Informatica Q1 2025 Earnings Report

Informatica EPS Results

• Actual EPS: $0.22
• Consensus EPS: $0.22
• Beat/Miss: Met Expectations
• One Year Ago EPS: $0.22

Informatica Revenue Results

• Actual Revenue: $403.90 million
• Expected Revenue: $392.14 million
• Beat/Miss: Beat by +$11.76 million
• YoY Revenue Growth: +3.90%

Informatica Announcement Details

• Quarter: Q1 2025
• Date: 5/7/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, May 7, 2025
• Conference Call Time: 5:00PM ET

Informatica (NYSE:INFA) develops an artificial intelligence-powered platform that connects, manages, and unifies data across multi-vendor, multi-cloud, and hybrid systems at enterprise scale worldwide. Its platform includes a suite of interoperable data management products, including data integration products to ingest, transform, and integrate data; API and application integration products that enable users to create and manage APIs and integration processes for app-to-app synchronization, business process orchestration, B2B partner management, application development, and API management; data quality and observability products to profile, cleanse, standardize, observe, and monitor data to deliver accurate, complete, and consistent data; and master data management products to create an authoritative single source of truth of business-critical data. The company's platform also includes customer and business 360 application that allow business analysts to create 360-degree views of business data domains like customer, product, supplier, reference, and finance with simplified business user experiences; data catalog products that enables customers to quickly find, access, and understand enterprise data using a simple Google-like search experience; governance and privacy products that help users define policies, govern data, and ensure compliance with industry and corporate policies; and a data marketplace that delivers cloud shopping experience for data consumers and enables data sharing and AI models across organizations to facilitate data-driven decision making. It also offers maintenance and professional services. The company sells its products through its direct sales team. The company was founded in 1993 and is headquartered in Redwood City, California.

Informatica Q1 2025 Earnings Call Transcript

Key Takeaways

• In Q1, cloud subscription ARR grew 30% year-over-year to $848 million, reaching nearly 50% of total ARR and on track to hit 58% by year-end as Informatica completes its cloud-only transition.
• Maintenance and self-managed ARR declined 13% year-over-year, reflecting the planned engineered wind-down of on-prem businesses, with combined on-prem ARR now about half of total ARR.
• Informatica implemented a new AI-driven retention operating model and tighter alignment between customer success and sales, which improved cloud renewal rates sequentially and addressed prior renewal challenges.
• Financial results beat guidance with total ARR up 4.1% to $1.704 billion, revenue up 4% to $404 million, non-GAAP operating income up 11% to $121 million, and adjusted free cash flow of $186 million.
• GenAI momentum accelerated as 175 customers used AI capabilities on IDMC, GenAI recipe downloads nearly doubled, 200,000 LLM calls were executed in the quarter, and ClearGPT services expanded to 500 customers.

Presentation

[Operator]

Good afternoon. Thank you for attending today's Informatica Incorporated Fiscal First quarter twenty twenty five call. My name is Megan, and I'll be your moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to turn the call over to Victoria Hyde Dunn, Vice President of Investor Relations.

[Operator]

Please proceed.

[Victoria Hyde-Dunn, VP - IR at Informatica]

Thank you, Megan. Good afternoon, and thank you for joining Informatica's first quarter twenty twenty five 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.

[Victoria Hyde-Dunn, VP - IR at Informatica]

Our prepared remarks will be posted on the IR website after the conference call concludes. During the call, we will 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 ks filing for the full year 2024 and the 10 Q to be filed for the first quarter of twenty twenty five. 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.

[Victoria Hyde-Dunn, VP - IR at Informatica]

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. GAAP measure can be found in this afternoon's press release and our slide presentation available on Informatica's Investor Relations website. And with that, it is my pleasure to turn the call over to Amit.

[Amit Walia, Chief Executive Officer at Informatica]

Thank you, Victoria. Thank you everyone for joining

[Amit Walia, Chief Executive Officer at Informatica]

us today.

[Amit Walia, Chief Executive Officer at Informatica]

Before turning to Q1 results, I'd like to provide three updates since we met last on our February earnings call. First, twenty twenty five marks the final phase of our business model transformation journey to being a cloud only company. As I mentioned before, our large high growth cloud business is very healthy as we continue the engineered decline of our end of sale on prem businesses. Looking at our on prem businesses, maintenance and self managed ARR combined represented approximately 50% of the total ARR in q one, down 13% year over year.

[Amit Walia, Chief Executive Officer at Informatica]

Turning to our cloud business, cloud subscription ARR represented approximately 50 of total ARR in q one, up from 40% a year ago. At the midpoint of full year guidance, it is expected to be 58% of total ARR. This is playing out as expected when we provided guidance in February. We see growth in cloud modernization deals, we see growth in new logos, and we continue to see growth in expansion opportunities unfolding for us. We also continue to see healthy cloud pipeline coverage and an increasingly growing appetite for our Gen AI capabilities from customer conversations, customer and product events, AI webinars, and actual product usage.

[Amit Walia, Chief Executive Officer at Informatica]

We are encouraged by this momentum, which is a tailwind to our business. We're also mindful of the fluid macro environment. We have not seen a noticeable change in customer buying behavior through April of this year. Most of our software and services are regarded as essential processing mission critical workloads and use cases and contributing to operating efficiency and growth for customers. Our cloud pipeline remains very healthy.

[Amit Walia, Chief Executive Officer at Informatica]

We have Informatica World next week, which many customers and prospects plan to attend driving second half lead gen and pipeline. As of today, we have a year over year increase in registration at Informatica World as well as an increase in pipeline at Informatica World compared to last year. Second, I'm pleased to share that we have taken steps to address the operational missteps in our renewals from last quarter. We've implemented all the operational changes that we discussed in our February earnings call, and they're already bearing fruit. We introduced a new retention operating model internally that leverages our internal AI models to help us identify potential risk accounts even earlier, ensuring we have more lead times to take proactive steps to mitigate.

[Amit Walia, Chief Executive Officer at Informatica]

We have enhanced operational discipline between our customer success and field sales team incorporating an even tighter alignment and incentives at the account level. Our first quarter results demonstrate that we have made good progress and we're moving in the right direction. Our team is now focused on building upon the Q1 success to execute against the Q2 targets. Third, taking all of this in, we are comfortable reaffirming our full year guidance. Very importantly, we remain on track to reach the remarkable milestone of a billion dollar business in cloud subscription ARR.

[Amit Walia, Chief Executive Officer at Informatica]

Our diversity of our businesses, geographies, industries, and large enterprise clients positions us very well to navigate the current climate. We continue to provide value to our best in class product innovation that hasn't skipped a beat. We are uniquely positioned as a leader in the and the only cloud data management company with the best data management products offered in a single platform with consumption based pricing, helping customers digitally transform to the cloud with AI and additional tailwind that has emerged in the last year or so. Our vendor neutrality and ecosystem of over six fifty partners broaden our global reach and impact. With our strong cash flow and cost discipline, we continue positioning ourselves well for sustainable growth and profitability.

[Amit Walia, Chief Executive Officer at Informatica]

With those three things, let me now turn to q one results. We delivered a solid start to the year with all key growth and profitability metrics above the midpoint of our guidance metric ranges. Cloud subscription ARR grew 30% year over year to over $848,000,000 above the midpoint of the guidance range. Total ARR rose over 4% year over year to 1,700,000,000.0 and total revenue grew 4% year over year to $4.00 4,000,000 both exceeding the high end of the guidance range. We strengthened our cash position and grew non GAAP operating income by 11% year over year to over $121,000,000 exceeding the high end of the guidance range.

