Informatica's CEO Discusses Q3 2013 Results - Earnings Call Transcript

| About: Informatica Corporation (INFA)

Informatica (NASDAQ:INFA)

Q3 2013 Earnings Call

October 24, 2013 5:00 pm ET

Executives

Stephanie Wakefield - Vice President of Investor Relations

Sohaib Abbasi - Chairman, Chief Executive Officer and President

Earl E. Fry - Chief Financial Officer, Chief Administration Officer, Principal Accounting Officer, Executive Vice President of Global Customer Support & Service and Secretary

Analysts

Brent Thill - UBS Investment Bank, Research Division

Tom M. Roderick - Stifel, Nicolaus & Co., Inc., Research Division

Mark R. Murphy - Piper Jaffray Companies, Research Division

Raimo Lenschow - Barclays Capital, Research Division

Edward Maguire - CLSA Limited, Research Division

Nandan Amladi - Deutsche Bank AG, Research Division

Chaitanya Yaramada - Robert W. Baird & Co. Incorporated, Research Division

Steven R. Koenig - Wedbush Securities Inc., Research Division

Michael B. Nemeroff - Crédit Suisse AG, Research Division

Abhey Lamba - Mizuho Securities USA Inc., Research Division

Rakesh Kumar - Susquehanna Financial Group, LLLP, Research Division

Steven M. Ashley - Robert W. Baird & Co. Incorporated, Research Division

Operator

Good afternoon. My name is Dustin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Informatica Q3 2013 Earnings Conference Call. [Operator Instructions] I'll now hand the call over to our host, Ms. Stephanie Wakefield. Ma'am, you may begin.

Stephanie Wakefield

Good afternoon, and thank you for joining us today. I'm here with Sohaib Abbasi, our CEO; and Earl Fry, our CFO, to discuss our Third Quarter 2013 Financial Results. Today's call is being webcast and will be available for replay on our Investor Relations website at www.informatica.com/investor.

As a reminder, today's discussion will include forward-looking statements such as our projected financial results for the third quarter and full year 2013 and 2014, our growth opportunities and strategies, our investment strategies, our product plans, our demands for our products and services, and the future effects of acquisitions and future integration efforts.

Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from the statements made today. For a discussion of these risks and uncertainties, you should review our recent SEC filings, including our most recent Form 10-Q. We assume no obligation and do not intend to update or revise any forward-looking statements made during this call as a result of new information or future events.

Also, during today's call, we will discuss non-GAAP financial measures. A reconciliation of non -- of GAAP to non-GAAP results is provided in today's earnings release and in the Supplemental Metrics section of our Investor Relations website. Sohaib and Earl will share a few remarks about the quarter before we turn to your questions. [Operator Instructions] With that, I'd like to turn the call over to Sohaib.

Sohaib Abbasi

Thank you, Stephanie. Our Q3 results clearly show that the leadership, organizational and operational changes we have implemented over the past 5 quarters are leading to record revenues. Total revenues grew year-over-year by 24% to $235 million, and software revenues grew by 35% to $99.8 million.

Included in software revenues, license grew by 34% year-over-year to $88 million, and subscriptions grew by 48% to $11.8 million, driven by our fast-growing cloud data integration service. The top Q3 highlights were strong performance of our North America team and of our newer products. The exceptional performance by our North American team reflects that our organizational and operational changes are working well. And the outstanding contribution by our newer products signifies that our product roadmap is well aligned with the evolving top priorities of customers.

Based on our firm conviction in our long-term growth opportunity, we are increasing our investments, both in strengthening our product portfolio and in pioneering new technologies to benefit from emerging megatrends such as cloud computing, big data and the Internet of Things.

In North America, our team's performance reflects strong, broad-based customer demand in the commercial sector that offset the as-expected muted demand in the public sector. The top data-driven IT initiatives included analytics, or big data projects, across many vertical segments; regulatory compliance and customer centricity in financial services; cost-effective, high-quality delivery in healthcare and omnichannel commerce in retail. Reflecting the vital role of our product portfolio for the top customer priorities, both IT and line of business executives increasingly regard Informatica as a more strategic partner.

