Informatica (INFA) - 2023 Q1 - Quarterly Report

Subscription Revenue and Growth - Subscription revenue for Q1 2023 reached $213.9 million, up from$ 197.7 million in Q1 2022, representing a growth of approximately 8.9%[137] - Total Annual Recurring Revenue (ARR) increased to $1,533.4 million in Q1 2023 from$ 1,397.0 million in Q1 2022, reflecting a growth of about 9.7%[160] - Cloud Subscription ARR rose to $483.3 million in Q1 2023, compared to$ 343.5 million in Q1 2022, marking an increase of approximately 40.7%[160] - The average Subscription ARR per customer increased from $231,000 in Q1 2022 to$ 270,000 in Q1 2023, showing a growth of about 16.9%[152] - Subscription revenues rose to $213.9 million, accounting for 59% of total revenues, an increase of 8% from$ 197.7 million in the prior year[198] Customer Retention and Acquisition - Subscription Net Retention Rate (NRR) was 110% for Q1 2023, down from 113% in Q1 2022, indicating a slight decline in customer retention[160] - Approximately 54% of subscription customers as of March 31, 2023, did not have a prior perpetual license maintenance contract, indicating successful new customer acquisition efforts[151] - Subscription Net Retention Rate (NRR) measures the contract value from the same set of customers year-over-year, indicating growth from price increases and additional sales[170] Revenue Composition and Strategic Shift - The perpetual license revenue as a percentage of total software revenue was 0% for Q1 2023, down from 1% in Q1 2022, reflecting a strategic shift towards subscription revenue[141] - Perpetual license revenues are expected to be less than 1% of total revenues as the company focuses on subscription-based licensing[178] - The company expects subscription revenues to account for substantially all software revenues going forward, as it has ceased active selling of perpetual licenses[199] Cost and Expense Management - Maintenance and professional services revenues decreased to $150.7 million in Q1 2023 from$ 161.9 million in Q1 2022, a decline of approximately 6.9%[143] - Total cost of revenues decreased by 2% to $81.9 million, with software revenue costs increasing by 44% to$ 35.9 million, now 17% of software revenues[203] - Research and development expenses increased by 9% to $82.0 million, representing 23% of total revenues, driven by higher personnel-related costs[208] - General and administrative expenses rose by 40% to$ 41.4 million, accounting for 11% of total revenues, primarily due to increased personnel-related expenses[211] - Restructuring costs increased to $27.3 million, representing 7% of revenues, due to a restructuring plan initiated in January 2023[213] Financial Performance - Adjusted EBITDA for Q1 2023 was$ 89,013, compared to $89,119 in Q1 2022, reflecting relative profitability adjusted for various expenses[175] - Total revenues increased by 1% to$ 365.4 million for the three months ended March 31, 2023, compared to $362.3 million for the same period in 2022, primarily driven by a 7% increase in software revenues[197] - Maintenance revenues fell to$ 125.4 million, representing 34% of total revenues, a decrease of 5% from $132.5 million[201] - Professional services revenues decreased by 14% to$ 25.3 million, accounting for 7% of total revenues, primarily due to reduced demand for consulting services[202] Cash Flow and Investments - Cash provided by operating activities was $69.9 million in Q1 2023, slightly down from$ 70.2 million in Q1 2022, with a net loss of $116.4 million adjusted for non-cash charges[221][222] - Net cash provided by investing activities reached$ 49.0 million in Q1 2023, significantly up from $6.2 million in Q1 2022, driven by$ 80.5 million in maturities of investments[223][224] - Net cash provided by financing activities was $14.9 million in Q1 2023, compared to$ 13.2 million in Q1 2022, mainly due to $16.1 million from the issuance of common stock under the ESPP[227][228] Debt and Interest - Long-term debt outstanding was$ 1.84 billion as of March 31, 2023, with a potential interest expense change of approximately $5 million annually for a 0.25% change in 3-month LIBOR[239] - The company plans to transition from one-month LIBOR to one-month SOFR starting in the second half of 2023, following the phase-out of LIBOR[240] - Interest income increased to$ 7.6 million for Q1 2023, up 1972% from $366 thousand in Q1 2022, while interest expense rose to$ (35.1) million, a 173% increase from $(12.8) million[214] Tax and Currency Exposure - Income tax expense surged to$ 59.6 million in Q1 2023, compared to $1.2 million in Q1 2022, reflecting a 4927% increase primarily due to a higher valuation allowance[215] - Approximately 25% of cash, cash equivalents, and short-term investments are held by foreign subsidiaries, exposing the company to foreign currency exchange risks[220][241] - The company utilizes foreign currency forward contracts to hedge against fluctuations in foreign currency expenses, with notional amounts totaling$ 101.2 million for Indian rupees as of March 31, 2023[244]