[Amit Walia, Chief Executive Officer at Informatica]

Turning to our customers. In q one, approximately sixty five percent of cloud net new ARR in the trailing twelve months came from new cloud workloads and expansion. And approximately 42% of that 65% coming from new customers to Informatica. We continue to expect the majority of our cloud growth to be net new wins for new cloud workloads amongst new and existing customers. Cloud subscription ARR customer count grew by 8% year over year and the number of cloud subscription ARR customer spending greater than a million with Informatica grew by 48% year over year.

[Amit Walia, Chief Executive Officer at Informatica]

The average cloud subscription ARR per customer rose to 343,000 growing at 20% year over year. Let me share a few customer stories behind these stats. Brew is a high growth coffee franchise backed by Blackstone with over 365 locations across The United States. In order to build a scalable infrastructure to support their businesses, Seven Brew partnered with us and a hyperscaler partner to develop a data foundation anchored in quality master data management. Another long standing Informatica customer, Chubb, which is a global leader in insurance with operations in 54 countries and territories, is expanding their Informatica engagement.

[Amit Walia, Chief Executive Officer at Informatica]

Currently, already leveraging IDMC for governance, quality, and integration, they opted to now modernize their MDM footprint to create a comprehensive data foundation with Informatica and Microsoft Azure. Longchamp that we all probably know, a French luxury leather goods company, renowned for its high quality handbags, luggage, and fashion accessories, chose to modernize the power center platform to Informatica iDMC to secure and accelerate their ERP modernization program. Taylor Made Golf needed to modernize its data integration stack to keep pace with omnichannel growth and new brand expansions. With Informatica, the golf icon consolidated its legacy integration vendors into one unified cloud platform, which is IDMC, enabling real time data flows across warehouses, ecommerce, assembly operations, and international offices. The Informatica platform is helping tailor made develop deliver new integration requirements faster than ever and instantly connect to partners like Snowflake with prebuilt connectors.

[Amit Walia, Chief Executive Officer at Informatica]

Turning from customers to our partners. Talking about our ecosystem partners, we announced expanded support for Databricks AI functions via our native SQL ELT, which enables customers to execute Informatica no code data pipelines and Databricks AI functions natively within Databricks. Databricks featured Informatica in their intelligent data engineering global broadcast. We participated in Databricks World Tours event globally, and we published a joint video with Databricks discussing how RIDMC and Databricks work seamlessly together to provide a robust, comprehensive enterprise platform for analytics and AI. With Google Cloud, we announced the general availability of a cloud data governance and catalog service natively on Google Cloud, which enables customers to use the Google Cloud committed spend via Google Marketplace to subscribe to our cloud data governance and catalog capabilities.

[Amit Walia, Chief Executive Officer at Informatica]

We also enhanced the integration of our MDM with SAP to facilitate an accelerated transition for organizations modernizing to s four HANA. Turning to our GSI partners. The trend of large partners doubling down and investing in Informatica as a core of the growing data and AI practice continues as another large GSI built an ambitious multiyear growth plan to scale the practice with us. As mentioned previously, some of our partners have been investing in solutions to also modernize non informatic legacy data integration, MDM, and data governance products into IDMC. During q one, we saw good progress as these solutions were brought to market and the pipeline has been steadily building.

[Amit Walia, Chief Executive Officer at Informatica]

We are committed to product innovation, customer centricity, vendor neutrality, and productivity at scale across hundreds of enterprise systems with varying latencies and formats. In March, IDMC processed over a 9,000,000,000,000 cloud transactions per month, growing 30% year over year. We are pleased to be recognized as a leader in the 2025 Gartner Magic Quadrant for Augmented Data Quality Solutions report. This marks the seventeenth time being named a leader, then Informatica positioned furthest on the completeness of Vision Access and the highest on the ability to execute access. In these seventeen years, many vendors have come and gone.

[Amit Walia, Chief Executive Officer at Informatica]

We have continued to move to the top right. Additionally, we are excited to welcome Krish Vittal Devara as a chief product officer to propel Informatica to its next phase of innovation and growth. With our enterprise customers, we empower them to use AI for data readiness and simplify the data estate with Informatica for GenAI use cases and GenAI tools from Informatica, which are both available on the IDMC platform. Let me give you some color behind both of them. With Informatica for GenAI, it's exciting to see many enterprise customers now building and deploying impactful GenAI apps, agentic workflows, and AI agents using our IDMC platform.

[Amit Walia, Chief Executive Officer at Informatica]

Because on the same platform, you can use and do GenAI workloads now. The momentum is clear. GenAI recipe downloads have been nearly doubled quarter over quarter, and we have now over 175 customers using GenAI capabilities on IDMC. In the last quarter alone, these customers executed approximately 200,000 LLM calls or prompts excluding ClearGPT, which is a whole different product and different use case. Real life customer success stories further exemplify the power of JennieR IDMC, including a leading North American insurance company that leveraged IDMC, OpenAI, and Snowflake to automate the processing and analysis of unstructured environmental assessment reports.

[Amit Walia, Chief Executive Officer at Informatica]

This significantly reduced manual workloads and expedited decision making processes. A California based credit union deployed IDMC and Azure OpenAI to automate call transcript analysis, generate concise summaries and assess quality and satisfaction metrics to improve customer experiences. These are all programs that are happening and are going to move from pilot to production at scale as time progresses. Now with Jennie had from Informatica, we have expanded our ClearGPT services globally, now serving over 500 customers across various industries globally. We added new capabilities including NLP interface for data quality reports, support for complex data exploration with metrics and visualizations, and inferred lineage to detect system connections using CLEAR automatically.

[Amit Walia, Chief Executive Officer at Informatica]

We also added support for Informatica's cloud data governance and catalog metadata access controls. We also introduced ClearGPT for MDM and three sixty apps on MDM to enhance conversational experiences, democratizing access to trusted data from MDM across the organization by improving decision making and collaboration. Additionally, ClearcoPilot is currently in preview for data integration and integrate and our iPass users and will be going live as we walk into Informatica world next week. A great customer success story that further exemplifies the power of GenAI from Informatica is Mabe, a leading Mexican appliances manufacturer. They transform their fragmented data architecture across different regions into a unified AI ready ecosystem using IDMC, Azure, and SAP.

[Amit Walia, Chief Executive Officer at Informatica]

By implementing a connected data management strategy, Mabei now delivers 95 plus data quality score, speeds of data delivery with prebuilt automation, and avoids hundreds and thousands of dollars in costly errors that democratized access to trusted insight through the GPT interface to their end users. What I'm excited about is in one week from now, we'll be at Informatica World. And as we head into Informatica World next week, we believe data continues to be fragmented in poor quality and unruly with AI amplifying these challenges. Across enterprises, AI doesn't deliver value alone. It needs a strong data foundation.

[Amit Walia, Chief Executive Officer at Informatica]

Organizations require relevant, responsible, and robust AI attainable through holistic, accurate, timely, accessible, governed, protected, and democratized data. That's data management, and it is crucial for transforming data into these valuable attributes. Since 2018, Informatica has led when we launched, by the way, the first version of Clear, we have led an AI powered data management with Clear. We are now enhancing our capabilities by integrating AI agents into our IDMC platform. Imagine autonomous AI agents managing processes like quality, discovery, governance to name a few.

[Amit Walia, Chief Executive Officer at Informatica]

We look forward to sharing much more at Informatica World next week. In closing, thank you to all of my Informatica colleagues across the globe for their hard work and to all of our shareholders and partners for their support. And, of course, our customers who continue to trust us. We look forward to seeing many of them and many of you next week at Informatica World. With that, let me

[Amit Walia, Chief Executive Officer at Informatica]

turn the call over to Mike. Mike, please take it away.

[Mike McLaughlin, EVP & CFO at Informatica]

Thank you, Amit, and good afternoon, everyone. Q1 is a solid financial quarter across the board with all key growth and profitability metrics above the midpoint of our guidance. I'll begin by reviewing our Q1 results focusing first on Informatica's annual recurring revenue.