In Europe, with strengthened leadership, driving more rigorous sales discipline, we are seeing early signs of success. The most notable improvement was in Central Europe, as a result, both of stronger leadership and gains from our acquisition of Heiler Software. European business imperatives to gain data-driven competitive advantages, are driving demand for the broader Informatica Platform, while initiatives for data privacy and cost efficiency are driving demand for ILM.

In emerging markets, including Latin America and Asia-Pacific, there is growing interest in our newer products, including Informatica Cloud. In Latin America, with our stronger leadership team and broad-based customer demand, we are better positioned for growth in the coming quarters. And in Asia-Pacific, with an increasing customer base, the relative contribution from existing customers continues to grow, underscoring our opportunity to upsell our core products and cross-sell our newer products. In my recent customer meetings in Japan and ASEAN countries, I was impressed by our increasingly strategic opportunities across many vertical segments, including financial services and telecommunications.

Turning to product results. Our newer products, beyond PowerCenter and PowerExchange, now contribute more than half of our software revenues. Our multiyear product innovation roadmap, complemented by our recent sales specialization model, has positioned us well for the bigger opportunity to cross-sell our expanded portfolio.

The usage of our newer products by our customers has increased consistently from 4% in 2007 to 46% of the active projects in Q3 2013, representing our progress in pursuing this bigger, largely untapped cross-sell opportunity.

Among our newer products, cloud data integration, MDM and ILM continue to be the fastest growing. Growing customer adoption of cloud computing is driving higher demand from customers of all sizes for our broadening cloud data integration service. A variety of top priority business initiatives such as customer centricity, supply chain optimization, regulatory compliance, cost-effective healthcare delivery and omnichannel commerce are leading to bigger strategic opportunities for MDM, including our new PIM offering. And the increasing focus on data privacy and cost-effective data archiving is fueling growing demand for ILM.

As an example of our ILM opportunity, one of the leading providers of insurance in the world chose Informatica MDM and Cloud MDM for its rollout of salesforce.com to more than 10,000 users. The insurance provider's associated business goals are to increase revenues through more effective upsell and cross-sell, to deliver better services through customer insights, to expedite post-merger integration and to reduce on-premise IT infrastructure costs.

As an illustration of our ILM archiving opportunity for big data, eMeter, a pioneer in smart grids technology for the utility segment, selected Informatica for cost-effective management of machine data. eMeter, now part of the smart grid division of Siemens, will offer Informatica ILM to its customers to archive massive volumes of machine data captured by millions of gas, electric and water meters it currently has under contract.

In our core data integration category, our upsell opportunities are fueled by our continual innovation. PowerCenter Big Data Edition, PowerCenter Express, and the latest, Data Integration Hub or DIH. As an encouraging indicator, one early adopter estimated that DIH will reduce cost and time of integration by up to 80%. Instead of the traditional labor-intensive brittle point-to-point integration, DIH enables a more productive, robust, public-subscribed approach.

In Q3, Jones Lang LaSalle, a leading financial and professional services firm specializing in commercial real estate services and investment management with operations in 70 countries, selected Informatica DIH and MDM over alternatives for its data integration projects. Customer interest in Informatica PowerCenter Big Data Edition continues to grow for IT projects utilizing Hadoop, as well as built-for-purpose analytic databases such as EMC Greenplum, in-memory databases such as SAP HANA, and Agile BI such as Tableau.

Turning to our long-term growth opportunity. We are increasing our investments, both in strengthening our product portfolio and in pioneering new technologies. Just as we pioneered cloud data integration 7 years ago, years ahead of customer demand, we are now innovating for long-term megatrends, such as big data and the Internet of Things.

