with Bank of America.

Koji Ikeda: When I think about Informatica and taking it back to the IPO and the results and the execution since then. The IPO, it really seems like it's just been business as usual, good execution as usual, but maybe not platform as usual. And what I mean by that is the platform, the offering IDMC has definitely gotten bigger and better since the IPO. A lot of new announcements over the past year, CLAIRE GPT, IPU pricing model, I mean, a lot has been announced. So I guess the question here is what are you most excited for within all the announcements over the past years as growth drivers over the medium term?

Amit Walia: What a tough question. You're asking you want me to pick my most favorite hidden all this stuff. I'll attempt. But look, I go back, I'd put it in 3 things. It's not one because it's always a power of things that come together. One is the innovation strategy. We not only bet on the platform because we knew that, as Mike said, it's a very fragmented market. While there are hundreds of bespoke tools running around. And we knew that, by the way, not all of number best-of-breed also as much as they said that. So we had best-of-breed products on one platform. So the consolidation, derisking of customer strategy to basically go with one vendor with the best products and the only platform has worked, and that allowing customers to manage their hybrid multi-vendor that landscape, which is true for every enterprise. Second is IPU pricing is killer reduces the whole selling cycle of talking about so many different pricing models that exist and makes the conversation strategic and value driven. You go drive value into customer. That's what you can go low, you can go high, in fact, more often than not, customer wants to then say, oh, geez, I know I'm going to do this mission-critical workload. I want to do this more with you, beautiful. So we have a very strategic look. Third one is, the whole strategic partner ecosystem that we have built with the Hyperscalers, the Snowflakes and the Databricks and the GSIs, it's very important. Because large G2K transformation projects basically do not happen by one tool doing a small corner project that happens with scale vendors going in and helping customers drive value. The tri-factor of this is what is bearing fruit.

Operator: Our next question comes from the line of Howard Ma with Guggenheim.

Howard Ma: Great. I also want to add my congratulations on a strong finish to the year that had no lack of challenges. Amit, I wanted to ask you about the expanded cloud technology partnerships that you had called out. So I'm talking specifically Microsoft fabric and SuperPipe with Snowflake, Databricks Unity Catalog, the integration of MDM with MongoDB. Can you give us a sense of the organizational alignment that it takes to establish these partnerships? And how much of a barrier to entry do you think it is to competitors? And so that's one part. And then the second part is, if we were to think about the data and the amount of revenue that Informatica generates from these partnerships across hyperscalers, sounds like Databricks, MongoDB versus other data sources and destinations, is that former group? Is that going to approach 100% at some point in the near term? Thank you.

Amit Walia: Sure, Howard. So I think our first question, look, Rome wasn't built in a day. These partnerships for us have not, they didn't start that yesterday. In fact, many, many years ago, we started working with Azure. We started working by the way. We were the partner, we launched partners with Redshift. Then, Redshift came up with AWS and the GCP when BigQuery came out and with Snowflake, very, very early days of Snowflakes and Databricks. So we've been working with them from very early days. And I think while it is becoming a lot more visible now, every time something new comes out, we are design partners. We won the design part of the here with AWS. We've been working with them for so many years. We are the design partner for Microsoft Fabric. So you can see we are there at the table with them and they're conceiving the new technologies because our joint customers want that. So these partnerships have come from a long time, and it has built technology thrust, go-to-market trust, customer trust. So it comes from that place. And hence, they multiply. And today, we are seeing the snowball effect of that one. And so that's the way to think about it. Second is, I think look, the 100% comment, we shared at our Investor Day. And the way to think about it is, clearly, the new workloads are growing. But when you think of an enterprise, the reason why I hesitate on the 100% things if you look at a data warehousing project in an enterprise, right, data is still coming from old sources and new sources, right? So in that context, IDMC is pulling data from the old mainstream, but also from the new Microsoft or new MongoDB database or the new Snowflakes on and so forth. It's going to be both, of course, the latter will continue to grow bigger in size as more and more data gets housed, there is an example. But the old ones will not become zero because data is still sitting over there. As that stuff gets retired, naturally, it won't matter to us. Our job is to bring make sure that we can connect and manage the entire data landscape of the enterprise. Hence, I hesitate to talk about the zero-sum game. But of course, all our growth and all our investments, as you can see, is pivoted towards the future, and that's what we invest in.

Operator: Our next question comes from the line of Fred Havemeyer with Macquarie.

Fred Havemeyer: Congratulations to the team for a really strong quarter here. I wanted to ask about the transactions that you're seeing flowing through cloud. I mean 62% year-over-year growth and transactions is really impressive. And as you're ramping, of course, rather continuing to grow cloud, how should we think about this overall cloud metric? Is it something illustrative here, just in general, showing that you have a tremendous increase in usage, or is this something that we should be considering as like perhaps proxy related to IPUs?