[Mike McLaughlin, EVP & CFO at Informatica]

Total ARR was $1,704,000,000 growing 4.1% year over year both on a reported and constant currency basis exceeding the midpoint of our guidance range by $18,600,000 This growth was driven primarily by new cloud workloads, strong cloud net expansion with existing customers and accelerating migrations from our on prem base to the cloud. Foreign exchange rates negatively affected total ARR by 649,000 on a year over year basis. Now let's break down our total ARR into its three components. First, cloud subscription ARR was $848,000,002,400,000.0 above the midpoint of our February guidance, representing 30% growth year over year and 30.1% in constant currency. New cloud workloads and net expansion with existing customers drove cloud subscription net new ARR of $196,000,000 year over year.

[Mike McLaughlin, EVP & CFO at Informatica]

Cloud subscription ARR now represents almost 50% of total ARR, up from 40% a year ago. Foreign exchange negatively impacted cloud subscription ARR by $424,000 on a year over year basis. Approximately 65% of cloud subscription net new ARR in the trailing twelve months came from new cloud workloads and expansion of existing workloads and 35% came from modernizations. This quarter our modernization deals were over one third of our cloud new bookings similar to last quarter. Our cloud subscription net retention rate was 120% in Q1 and our cloud renewal rate was in line with our forecast for the quarter.

[Mike McLaughlin, EVP & CFO at Informatica]

The second category of total ARR is self managed subscription ARR. This category, which we no longer actively sell, declined in the quarter to $422,000,000 This was down 5.6% sequentially and down 16% year over year consistent with our expectations due to the effects of natural churn and the roll off of migrated on prem workloads to the IDMC Cloud Platform. The third component of total ARR is maintenance for on premise perpetual licenses sold in the past. Maintenance ARR was $433,000,000 down 4% sequentially and 9.5% year over year. This was consistent with our expectations driven by both natural churn and the roll off of migrated on premise workloads to the cloud.

[Mike McLaughlin, EVP & CFO at Informatica]

Approximately one third of our year over year maintenance ARR gross churn resulted from maintenance to cloud migrations. Our guidance for the full year assumes the roll off of modernized maintenance and subscription ARR accelerates this year as modernization bookings accelerate. Modernizing our on prem customer base to IDMC continues to be an important part of our strategy. At the end of Q1, '10 point '7 percent of our maintenance and self managed ARR base has been modernized to the cloud or is in the process of modernizing, up from 9.4 last quarter and 5.5% a year ago. We have a life to date average 1.9 ARR uplift ratio on these modernizations, flat to last quarter.

[Mike McLaughlin, EVP & CFO at Informatica]

Over the past four quarters, our average modernization uplift ratio was 1.8 and we expect the average uplift ratio to be in the 1.5 to 1.7 range in 2025 consistent with the forecast for the year we shared last quarter. In Q1, our realized modernization uplift ratio was slightly above the high end of the range we forecast for the year. Now I'd like to review our revenue results for the first quarter. GAAP total revenues were $4.00 $4,000,000 an increase of 3.9% year over year or 5.6% year over year in constant currency. This exceeded the midpoint of our February guidance by approximately 14,000,000 Our revenue growth was driven by strong cloud growth offset by declines as expected in our maintenance and self managed subscription revenues.

[Mike McLaughlin, EVP & CFO at Informatica]

Foreign exchange rates negatively impacted total revenues by approximately $6,600,000 on a year over year basis. Cloud subscription revenue was approximately $200,000,000 or approximately 50% of total revenues, growing 32% year over year. As a reminder, due to the timing differences between revenue recognition and ARR, the relative growth rates of these two metrics will differ from period to period. Self managed subscription and support and license revenue combined were $84,000,000 or 21% of total revenues, declining 16% year over year due to both natural churn and the roll off of self managed workloads that have been modernized to the IDMC Cloud Platform. As a reminder, the impact of upfront revenue recognition for the license component of our on premise self managed contract renewals and new bookings affects reported GAAP revenue.

[Mike McLaughlin, EVP & CFO at Informatica]

The decline in upfront recognized self managed revenues accounted for $9,000,000 of the $16,000,000 year over year decline, which was in line with the expectations embedded in our February guidance. Maintenance revenue was $103,000,000 representing about 26% of total revenues, a decline of approximately 12% year over year. Approximately one third of our year over year maintenance gross churn resulted from maintenance cloud migrations. Professional services revenues, which includes implementation, consulting and education, were down about $2,300,000 year over year to $17,000,000 As a result, we expect this trend to continue in 2025 as our services partners assume a greater share of our customers' implementation work. Turning to the geographic distribution of our business, U.

[Mike McLaughlin, EVP & CFO at Informatica]

S. Revenue grew 6% year over year to approximately $256,000,000 representing 63% of total revenues. International revenue grew 1% year over year to 148,000,000 representing 37 of total revenue. Using exchange rates from Q1 last year, international revenue would have been approximately $6,600,000 higher in the quarter, representing international revenue growth of 5.2% year over year. Now I'd like to move on to our profitability metrics.

[Mike McLaughlin, EVP & CFO at Informatica]

Please note that I will discuss non GAAP results unless otherwise noted. In Q1, gross margin was 82%, about one percentage point higher year over year. We remain focused on maintaining healthy gross margins as our business transitions to the cloud. Operating expenses were consistent with expectations. Operating income was approximately $122,000,000 growing 11% year over year and exceeding the midpoint of our February guidance by almost $17,000,000 Operating margin was 30.1%, a 200 basis point improvement from a year ago.

[Mike McLaughlin, EVP & CFO at Informatica]

Adjusted EBITDA was 125,000,000 and net income was 69,000,000 Net income per diluted share was $0.22 based on approximately $3.00 9,000,000 outstanding diluted shares. Basic share count was approximately $3.00 3,000,000 shares. Adjusted unlevered free cash flow after tax was 186,000,000 30 six million dollars above the midpoint of the modeling range we offered last quarter, primarily due to faster cash collections and other working capital dynamics. We expect these favorable working capital factors to reverse in Q2 and therefore Q2 free cash flow will be significantly lower than reported for Q1. Our free cash flow for the first half of twenty twenty five should be in line with the historic linearity of that metric and we are on track to deliver adjusted unlevered full year free cash flow that is in line with our full year guidance.

[Mike McLaughlin, EVP & CFO at Informatica]

Cash paid for interest in the quarter was $30,000,000 consistent with our expectations. And I'd like to provide an update on our share repurchase activity. During the first quarter, we spent $100,000,000 to repurchase 4,900,000.0 shares of Class A common stock at an average price of $20.5 through open market purchases. We did not repurchase any shares from April through yesterday. We've reduced our total share count by 2.8% since we launched our buyback program in Q4 of last year.

[Mike McLaughlin, EVP & CFO at Informatica]

Currently, have $597,000,000 available under our $800,000,000 stock repurchase program. We ended the first quarter in a strong cash position with cash plus short term investments of $1,250,000,000 an increase of $139,000,000 year over year. Net debt was $567,000,000 and trailing twelve months of adjusted EBITDA was $564,000,000 This resulted in a net leverage ratio of one point zero times at the March. Now I'll turn to guidance, starting with the full year 2025. As Amit mentioned, we delivered solid results in Q1 and the guidance assumptions we made in February continue to align with our expectations.

[Mike McLaughlin, EVP & CFO at Informatica]

Therefore, we are comfortable reaffirming all previously issued guidance for the full year. As we look forward to the rest of the year, we will remain disciplined about managing our costs and balancing reinvestment in the business. We've seen the U. S. Dollar weaken since we initially set our full year guidance.