For big data, we are pioneering self-service versatile technology to business users to prepare data once for all analytic purposes, instead of the traditional way for IT developers to prepare data multiple times, once for each alternative. And at last count, there were 6 alternative analytic platforms, each optimized for distinct purposes: data warehousing; built-for-purpose analytic databases; Agile BI; in-memory databases; cloud analytic services; and Hadoop. Despite the remarkable vendor claims to the country, in analytics, one size does not fit all.

For the Internet of Things, advancing on our Vibe Virtual Data Machine roadmap, we will soon deliver high-performance data streaming technology, code-named project Binge, to capture ultra-high volumes of high-velocity machine data, such as sensor data, web-locked data, application lock data, and call detail record data. Built using the proven, latest and lowest latency and highest bandwidth Informatica Ultra Messaging, Binge would allow customers to keep up with the high volumes of transient machine-generated data and mitigate the risk of losing any ultrafast data.

To sum up, our Q3 results are further evidence that our leadership and operational changes are working well and that our product roadmap is well aligned with the top priorities of our customers. With confidence in our improving operational discipline and conviction in our promising long-term opportunity, we are increasing our investments in pioneering new technologies to benefit from emerging megatrends, such as big data and the Internet of Things.

Now, I'll turn it over to Earl.

Earl E. Fry

Thank you, Sohaib. Our total revenues were a third quarter record, at $235.4 million, up 24% on a year-over-year basis. Software revenues were $99.8 million, up 35% year-over-year. License revenue component of software revenues came in at $88 million, up 34% year-over-year, while subscription revenues grew to $11.8 million, up 48% year-over-year.

Total service revenues were a record $135.6 million, up 16% year-over-year, with the maintenance revenue component, up 14% to $104.5 million, and the consulting and education component, up 26% to $31 million. Our deal metrics were solid in Q3 and reflect the increasingly strategic nature of our relationships with our customers. We booked 23 transactions over $1 million, up significantly from 13 a year ago, and we closed 87 deals over 300K, up from 75 a year ago. Our average transaction size for orders over $100,000 came in at a record $589,000, up from $443,000 a year ago.

Our Q3 geographic results reflect solid contribution from North America, stabilization in Europe against a still-challenging macro backdrop and room to improve in Asia and Latin America. North America represented 70% of our total revenue in the third quarter, while Europe represented 21%, and the rest of world represented 9%. This is similar to our year-ago third quarter results for North America with 71%, Europe was 20%, and the rest of the world was 9% of total revenue.

From a vertical industry perspective, financial services, healthcare and manufacturing were our top contributors to new license orders. And as we expected, we saw softer U.S. federal government spend this quarter, which resulted in total public sector contributing only about 8% of new license orders during the third quarter.

Non-GAAP gross profit, which excludes $5.6 million in amortization of acquired technology and $1.3 million of stock comp, came in at $196.7 million or 84% of total revenue in Q3, consistent with a year ago.

Software margins were 97% in Q3, and service margins were 73%. Non-GAAP operating income as a percentage of revenue was 23% in the third quarter compared to 23.7% a year ago. And as Sohaib commented earlier, we are making incremental technology investments and continue to strengthen our sales force, in line with our top priority to drive increased revenue growth.

GAAP net income for the third quarter 2013 was $0.09 per diluted share, and non-GAAP net income was $0.33 per diluted share. Non-GAAP net income for diluted share was up 24% from last year and came in at the very high end of our target range.

Total headcount at the end of Q3 was 3,178, up 98 from the end of Q2, and up 364 from a year ago, with a majority of the current quarter increase coming in R&D headcount additions. Sales and marketing headcount ended the quarter at 1,045, up 10 from Q2 and up 63 from a year ago. We expect to continue to add critical headcount in all areas of the company through the remainder of 2013.

Cash flow and balance sheet metrics were solid again this quarter, reflecting strength and consistency in our business model. We ended the quarter with $621 million in cash and investments, up from $604 million in Q2. We generated third quarter cash flow from operations of $29.8 million. And over the past 12 months, we've generated $198 million in cash flow from operations.

