Informatica Inc at UBS Global Technology and AI Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Karl Keirstead - UBS Equities - Analyst : I wanted to start just by talking a little bit about the stickiness of Informatica. I actually covered your stock in Version 1 in the public markets a long, long time ago. And here we are. And Informatica is like here still thriving, probably UBS still using you relative to 10 years ago. So maybe this is a little bit of a layup for you, Amit, but maybe just so that those that don't know the story as well, like what's the essence of that stickiness to the story?

Question: Karl Keirstead - UBS Equities - Analyst : Yeah. That's a great story. Let's talk a little bit about some of the mega trends you're seeing. That's not just an easy segue to talk AI. Because maybe in addition to AI, there are some other interesting trends that everybody in the audience should keep track of. So in addition to this AI revolution, in addition to this continued migration to the cloud, are there other megatrends that you're shaping Informatica to seize?

Question: Karl Keirstead - UBS Equities - Analyst : So before moving to AI, one question I have about some of those more non-AI or traditional tailwinds for Informatica, is that the transition of sort of trapped corporate data on-prem to the cloud has been building for years, obviously. It feels to me as if that pace of migration activity moderated somewhat in the last 18 months given we've been in a very tight budget environment. I'm curious whether the two of you are seeing any evidence that on-prem to cloud migration activity for the data, apps as well, is starting to percolate up a little bit or too soon to tell?

Question: Karl Keirstead - UBS Equities - Analyst : So now let's talk AI a little bit. And I think one disappointment that investors have is that one could have maybe two years ago had this thesis that AI would serve as a key catalyst for organizations to modernize their data stack, get their data state in order. And here we are, and you have to squint pretty hard in my judgment to see any obvious AI lift across all the independent data software firms. Amit, why is that? Why aren't we seeing it yet if data is such a close cousin of AI?

Question: Karl Keirstead - UBS Equities - Analyst : Okay. We'll stay patient, Amit. When it does come, where are we going to see it in Informatica's business? Will it be on the core data migration side? Will it be -- will your data governance offering start to perk up? Like where are you looking for early evidence of an AI pull-through? What part of the suite?

Question: Karl Keirstead - UBS Equities - Analyst : Amit, one idea I have, I'll bounce this off you that could be a potential catalyst for Informatica and the other data software firms. You're hearing all kinds of buzz about scaling laws. So the incremental improvement in models is perhaps starting to diminish. When I think about what that means, REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 03, 2024 / 9:15PM, INFA.N - Informatica Inc at UBS Global Technology and AI Conference it probably means that the last remaining set of data that has yet to be exposed to the models to make them more intelligent is all the extraordinarily valuable data that companies like UBS are sitting on. So I wonder if the rate of improvement with these general purpose model slows, it could serve as a catalyst for organizations to spend more money fine-tuning those models on their corporate data as kind of the next leg up in those model performance. And if that were to happen, it would seem to me that there's a bigger role for data software firms to play in that trend. Crazy or not?

Question: Karl Keirstead - UBS Equities - Analyst : We're even early on that?

Question: Karl Keirstead - UBS Equities - Analyst : Okay. Maybe we'll bring Mike into the conversation. I'd like to switch subjects and talk about this extraordinary mix shift that's happening inside Informatica that Amit talked about. So when I used to cover the company, it was 100% on-premise, way, way back, Version 1. Now, I think latest quarter, 44% of your total ARR is coming from cloud, extraordinary shift. So maybe the first question for you is where is that cloud growth coming from? I presume there's some new logos. Is it expansion of existing clients that are still running Informatica on-prem? What's the source of that extraordinary cloud ARR growth if it's not pure migration, which I don't think it is.

Question: Karl Keirstead - UBS Equities - Analyst : New workloads? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 03, 2024 / 9:15PM, INFA.N - Informatica Inc at UBS Global Technology and AI Conference

Question: Karl Keirstead - UBS Equities - Analyst : Got it. Makes sense. But on that 25%, Mike, how is that likely to trend over the next year or so? Are we coming out of a period maybe where there was significant migration activity that might cool? Or is it the opposite where perhaps due to end market changes or even Informatica pushing clients somewhat. You could actually see an acceleration of that migration activity. How do you think it will look over the next year?

Question: Karl Keirstead - UBS Equities - Analyst : So we're about to lap that?

Question: Karl Keirstead - UBS Equities - Analyst : Okay. And Mike, on the way in which that mix shift translates to your reported revenue growth rate, not ARR. We've been waiting for that mix shift to essentially serve as an accelerant to the reported revenue growth. It's taking a little while. The growth rate is kind of sticky in that single-digit range. When are we going to hit the point where enough is cloud growing at a much faster clip that the mix starts to take Informatica past the double-digit point? Maybe that's venturing a little bit too much into guidance. So maybe you want to --

Question: Karl Keirstead - UBS Equities - Analyst : That's great news. Amit back to you on the competitive front. And I won't ask you about traditional smaller Informatica rivals, the five trends of the world. But rather we all follow the Snowflake and Databricks a lot. And they've been -- I don't think, earnestly so far, gently been stepping into what they're calling a ETL business. Do you view them as overlapping with you guys a little bit more than a year ago or what they're doing so different than what Informatica is known for that you wouldn't really consider them to be a direct rival? Because I know you're actually an extraordinarily important partner to at least Snowflake, I think Databricks as well.

Question: Karl Keirstead - UBS Equities - Analyst : Congrats.

Question: Karl Keirstead - UBS Equities - Analyst : Yes, got it. I'll ask one financial question, Mike. So maybe back to you, Mike. When we look at Informatica's fourth quarter ARR guide, and we run the simple math on what sequential ARR growth that implies in the quarter. It's actually very, very healthy and up nicely actually from 4Q last year. What is it that's happening in the fourth quarter that leads us to that numerical conclusion?

Question: Karl Keirstead - UBS Equities - Analyst : Becoming a little bit more of a -- this year anyway, a little bit more of a 4Q skew?

Question: Karl Keirstead - UBS Equities - Analyst : Okay. Let's close with a question around your margin performance. That's been one of the bright spots for Informatica since you went public in the second incarnation. You've just consistently beaten your EBIT margin guidance. So looking forward, I can see puts and takes. On the positive side, for a company at your maturity, I can actually -- I'll be honest, imagine you running at margins considerably higher than what you're at now. It seems very conceivable to me if I just comp you against other mature software companies. On the other hand, you're investing heavily in a lot of new features, and you've got some growth initiatives. So I'd love to ask you how you're balancing those two and thinking about margins over the next couple of years?

Question: Karl Keirstead - UBS Equities - Analyst : Okay. Makes sense. We've got one more minute, but that means we have one minute for a question from the audience, if anybody has one? No. Okay. Well, we can end at 56 seconds early. Amit, Mike, thank you for joining us today. Thanks, Vic for making it all happen.