[Mike McLaughlin, EVP & CFO at Informatica]

If these FX rates persist, it will provide a tailwind to revenue, which will be mostly offset by an expense headwind. You can find the details of our full year guidance and the expected FX impact in constant currency for Q2 and the full year in the press release we filed this afternoon. Now turning to guidance for the second quarter. We expect continued strong growth in our cloud subscription business, which is the focus of all of our go to market efforts and continued decline in our combined on premise maintenance and self managed businesses, which we no longer actively sell. The decline rate of our on premise maintenance and self managed ARR and revenue is due to both the roll off of migrated on prem workloads to the cloud and natural churn which impacts the associated ARR and the reduction in renewal term lengths for on premise self managed contracts, which impacts the associated ASC six zero six self managed revenue.

[Mike McLaughlin, EVP & CFO at Informatica]

As we mentioned before, this is in line with the expectations we laid out in February and is factored into our revenue and ARR guidance. You will note that our Q2 revenue and non GAAP operating income guidance are lower than would be implied by our past quarterly linearity. However, you will also note that for the first half of twenty twenty five, our guidance implies similar linearity to what we have experienced in the first half of past years. With this in mind, we are establishing guidance for the second quarter ending 06/30/2025 as follows: We expect cloud subscription ARR to be in the range of $889,000,000 to $9.00 $1,000,000 representing approximately 27.4% year over year growth at the midpoint of the range or approximately 27.4% year over year growth on a constant currency basis. We expect GAAP total revenues to be in the range of $391,000,000 to $411,000,000 representing approximately 0.1% year over year growth at the midpoint of the range or approximately negative 0.5% year over year decrease on a constant currency basis.

[Mike McLaughlin, EVP & CFO at Informatica]

We expect total ARR to be in the range of $1,690,000,000 to $1,714,000,000 representing approximately 2% year over year growth at the midpoint of the range or approximately 2.1% year over year growth on a constant currency basis. And we expect non GAAP operating income to be in the range of $93,000,000 to 107,000,000 representing approximately negative 12.9% year over year decrease at the midpoint of the range. For modeling purposes, I would like to provide a few more pieces of additional information. First, we expect adjusted unlevered free cash flow after tax for the second quarter to be in the range of 55,000,000 to $75,000,000 Second, we estimate cash paid for interest will be approximately $30,000,000 in the second quarter and approximately $116,000,000 for the full year using forward interest rates based on one month SOFR and a credit spread of two twenty five basis points. Third, with respect to taxes, our Q1 non GAAP tax rate was 23% and we expect that rate to continue for the full year 2025.

[Mike McLaughlin, EVP & CFO at Informatica]

Lastly, share count assumptions. For the second quarter, we expect basic weighted average shares outstanding to be approximately 302,700,000.0 shares and diluted weighted average shares outstanding to be approximately 306,300,000.0 shares. For the full year, we expect basic weighted average shares outstanding to be approximately 304,300,000.0 shares and diluted weighted average shares outstanding to be approximately 309,200,000.0 shares. Please note that these share count forecasts do not include the impact of any future share repurchases. In summary, we are very pleased with our first quarter performance and we're off to a great start in 2025.

[Mike McLaughlin, EVP & CFO at Informatica]

And with that, operator, we're now ready to take Q and A.

[Operator]

Absolutely. Our first question will go to the line of Howard Ma with Guggenheim. Howard, your line is open.

[Howard Ma, Director & Equity Research Analyst at Guggenheim Securities, LLC]

Great. Thank you. And it's great to see the outperformance on all key metrics to start the year. Mike, I wanted to ask you about full year guidance. When you first gave the initial f y twenty five guidance three three months ago, I think many investors interpreted it as a as a reset and and appropriately conservative.

[Howard Ma, Director & Equity Research Analyst at Guggenheim Securities, LLC]

So I'm I'm I'm a little surprised by the the lowered top line guidance on a constant currency basis, especially considering the the strong q one results. So can you clarify, is is the revised guidance simply a decision to to keep the reported number unchanged? And in other words, you're you're deciding not to flow through what has become, you know, incremental FX tailwinds since the last guidance, or is it a reflection of deteriorating business trends? And if if macro does deteriorate, is there enough cushion here?

[Mike McLaughlin, EVP & CFO at Informatica]

Yeah. It's the former, Howard. We're not in the habit of revising our guidance, particularly only one quarter into a full year based upon FX moves. As you know, FX has moved dramatically, historically dramatically over the last couple of quarters, both directions. And as we pointed out in the script, if these FX rates persist, we will see a tailwind to revenue, and, you know, that'll obviously be beneficial, to all of us, but they may not.

[Mike McLaughlin, EVP & CFO at Informatica]

And so we have chosen not to flow them in to the guide, but we're not hiding it either. Likewise, we haven't flowed any conservatives or we haven't we haven't lowered anything based upon, you know, fears of macro impact, tariffs, you know, all that sort of stuff. Know, we we still feel good about the reported guide, and we don't view it as a lowering of anything. It's we're on track to deliver what we said we were gonna deliver three months ago.

[Howard Ma, Director & Equity Research Analyst at Guggenheim Securities, LLC]

That's great. I'm I'm glad you clarified that. And as a follow-up in in the same vein, also for you, Mike, with cloud subscription ARR representing 58% of the business, exiting this year, growing 25%, I I believe that implies, that the remaining 42%, that is maintenance and self managed ARR is gonna exit the year down about 25% compared to the 13% decline in q one. And so, you know, in the same vein, is that it's just conservatism, or is is there something, you know, we should be concerned about? Thank you.

[Mike McLaughlin, EVP & CFO at Informatica]

Yeah. No. Look. It's I would consider it as on track to what we expected and what we guided to, three months ago. You know, we've we've tried to be clear that the natural churn in self managed, is getting larger as it gets further and further from the end of sale, which we declared two years ago.

[Mike McLaughlin, EVP & CFO at Informatica]

Maintenance churn is a little bit larger on a natural churn basis, but still very solidly in the mid nineties. And and what's really accelerating and accelerating more as the year goes on, acceleration, acceleration, maybe that I shouldn't say it that way, is migration, modernization that folks are signing up to move their data workloads to the cloud, and they're using Informatica, IDMC to do it. And that's gonna lead to more roll off of both self managed and maintenance as the year goes on, and that's contributing to that double digit decline that we expect for the rest of the year and what we expected when we talked to you in February.

[Howard Ma, Director & Equity Research Analyst at Guggenheim Securities, LLC]

Got it. Thanks again.

[Operator]

Thank you, Howard. Our next question will go to the line of Pindulom Bhora with JPMorgan. Pindulom, your line is open.

[Pinjalim Bora, Executive Director - Equity Research at JP Morgan]

Great. Thank you for taking the questions. I just want to go back to the cloud renewals. Don't think I got a number there. Obviously, it was pressured last quarter.

[Pinjalim Bora, Executive Director - Equity Research at JP Morgan]

Maybe help us understand what did you see in terms of the cloud renewals rate versus last quarter? Was it kind of consistent? Or did you see any incremental pressure or improvement?

[Mike McLaughlin, EVP & CFO at Informatica]

Yeah. Thanks, Pindulim. We're not going to be disclosing any particular renewal rates other than maintenance going forward. But directionally, can say two things. One, it was consistent with what we expected and it was sequentially up.

[Mike McLaughlin, EVP & CFO at Informatica]

And we feel that we are on track to deliver the cloud renewal rates that we expected to deliver for the full year when we talked to you three weeks ago. And we're very much on track with the operational and systematic changes we made to make sure that that cloud renewal rate is solid and gets even better in '26 and beyond.

[Pinjalim Bora, Executive Director - Equity Research at JP Morgan]

Okay. Understood. One for you or a follow-up for you, Mike. For Q1, when I look at the ARR results, overall, seems like pretty good. But when I look at the net new ARR for cloud and look at the rest of the net new kind of changes for maintenance and self manage, I think typically in prior quarters, the net new on cloud kind of nets out positive versus the decline on the other two.