Amit Walia: So think about it as usage. So I was not correlated to ARR and all. The best indicator of that is that it is -- it means that it's more activity more usage of our products -- through IPUs on our platform. So obviously, customers are doing more and more and more work. And I look at it, that's what it is. And that's the way we track that very, very closely. We see exactly what action is happening. So that's that it's a directional sense to say, heavy activity, which means that we don't have products sitting on shelf. People go, use it. And that covers a broad swath of usage. It could be governance usage. It could be a master data management usage. It could be ELT usage, it could be pure data quality usage. All of those kind of things are baked into this transaction metric that we share.

Operator: Our next question comes from the line of Tyler Radke with Citi.

Tyler Radke: Yes. You talked about how you're seeing kind of a greater appetite from customers to do transformations. And earlier this week, we heard from Teradata some pressure on some large customer losses. And it does seem like as IT budgets are picking up, the move to the cloud is accelerating. I'm wondering, I guess, first, if I look at your non-cloud business, the On-prem subscription ARR and maintenance, those were a bit stronger than expected. So could you just unpack again what was driving that? And then secondly, if we are seeing this broader shift to the cloud, how do you kind of think about the timing of when that happens to your on-prem base? Is it tied to these large core system migrations or is it completely independent event.

Amit Walia: Tyler, so you're right. The Self-managed Subscription portion of our 3 buckets of ARR and revenue did outperform our expectations for 2023. Maintenance was pretty close to in line and cloud outperformed also, as you can see, based on the results versus the guide. But the Self-managed did end up higher than we thought. And it turns out that there are a meaningful number of customers out there that are federal government that are agencies that have difficulty moving to the cloud in the short term. We have tertiary geographies that are not Cloud ready. And those customers still need our product and still get a tremendous amount of value out of product. So much of the outperformance was some of those customers adding on to their existing implementation because they need more, not because they don't want to go to the Cloud eventually, but they just. Now it's a small number, so forecasting it has a pretty high standard deviation around it and just ended up that landed higher than we thought. We still do not emphasize that. We don't actively sell it as because it is end of sale. And frankly, we're happy with it because it means we have a lot of happy customers that want to stay with us as a company and as a brand, those will eventually become cloud customers for us in the future. Now with respect to the pace of that migration, I think that was the second part of your question, it is accelerating. And you can see it in the year-over-year compare of '22 to '23. And you can see it in the quarterly progression Q3 and Q4 after we introduced Power Center Cloud edition. So we do expect an accelerated pace in 2024. The strong majority of our cloud growth will still be new customers and expansions of existing cloud workloads, not migration, but migrations are accelerating, too, and we'll have a somewhat greater contribution to our total growth in 2024.

Operator: Our last question comes from the line of Stefan Schwartz with Wells Fargo.

Andrew Nowinski: I'm on for Andy Nowinski. Thanks for setting me in. Wanted to ask relative to your commentary on cloud workloads. Past quarter, the hyperscalers talked about cost optimization coming to an end. Are you seeing similar trends in your cloud ARR pipeline for this upcoming year, maybe a similar kind of inflection?

Amit Walia: I wish we had optimization in our business. So we went belly up, so we have to be worried about going belly down. No, look, tongue-in-cheek, sorry. I think look we have always been focused on mission-critical workloads. We did see, as you see during those times where our performance has been very steady. We didn't see significant getting ahead in terms of selling excess capacity to be very honest. When we sell IPUs, we are maniacal about selling it against mission-critical workloads and our customer success team, make sure that the customers get into business value creation asap. So I think that, we haven't seen, we didn't run into those to be very honest, if I could use that word of cost optimization for us. Yes, we do see, on the other hand, what is happening towards there and that I see. We've been very steady in terms of selling the mission-critical workloads across our platform. And hence, we've been in some more solid growth but steady growth.

Mike McLaughlin: And part of that is the fact that unlike some of those companies that suffered from optimization in 2023 and 2022. We have multiyear committed contracts with our customers. So they pay us a year in advance. They're multiyear commitments. They're not month-to-month. Your bill changes based upon how much you use. So to that extent, simply structurally were not as subject to the swings of optimization versus expansion.

Operator: Thank you. There are no additional questions waiting at this time. I would like to pass the conference back to the management team for any closing remarks.

Amit Walia: Thanks, operator. Well, look, I know we are a little bit over time. Thank you for staying back. Well, look, I think as you can see, we're pretty excited about where we are with our cloud-only consumption strategy. Year one of that was obviously executed very well. We're into year two. And with this stage basically, like I said, it's all about continuing to maintain our focus and execution. We have a great place in the market. Ongoing digital transformation migration and, of course, now GenAI continue to be the three vectors driving our growth. We look forward to continuing our execution this year. And for a lot of you, hopefully, we'll see you at Informatica World in May this year. Thank you.

Operator: That concludes today's conference call. I hope you all enjoy the rest of your day. You may now disconnect your lines.