During the third quarter, we used $21 million in cash to repurchase 557,000 shares of our stock, and ended the quarter with 100 -- with 111.5 million shares outstanding on a fully diluted basis. DSOs were 63 days in Q3, within our target DSO range of 55 to 65 days.

Based on Q3 orders, our potential future revenues disclosure, which includes deferred revenue balances, as well as orders not yet taken to revenue as of September 30, is $301.6 million, up over $50 million from last year. Deferred revenue was $263.3 million, up over $36 million from last year and down $9.3 million sequentially, primarily due to typical seasonality of maintenance renewals.

Our tax rate for the quarter was 62% on a GAAP basis and 32% on a non-GAAP basis. We continue to expect our non-GAAP tax rate for the full year 2013 to be approximately 33% before the impact of certain discrete tax items. And as we highlighted on the Q2 earnings call, we expected to, and did, incur acquisition integration-related tax expenses in Q3, which impacted our GAAP tax rate significantly and will cause our GAAP tax rates to be closer to 40% for the full year of 2013.

We continue to expect our income tax provision, as well as both our GAAP and non-GAAP tax rates will have some degree of variability and will be very sensitive to our quarterly geographic mix of earnings.

Turning to guidance. As we've consistently stated over the past few quarters, our top revenue -- our top priority is to drive increased revenue growth by continuing to invest in new products and technologies and a stronger sales organization. We are encouraged by our recent execution in North America and expect to begin seeing better contribution from Europe and our other international operations in the coming quarters.

Based on these assumptions, we are setting Q4 revenue guidance in a range of $260 million to $275 million, and setting Q4 non-GAAP earnings per share guidance in a range of $0.45 to $0.50. And as a result for the year 2013, we are increasing our target for total revenue to a range of $932 million to $947 million, and tightening our non-GAAP EPS target to a range of $1.40 to $1.45.

Looking forward to 2014, we expect a constructive macroeconomic environment in North America and are optimistic about our ability to improve international sales execution, particularly in Europe. We are setting our initial targets for 2014 with a revenue range of $1.01 billion to $1.06 billion and non-GAAP EPS in a range of $1.55 to $1.65. Also, since we have recently increased our investments in the business, I would encourage investors to revisit their quarterly models for 2014 and be conservative with their profit margin and earnings assumptions for the first half of 2014.

As a reminder, our non-GAAP EPS targets do not include the after-tax impact of an estimated $0.04 per share per quarter for the charge for the amortization of intangibles and acquired technology, the tax-affected impact of stock comp of approximately $0.10 per share per quarter, an estimated $0.02 a share impact in Q4 '13 only due to an additional acquisition integration-related tax expense and any major acquisition costs and expenses.

With that, we will open up the call for questions. [Operator Instructions] Operator, may we have the first question?

Question-and-Answer Session

Operator

Our first question comes from the line of Brent Thill with UBS.

Brent Thill - UBS Investment Bank, Research Division

As it relates to some of the larger deals, you saw a nice pick up in the deals over $1 million. I'm curious if you could just help give us a sense of how customers are taking more of the broader portfolio. And what really drove that pickup in some of the larger deals?

Sohaib Abbasi

Brent, one of the encouraging metrics was that of the $1 million deals, $20 million deals in North America, it represented 9 different verticals that shows very healthy diversification across a number of vertical segments. And among our newer products, Data Quality and MDM played a very big role in those deals. They were in -- about 40% of our deals included those newer products. And there were even deals that -- larger deals that included our cloud product. So diversification across many verticals and diversification across our product line.

Earl E. Fry

Yes. Maybe just a little more color on that. As Sohaib mentioned, we did see good multiple products being sold in most of the million-dollar deals, and has really a large portion of them had Data Quality and MDM. We had another -- almost 40% of them had included the B2B product. We had another 25% of them included the ILM Technology. And we had, for the first time, we had almost half. So I would say, 11 of the deals over $1 million were actually $2 million or more. So we're seeing customers make bigger strategic bets. And again, it's across a variety of products which we've been talking about the cross-sell opportunity for a long time. And you're seeing it across a broad spectrum of verticals, which effectively allowed us to counteract some of the softness we expected in the public sector.