[Pinjalim Bora, Executive Director - Equity Research at JP Morgan]

But this quarter, seemed like netted out negative. I'm trying to think if it's largely because of the higher credits that you were talking about last quarter depressing that cloud ARR number or just the lower uplift multiple? Maybe help me understand that.

[Mike McLaughlin, EVP & CFO at Informatica]

I wouldn't attribute it to either of those things, Pendulum. Q one is always our smallest quarter by a big factor, and q one depends really idiosyncratically on, you know, what happens to be in the pipeline and what closes. It wasn't that the credit dynamics against the on prem or the uplift multiple were distorting it. And frankly, it was in line with what we expected and we beat the guidance that we offered to you last quarter. If you look at our q two guidance, you can see that it's going to be a larger quarter and gets us back to on a first half basis to a linearity that's pretty similar to what we've guided to in past years.

[Mike McLaughlin, EVP & CFO at Informatica]

So it's really more about just the idiosyncrasies of Q1 versus Q2 and the rest of the year, not those other factors.

[Pinjalim Bora, Executive Director - Equity Research at JP Morgan]

Got it. Thank you.

[Operator]

Thank you, Pindulo. Our next question will go to the line of Alex Zukin with Wolfe Research. Alex, your line is open.

[Alex Zukin, Analyst at Wolfe Research LLC]

Thanks. Amit, maybe just first for a two parter. Can you maybe comment on some of the what looked like successful operational and execution changes you guys made? What the results have been that kind of we can see in the P and L at this point? And then maybe also on the competitive environment, we've heard a bit more noise about the data vendors, getting a little bit more aggressive in the space.

[Alex Zukin, Analyst at Wolfe Research LLC]

You also obviously announced the partnership with Databricks. Maybe just help us, understand, a little bit of what's going on there. And then I have a quick follow-up for Mike.

[Amit Walia, Chief Executive Officer at Informatica]

Sure. Thanks, Alex. I think first, like Mike said, the operational changes that we made walking to the year around the renewal stuff is actually bearing fruit. We delivered against our guidance expectations and the team had I think as Mike said, sequentially, renewal rate for clouds went up and basically against what we were, expecting in our guidance plan. Same is looking through for q two right now, Alex.

[Amit Walia, Chief Executive Officer at Informatica]

So I feel very good about what the team is doing under the covers. And and of course, we cannot think of the full year, but I think very early on, they started basically hitting the turf and they obviously like I always said, that team has delivered day in, day out. They took it upon themselves. It hurt their pride, they are basically working hard towards that. I feel good.

[Amit Walia, Chief Executive Officer at Informatica]

On the competitive dynamics, CS saw no change. In fact, if anything, you saw the announcements we have done and what I announced this week. And I think next week when, most most of you will be there in Florida, you'll see even more enhanced announcements, not only of our innovation, but also our partnerships, and you will see that they continue to remain aggressive. With Databricks in particular, like I said, look, we support everything that they have. Our partnership with them is even more expanded in the enterprise segment as customers want to modernize, leverage AI.

[Amit Walia, Chief Executive Officer at Informatica]

They need they don't want to couple things together. They want to actually have a at scale platform like us, and that's the partnership we have with we have with them, which we announced, and that's actually bearing fruit. We see that. We're doing modernizations and new workloads in a bunch of large customers with them as well. So it's all good tailwind.

[Amit Walia, Chief Executive Officer at Informatica]

I don't see any change to the rest of the competitive dynamic out there, Alex.

[Alex Zukin, Analyst at Wolfe Research LLC]

Perfect. And then, Mike, maybe for you. Just again, think you got this question from the first two analysts. But just explain your confidence or maybe the conviction and visibility around maintaining the cloud ARR guide for the full year, given it looks like the NRR went down a little bit more than maybe it had historically on a sequential basis to 120, and you're still implying a net new ARR acceleration for the second half. Is that just more migration tailwinds kinda coming coming to bear?

[Alex Zukin, Analyst at Wolfe Research LLC]

Or kinda how do we how do we think about your your visibility there?

[Mike McLaughlin, EVP & CFO at Informatica]

Yeah. Migration is certainly a key a key part of it. And but the net new customer workload pipeline also looks good to support it. And, again, the first half, second half linearity using our q two guidance as the metric for first half is similar to how we've guided that in the past couple of years, which gives us further, confidence in it. And look, business, you know, feels good.

[Mike McLaughlin, EVP & CFO at Informatica]

While we are not yet in production with many of these AI workloads that Amit talked about, that pipeline for that product is real. And, you know, we would certainly hope that we'll be generating revenue from those Informatica for GenAI type workloads in the latter half of the

[Mike McLaughlin, EVP & CFO at Informatica]

year as well.

[Amit Walia, Chief Executive Officer at Informatica]

I think I have two comments to that, what Mike just said. Alex, to give you more piece part. One is on AI in particular. When we say more, of course, when customers go to production, it actually has an enhanced usage.

[Amit Walia, Chief Executive Officer at Informatica]

So then what we mean by what customers are doing today, they are using the product and the platform. Of course, same goes in modernization. Customers, obviously, when they are in dev, test, pre prod, the consumption of IPUs is less than when they get to prod. So we are seeing that the if the example that give you are all customers doing live work on the product, these are basically actively customers using the IPUs. As they scale into large productions, we expect, obviously, larger utilization.

[Amit Walia, Chief Executive Officer at Informatica]

That's what we see both on Informatica for GenAI as well as the GPT usage. And, of course, next week, we'll we'll unveil a lot more.

[Amit Walia, Chief Executive Officer at Informatica]

On the other side

[Amit Walia, Chief Executive Officer at Informatica]

look. I think, to build on what Mike said, look. The reality is as I sit here today, the barring any meltdown that can happen in the world, which none of us know, I mean, look, keep that aside, pretty healthy pipe right now. When we look at q two pipe, I'd mentioned in my prepared remarks that Informatica world, we're a year over year increase in the number of attendees and a year over increase in the pipe that basically we tagged against Informatica World. All of those things look, pretty good to us.

[Amit Walia, Chief Executive Officer at Informatica]

So while there are other things in the world that can happen that we keep an eye on, we cannot ignore those. We also look at these tailwinds and we balance the two and we feel good about where, hence we come to where we feel good about the guide.

[Alex Zukin, Analyst at Wolfe Research LLC]

Perfect. Thank you, guys.

[Operator]

Thank you, Alex. Our next question will go to the line of Koji Ikeda with Bank of America. Koji, your line is now open.

[Koji Ikeda, Director - Enterprise Software Equity Research at Bank of America]

Yeah. Hey, guys. Thanks so much for taking the questions. So earlier today, it was, it's it's kind of reported out there that ServiceNow bought a cloud native data catalog and data governance vendor today. And so thinking about that, it seems to be two sides of the coin.

[Koji Ikeda, Director - Enterprise Software Equity Research at Bank of America]

You know, on one side, definitely validating the importance of it. But on other hand, maybe increasing competition. And so curious to hear your thoughts on it.

[Amit Walia, Chief Executive Officer at Informatica]

Sure. I think I it's we don't look at it compare first of all, data dot world is a pretty tiny company. We've never ever run into them ever in any of our deals because they basically you they're as you can imagine, in every market, especially in data, which

[Amit Walia, Chief Executive Officer at Informatica]

is such a fragmented market. I mean, there are

[Amit Walia, Chief Executive Officer at Informatica]

500, six hundred companies out there doing offering data tools. So we'll never run into them ever. They're there. Obviously, there's a lot of people who do tiny, simple, easy use cases.

[Amit Walia, Chief Executive Officer at Informatica]

By the way, when I say easy, it's like easy easy easy at

[Amit Walia, Chief Executive Officer at Informatica]

the lower end of easy, not even easy, like, so that's that's how first I'll categorize. Number two is, look, I think let's not confuse cataloging to people what we do. The cataloging is needed in all markets. So as an example, even Tableau that is in the BI market actually has it had its own catalog. And when it came out, people in the early days thought, well, it's competitive.

[Amit Walia, Chief Executive Officer at Informatica]

No. Everybody has to catalog for their own use case, first of all. So look. I don't know what ServiceNow plans to do with it, but when you are moving IT tickets or log data, if you're a Splunk, you need to catalog those things for your own purpose within your own market. So that's how I see it versus people are looking to actually hire a lot of things for their own, world.

[Amit Walia, Chief Executive Officer at Informatica]

I don't see this here now. There is a whole new vendor in data cataloging, and that's not how I see it. But look, obviously, we will remain to see. But that's that's the reality of where the world is today.

[Koji Ikeda, Director - Enterprise Software Equity Research at Bank of America]

Got it. Thanks, Amit. And maybe a follow-up question for Mike. Appreciate all the commentary on kind of the new customer net new ARR and the migrations ARR, net new ARR. And it looks like, just based on our model, the migration net new cloud ARR is roughly the same this quarter as it was last quarter.

[Koji Ikeda, Director - Enterprise Software Equity Research at Bank of America]

But when I look at the churn away from self managed and maintenance, that seems to be getting bigger this quarter. So just help me square what's going on there, anything that we should be thinking about, you know, outside of

[Mike McLaughlin, EVP & CFO at Informatica]

just the normal course of business? Sure. So, the thing you have to remember is, as we've, you know, explained in the past is that we have and will continue to have for the next couple of quarters, the double what I call the double double overlap of the roll off of our original power center modernization program that we were selling prior to power center cloud edition, which as you remember, we launched late q three twenty twenty three and really didn't start selling in volume until q four and q one of, q four of twenty three and q four of q one of twenty four. Those power center modernizations original version, that was a two year modernization program. And so the maintenance or self managed, primarily maintenance, didn't roll off until you were done with the modernization, which is two years later.

[Mike McLaughlin, EVP & CFO at Informatica]

So all of the 2023 deals of that flavor are gonna roll off in 2025, particularly the first two quarters and some in the third quarter. And we have the roll off of the six month modernization program, is Power Center Cloud Edition that we sold in the second half of twenty twenty four and then, you know, going on into 2025. So you will see a exaggerated or or amplified roll off based on modernization from self managed and and maintenance that's not gonna apply to the increase in cloud modernized ARR. When we get to '26 and beyond, that old two year stuff will be out of the mix, and so that distortion will be gone. But it's just a it's just a fact of life for the next couple of quarters, and, you know, we bake that into all of our guidance and and modeling.

[Koji Ikeda, Director - Enterprise Software Equity Research at Bank of America]

Super clear. Thanks, Mike. Thank you for that. Appreciate it.

[Operator]

Thank you, Kaji.

[Operator]

Next question for the WiFi network.

[Operator]

Our next question will go to the line of Kash Rangan with Goldman Sachs. Kash, your line is open.

[Kash Rangan, Managing Director at Goldman Sachs]

Alright. Thanks, guys. I'm gonna try and see if I can do a Zukin meets Zelnick in my question, although it's cash. I assure you it's not Zukin or Zelnick, I'm gonna try to ask them ask the questions the way they might. With with that so with respect to the reset at the start of the year following q four results, I I can see why you're reiterating the reset guidance.

[Kash Rangan, Managing Director at Goldman Sachs]

But you also had a plan before you experienced the the issues that you did in q four that call for cloud CAGR of some 32%, etcetera. So while I appreciate the fact that you're reiterating guidance that might seem like it's a good short term thing, what Brad would have asked you is so why why is this acceptable and why are we not striving for getting back somewhere along the way to those old targets? And what are the measures that you might have put in place that give you relief, not just in a three month time horizon, but something that structurally sets you up well. And this is the this is the parter, and this this is the this is Dukin question. So you you see a lot of companies say AI needs data, which we agree, and you've been saying that too.

[Kash Rangan, Managing Director at Goldman Sachs]

But you're also seeing the different companies offer their own data platform, whether it's Salesforce or, of course, Snowflake is Snowflake. And then, ServiceNow has been doing that. So every platform applications company seems to want to do their own data platform. So how are you to measure your success in a landscape where you your platform neutrality is definitely well appreciated, but what is the proof we're gonna see that it is translating into meaningful incremental revenue and not just sustainable revenue? Thank you so much once again.

[Kash Rangan, Managing Director at Goldman Sachs]

I appreciate the, start of being direct, but, I thought we it's we're all friends here.

[Amit Walia, Chief Executive Officer at Informatica]

No. No. No. No issues being direct. I z plus z equal to k is what I would call this question then in an algebraic equation.

[Amit Walia, Chief Executive Officer at Informatica]

So we're all math people in we're all math people in this call. Multiple piece part question. So I think first, I'll begin with reset guidance against guidance what we are doing and why not go back to the old one. Cash, I think, you know, with all humility, are one quarter and into the year. And I think in one quarter, neither anybody should walk out after after you implement changes and claim super super victory and just basically raise their hands up in the, in the air and saying, hey.

[Amit Walia, Chief Executive Officer at Informatica]

And I'm gonna be 10 steps ahead back to the old one or neither we are decelerating. I think I think we have to have the the patience to basically we just finished three months in a fiscal year with where we feel that all the changes we made, we are feeling good about them. So I think I think until we finish half a year, I think it'll be with also realizing that while we have payments that I talked about, the world also is out there out there in the that we cannot ignore. So I think in one quarter, it'd be I think it would have been silly of us to come back and say, we're back to the old world. So that's not what we think, and I think that's the prudence and the, and how we execute internally.

[Amit Walia, Chief Executive Officer at Informatica]

So that's my answer to why not go back to the old one within three months of the change. I think, look, when we go to the second half, which is why we also took out the medium term guidance and look, we'll come back and we'll give you a revised medium of guidance. And for that also, we need to close out first half of the year, see many trends, feel good about many things, and we can come back and be thoughtful about what we wanna do. So that's answer number one. Answer number two, data platforms.

[Amit Walia, Chief Executive Officer at Informatica]

I think they're mixing two things with with with all with all due respect. Snowflake, I think there are two things I'll remind everybody. And I think, first of all, data platforms are not data management platforms. A Snowflake and a Databricks and a data cloud are not data managed. Just because the word data is there, we can very well put databases in that to MongoDB, and we can go into I can go on and on and on.

[Amit Walia, Chief Executive Officer at Informatica]

So I think I think customers choose data platforms and data management platforms and analytical BI tool platforms and yada yada yada. They just they just do the database and say everything goes into that. And, Kash, you've lived the world. I've lived the world. That existed when Oracle had databases.

[Amit Walia, Chief Executive Officer at Informatica]

Teradata had a data warehouse. Netease existed in that argument. Since then, since time immemorial has always come back to us, Hadoop came in and it was the same, but that's not how data and data manager platforms are two very different things. I would further enhance that the fragmentation of the data platform is exactly coming to work with our strength is. The more the data platforms, the more the application platforms, the more the fragmentation is, the more is, the more the complexity is, the more we solve that problem for our customers.

[Amit Walia, Chief Executive Officer at Informatica]

So that's how customers look at doing things. Thirdly, I'll also remind everybody, and I think we keep forgetting it's on our investor deck. So now that so that's it. Okay. Cloud ARR, 50% of it is master data management and data governance, 50% of it is integration, which is app integration and data integration.

[Amit Walia, Chief Executive Officer at Informatica]

And we always think of the data platform, which, by the way, don't compete with us. And even if there is a overlap in some areas, sure, that somehow ETL makes up Informatica, so % of cloud is that. So if somehow there's a native tool somewhere, ADF has it, that's it. Informatica is over. That's nothing wrong with MDM.