Operator

Our next question comes from the line of Tom Roderick with Stifel.

Tom M. Roderick - Stifel, Nicolaus & Co., Inc., Research Division

So I know there's certainly the temptation to just look at the license line here, which certainly outperformed and was very good. But as we put the 2 together, I guess, I'd be curious in understanding better how you're compensating the sales force to sell relative to subscriptions versus license. And from that standpoint, how should we think about the potential for the subscription line to grow as we kind of work our models through going into next year?

Sohaib Abbasi

Tom, one of the evolutions that we've talked about is mainstreaming of our subscription business, specifically cloud. And as was represented by one of our large transactions, it included both our MDM on-premise product and Cloud MDM. And we will begin to see more of such opportunities where our customers are moving towards a hybrid IT organization. And we have the incentives for our field to work very closely with our specialists in MDM, as well as in cloud areas for us to make sure we can position the entire portfolio.

Earl E. Fry

And Tom, let's not forget that the use cases are very different for our cloud integration and MDM technologies than the on-premise technologies. So it really behooves our sales teams to make sure they understand what the customer use cases are and need, so that we've got the right solution for them. So -- and then that said, maybe addressing the other part of your question, I do expect the subscription business to continue to grow at a much faster rate, even through all of next year than the overall license and software lines. So I do expect that to continue to grow at a very healthy clip.

Operator

Our next question comes from the line of Mark Murphy with Piper Jaffray.

Mark R. Murphy - Piper Jaffray Companies, Research Division

Sohaib, we spoke with 11 of your partner firms earlier this month, and I was really surprised by the breadth of the big data activity that was involving Informatica. And sometimes it was in conjunction with Hadoop. There was also a sense that your big data products could pick up in full force next year. So I was just curious if you might have any comment on the underlying dynamics there and, specifically, the outlook for your big data products going into next year?

Sohaib Abbasi

As we've commented on -- in several of our earnings calls, we see big data projects using a variety of alternatives. Hadoop is obviously one that is being used by Facebook and OpenTable, Western Union and a few others that we've talked about. But we also have customers that are using Informatica for big data projects that involve in-memory databases, involve analytic databases. We have over 100 customers that are using Informatica for a variety of such big data projects. And the interest continues to grow, the number of the POCs, the number of demonstrations. And the pipeline looks very healthy. There continues to be increasing interest in big data, and I'm very optimistic that we will benefit from that in the coming year.

Operator

Our next question comes from the line of Raimo Lenschow with Barclays.

Raimo Lenschow - Barclays Capital, Research Division

Just quickly, maybe a question for you, Earl. If I look at deferred, and that came in slightly weaker than we had modeled and consensus modeled, and then obviously then, people calculate the booking numbers and then bookings looked a little bit weaker. Can you -- I mean -- but I know in deferred, there's a lot of maintenance and stuff in there. Can you just help us understand the moving parts in there, so that we can clear that up?

Earl E. Fry

Sure. The vast majority for the sequential decline in deferred revenues is because of maintenance. And if you go back to a year ago, we had basically the same pattern. So as we get larger, as -- and part of it also goes to the fact that we had 2 soft quarters in Q2 and Q3 of last year, which impacts our -- the volume of maintenance renewals that we had available to us in Q3. So I do expect we will continue to exhibit, even going forward, seasonality in the deferred revenue balance, driven in large part by basic seasonality in deferred maintenance. I expect deferred maintenance, total deferred to be up very nicely in Q4. So it's literally just seasonality on the deferred maintenance side.

Operator

Our next question comes from the line of Ed Maguire with CLSA.