[Amit Walia, Chief Executive Officer at Informatica]

Nothing over data governance. Nothing over catalog across an enterprise. Nothing with app integration, nothing to do with modernization. So that's the real world. Coming back, we're gonna finish the first half.

[Amit Walia, Chief Executive Officer at Informatica]

We absolutely want to accelerate the growth. And lastly, let's not forget, cloud is growing. Because we have this double whammy this year that is on on prem self managed that Koji asked and Mike explained, we're going through the last mile of this big decline that we are taking that naturally smooths out the growth curve as you think of '26 and '27. You asked a great question. Sorry for the long answer, but I just had to reply with at least a three part algebraic equation.

[Kash Rangan, Managing Director at Goldman Sachs]

No. No. I love the passion you answered. Thank you so much for indulging me and Zelnick and Suken.

[Operator]

Thank you, Kash. Our next question will go to the line of Miller Jump with Truist. Miller, your line is open.

[W. Miller Jump, Vice President, Equity Research at Truist Securities]

Hey, thank you for taking the question. Just to stay on the AI topic maybe. Look, like the commentary you gave up top sounds like customers were leaning harder into the Informatica for GenAI initiatives in the quarter rather than pumping the brakes on new projects. Is that the correct interpretation? And then Mike, just a follow-up to that.

[W. Miller Jump, Vice President, Equity Research at Truist Securities]

I just want to make sure I understand part of the comment you made in response to Alex's question. Is an increase in the Informatica or GenAI business baked into your assumptions in the second half of the year? Thanks.

[Amit Walia, Chief Executive Officer at Informatica]

Yeah. I think I think two ways to think about it. First of all, remember that the beauty of IDMC and the beauty of IPU consumption pricing model is that customers can, without having to think a, b, or c, can start their GenAI, you know, whatever you wanna call it, pre prod projects right away. And that's what they are doing. We see that of the one seventy five customers that are Informatica for GenAI or the 500 plus for for ClearGPT.

[Amit Walia, Chief Executive Officer at Informatica]

That's what they're doing. They can immediately consume their IPUs given what they have and go have at it. And we are seeing that we can track that data. And that's what we see customers do. Now, so I don't see customers slow down their AI initiatives.

[Amit Walia, Chief Executive Officer at Informatica]

Not at all. I think AI is not like, oh, I will do it at some point. I think what is happening is that every enterprise is making a decision of different order because there are different places they use, like, GenAI. And in the world of where we live, for example, customers using GenAI in a in a in a chatbot to basically take customers at calls. Those are all things happening at the app layer.

[Amit Walia, Chief Executive Officer at Informatica]

So here, the customers are going about doing the work, and they are working around the organization to then figure out, okay. Now that I have to take it to prod, what are the guardrails? How do I get it approved? And what is it that the business has to do? Those are kind of I see them happening because why?

[Amit Walia, Chief Executive Officer at Informatica]

Because the GSIs are doing that work for them. And then Informatica practice comes and talks to us. The same practice is working with Azure and a Snowflake. So we are seeing the gradual increase of that adoption on our platform, on our usage, and I expect to see them going into prod as we think about the latter half of this year and next year for sure.

[Mike McLaughlin, EVP & CFO at Informatica]

And with respect to your question about what's in the model, we don't have a specific line item for AI bookings in 2025. What we have is numerous preproduction workloads that are using our capabilities for AI, and we have an ever growing pipeline of customers that are interested in using Informatica for that purpose. And it all contributes to our view that we're gonna meet the cloud guide for the year. So, no, there's not a specific number in there, but directionally, it all ladders up to what we think is a good foundation for the amount of software we expect to sell in 2025.

[W. Miller Jump, Vice President, Equity Research at Truist Securities]

Appreciate the color. Thank you.

[Operator]

Thank you, Miller. Our next question will go to the line of Matt Hedberg with RBC Capital Markets. Matt, your line is open.

[Matthew Hedberg, Software Analyst at RBC Capital Markets]

Great. Thanks for taking my questions, guys. You know, I wanted to go back. It you know, to hear you guys in the last mile of the cloud transition is is certainly exciting. And, you know, I know you guys want to sort of, like, you know, not force change with your maintenance customers.

[Matthew Hedberg, Software Analyst at RBC Capital Markets]

But as you enter this last mile, are there things that you're thinking about potentially doing, whether it's additional sales compensation or maybe end of lifing maintenance at some point to kind of, you know, truly get that middle of the last 10 feet, you know, once we're, you know, kind of close to that last mile?

[Amit Walia, Chief Executive Officer at Informatica]

Terrific question, Matt. I think, I'll answer it this way. And then you'll, if you're there next week, you'll probably hear us talk a lot more about these things with our customers. Look. We've we've not leaned in to do end of life, but there are natural things that are that are headed towards there.

[Amit Walia, Chief Executive Officer at Informatica]

Like, for example, power center is now end of normal support, regular support. And we've already told our customers they're already aware of it and starting early next year in March, it'll get into extended support. And in the old days, customers would move from one version of on prem to the next version of on prem, and this is the last version of on prem after this, either they stay on extended support, which is cost more, or they move to cloud. And, you know, the reason and you know, like that, we are seeing lot of, you know, extra, attendance to our modernization webinar, customers reaching out because, you know, they take time to prepare. So in a way, remember, because we run operational workloads, we don't want to basically put a hammer on a customer's head and say we're gonna end up, like, tomorrow.

[Amit Walia, Chief Executive Officer at Informatica]

But the end of support is leading customers to basically make that decision in one way where there's a compelling win. Secondly, tied to that is we are seeing such a high rise in both our AI webinars also. Customers are connecting with dot, which we've been educating them in the last twelve months even more so that, hey, You want AI. You only can get AI when you get to the cloud. And they're basically now getting a two for that.

[Amit Walia, Chief Executive Officer at Informatica]

Okay. I have a compelling event that I can get all the AI benefit get to cloud. So we're seeing the increased, involvement of customers with us coming to our webinars and talking to our reps. So, again, customers plan with our product. So I think we see that, and I and I and I think that should be the natural flow of things.

[Matthew Hedberg, Software Analyst at RBC Capital Markets]

Thanks, Amit. That's super super helpful. And then, I just had one for Mike. Just a clarification on Howard's question. And maybe I just want to make sure that I understand the full year guide.

[Matthew Hedberg, Software Analyst at RBC Capital Markets]

It looked like last quarter, you guided revenue from a constant currency basis, 4.6%, but now it's 3.5% constant currency. So I mean, to me, that seems like a little bit of a lower, but I maybe it's some something to do with, you know, the way you calculate constant currency. I just just point of clarification on that.

[Mike McLaughlin, EVP & CFO at Informatica]

Look. We guide in dollars, and we are reaffirming the numbers that we're gonna deliver for the full full year. And we're not obsessed after one quarter into the year in particularly a context of a world where exchange rates have been moving, you know, three to 8% in the course of a quarter of micro adjusting our full year guide for FX. It's not a lower it's not a lower of anything. Yes.

[Mike McLaughlin, EVP & CFO at Informatica]

Mathematically, we didn't roll into the guide potential future FX rates for the reasons I just described. We're focused on delivering the dollars that we got it to deliver in February.

[Matthew Hedberg, Software Analyst at RBC Capital Markets]

Okay. Thanks a lot, guys.

[Operator]

Thank you, Matt. Our next question will go to the line of Tom Blakey with Cantor Fitzgerald. Tom, your line is open.

[Thomas Blakey, Managing Director at Cantor Fitzgerald]

Hey, guys. Thanks for taking my question. I think my questions might be a little simpler here. But the could you just walk us through again what dynamics you're kind of seeing here? Remind us, I guess, on the 1.5 to 1.7 average lift, you know, is kinda holding things back on what you saw in the quarter that maybe allowed you to, exceed this, in 1Q twenty five if I heard you correctly.

[Thomas Blakey, Managing Director at Cantor Fitzgerald]

Just trying to get a better understanding of, what could degrade into 2Q or the second half here and what could be better. Maybe as a follow-up, I'll just ask if the 1,000,000 plus cohort seemed a little stronger than at least what I was looking for in in 1Q. Was there anything there, aside from just timing pulling things in from 2Q to 1Q? Or is there something else from a, you know, any any other dynamics would be helpful there that could possibly also continue, into the second half would be helpful? Thank you.

[Mike McLaughlin, EVP & CFO at Informatica]

Yeah. Sure. So let me start with the uplift multiple. The uplift multiple is coming down as I described last quarter because we're allowing it to come down because we're letting our Salesforce address a larger portion of our installed base that will naturally generate our on prem installed base. They will naturally generate a lower uplift multiple because of how they're using their on prem products, needs fewer IPs to modernize than some others, or what they're paying for their historical, on prem subscription or maintenance versus what, you know, a fair price for IPs is going forward.

[Mike McLaughlin, EVP & CFO at Informatica]

And we are allowing that uplift multiple to degrade because we have enough experience with cloud modernizations to know that the lifetime value of that customer once they modernize is really, really attractive. We know that when they sign up for the modernization upfront, they drag additional expansion sales in addition to the IPUs they need to do the modernization, and that's not included in our uplift multiple calculation, by the way. Once they get in production in the modernization, their utilization of IPUs is very good, which tends to lead to interim expansion. And they renew at a very high rate, higher than our average once they get to the maturity of their initial deal. So the reduction of the uplift multiple, while it does have, you know, near term implications mathematically on the amount of cloud we get in day one from a modernization is is an intentional reduction.

[Mike McLaughlin, EVP & CFO at Informatica]

In q one, it was a little bit above that 1.5 to 1.7 range, but I wouldn't read anything into that. We expect for the full year that it's going to be in that range that we guided to. I'm happy that it's where it is, but I'll be equally happy if it lands at 1.6 for the full year. And then was was there a second part to that question?

[Thomas Blakey, Managing Director at Cantor Fitzgerald]

Yeah. Just asking about

[Mike McLaughlin, EVP & CFO at Informatica]

building Yeah. The one that

[Thomas Blakey, Managing Director at Cantor Fitzgerald]

Plus cohort.

[Amit Walia, Chief Executive Officer at Informatica]

Yeah. The 1,000,000

[Mike McLaughlin, EVP & CFO at Informatica]

Yeah. The 1,000,000 plus. Look. Our customers are generally large, and they're getting larger. You can see it in the increased ACV of our cloud customers up 20% year over year.

[Mike McLaughlin, EVP & CFO at Informatica]

And when that's happening, you're gonna have more people wherever you draw the line in the sand, whether it's hundred thousand dollar customers, million dollar customers, $500,000 customers, that's gonna go up too. It's just reflective of the fact that large enterprises trust Informatica for their cloud data management and that's continues to accelerate.

[Amit Walia, Chief Executive Officer at Informatica]

Thank you.

[Operator]

Thank you, Tom. Our last question will go to the line of William Power with Baird. William, your line is now open.

[William Power, Senior Research Analyst at Baird]

Hi. Thank you. This is Yoni Simolis on for Will Power. Thanks for taking the question. I just wanted to double click on the cloud NRR.

[William Power, Senior Research Analyst at Baird]

It looked like it ticked down a little bit further in Q1. So I'm wondering if you could discuss what might have driven that under the surface. Sounds like gross retention was in line with your expectations. Sounds like you haven't seen much in terms of macro. So is it more that you're encountering difficulty with the cross sell of products into your customer base, or is it more a function in the slowdown and the expansion of workloads that customers are bringing on to your platform?

[William Power, Senior Research Analyst at Baird]

It'd great if you could just discuss the specific drivers of the net new business in more detail. And also, there are any particular actions you're taking in the cross sell motion, aside from the the organizational improvements that Avi mentioned at the top? Thanks.

[Mike McLaughlin, EVP & CFO at Informatica]

Yeah. Sure. So, you know, the net retention rate has variability to it, and we've always warned people that that would be the case. And, you know, it it exhibited that variability in q one, which, as you know, is our smallest quarter of the year and therefore is most subject, to that. One of the things and and so, you know, there's nothing that we believe is negative about that.

[Mike McLaughlin, EVP & CFO at Informatica]

It's still a 20%. And if you're if you deliver your overall growth, but your net retention rate is a little bit lower, it means your net new is higher. And so we're we're happy about that bit of it. There is one thing that does affect that though that is structural, and that is modernizations. So your average modernization customer, so a customer who is choosing to move their data workload from Informatica on prem to Informatica cloud, is more likely than a net new workload customer to be a new cloud logo, and therefore, more likely to be not accretive to your net retention rate because they weren't in our cloud base or cloud base.

[Mike McLaughlin, EVP & CFO at Informatica]

They were in our on prem base, our net retention rate is cloud only. They're more likely to have not been in the cloud base a year ago than someone who is standing up a new workload or an expansion of existing workload. And as we see, therefore, modernization contribute a greater proportion of our cloud growth, directionally, has a negative impact on the net retention rate, but it has a positive impact on the net new. So, you know, there there are gonna be things that are gonna move that number around, but, know, the range that it's in, we feel comfortable with.

[William Power, Senior Research Analyst at Baird]

Okay. Thanks so much.

[Mike McLaughlin, EVP & CFO at Informatica]

Sure thing.

[Operator]

Thank you, Wilson. That will conclude the Q and A session. I will now turn the call back over to the management team for closing remarks.

[Amit Walia, Chief Executive Officer at Informatica]

Thank you. Well, look, I think as we said, q one, we feel very good about a solid start to the year. And I'll address that, look, it's a landmark moment. We are almost 50% of our total ARR is cloud now, 49.8 some decimal points to be precise, and that's a very big milestone for us. And lastly, I think I will just remind everyone that our cloud business is growing very handsomely.

[Amit Walia, Chief Executive Officer at Informatica]

This is a year where it's the last mile of our transformation, where we have the double bubble that Mike explained, where we are basically churning the dip reducing a lot of those self managed modernization roll offs that are coming from PC1.o. So overall, this is the last mile of that happening. We obviously came back in February and gave you guys a revised guide for the year, and we are executing in that guide and we feel very good about that. Obviously, we are gonna come back at the end of the first half of the year. As we look towards the latter of the year, we'll come back and give you a revised guide, medium guide.

[Amit Walia, Chief Executive Officer at Informatica]

But we feel very good about where the cloud business stands, the intrinsics of what we are doing, how customers are modernizing, how AI workloads are getting adopted, our place in the market. Obviously, our innovation, we unveil more of it next week at Informatica World. So overall, feel very good about the start of the year and how our teams are executing. Thank you.

[Operator]

That will conclude the Informatica Incorporated fiscal first quarter twenty twenty five call. Thank you for your participation. I hope you have a wonderful rest of your day.

Participants

Executives

• Victoria Hyde-Dunn, VP - IR
• Amit Walia, Chief Executive Officer
• Mike McLaughlin, EVP & CFO

Analysts

• Howard Ma, Director & Equity Research Analyst at Guggenheim Securities, LLC
• Pinjalim Bora, Executive Director - Equity Research at JP Morgan
• Alex Zukin, Analyst at Wolfe Research LLC
• Koji Ikeda, Director - Enterprise Software Equity Research at Bank of America
• Kash Rangan, Managing Director at Goldman Sachs
• W. Miller Jump, Vice President, Equity Research at Truist Securities
• Matthew Hedberg, Software Analyst at RBC Capital Markets
• Thomas Blakey, Managing Director at Cantor Fitzgerald
• William Power, Senior Research Analyst at Baird