Edward Maguire - CLSA Limited, Research Division

I was wondering if you could just discuss what the environment that you're seeing in really traditional data warehousing which, I mean, I know there's a lot of new uses of your technology. But could you comment on really the -- what you're seeing in terms of the core ETL uses?

Sohaib Abbasi

Ed, as you know, our core products are being deployed with a variety of alternative analytic platforms. Clearly, data warehouse -- the traditional data warehouses continue to be the dominant way that customers are using our products. But their increasing usage, were built for purpose analytic databases like Teradata Aster Data, or Netezza from IBM, Vertica from HP, as well as in-memory databases. So our core products are doing very well. But again, we're enjoying the benefit of having a product that is open and works with a variety of analytic alternatives.

Earl E. Fry

And probably another thing to think about, we've talked a lot about how people are augmenting their current data warehousing environments with new forms of analytics. And I think the best evidence of that is not only kind of the mix of new business for us, but the fact that we continue to enjoy 95%, 96% maintenance renewal rates, which basically goes to the fact that people are continuing to run their existing data warehouse and analytic platforms and augmenting it with newer platforms.

Operator

Our next question comes from the line of Michael Turits with Raymond James. Next question comes from the line of Nandan Amladi with Deutsche Bank.

Nandan Amladi - Deutsche Bank AG, Research Division

With all the healthcare exchanges in the U.S., how important is that segment for you? You've had a product in that space for some time. Can you talk about the traction for your platform there?

Sohaib Abbasi

Healthcare, in general, is one of our fastest-growing vertical segment. Clearly, the ObamaCare Reform Act, a mandatory requirement for health insurance exchanges is creating demand at the state level. And we, Informatica Technology, is being utilized in about -- by a dozen states. But the opportunity in healthcare goes beyond that. There are several initiatives by providers to reduce the cost and improve the quality and the focus on patients, as well as physician utilization. All of those are driving very healthy demand for our entire product portfolio.

Operator

Our next question comes from the line of Steve Ashley with Robert Baird.

Chaitanya Yaramada - Robert W. Baird & Co. Incorporated, Research Division

This is Chaitanya Yaramada for Steve Ashley. I just wanted to ask about the European sales execution initiatives. Just wanted to get an update on where you are with all the leadership and personnel changes. And perhaps just an update on where you think you are in terms of getting fully back on track with execution there.

Sohaib Abbasi

We have a very strong leadership team in place in Europe. I have every confidence that they will continue to show marked improvements in the coming quarter. In terms of maturity relative to the North America leadership team where we started making changes much earlier, I expect that in the coming quarters, we will benefit in many of the same ways as we benefited in North America. We're about 2 or 3 quarters behind North America in terms of majority of that team.

Operator

The next question comes from the line of Steve Koenig with Wedbush Securities.

Steven R. Koenig - Wedbush Securities Inc., Research Division

Yes, I'm wondering if you can help me understand a little bit in terms of contrast in North America and Europe staying on that line of questioning. To what extent is the improvement in North America, do you think, helped by the better macro in North America? And should we be thinking about handicapping the European, the hopefully better European execution by the observation that the macro is not as good in Europe? And I guess part of that question is, to what extent do you think the better execution in Europe can be helped by or needs improvement in the macro environment over there?

Sohaib Abbasi

We believe that we have an opportunity to execute much better in Europe. We clearly are very pleased with the execution and the improvements that we've demonstrated in North America, and I expect that we could have similar improvements in Europe. There is no doubt that the macroeconomic environment continues to be uncertain, to a greater extent, in Europe. However, given that the opportunities that are available to us in improving our own operational discipline, I expect that we will benefit from that.

Earl E. Fry

Yes. And recognize that it's still a tough environment there. But directionally, it's not getting any worse, as you will, in Europe. So I think our own -- the change is, as we solidify our management team and improve our execution, that should provide a good help for us and, again, continue to expect that a benign or at least constructive macroenvironment in North America. We, as we have been over the last couple of quarters, we will be able to continue to take good advantage of that.

Operator

Our next question comes from line of Michael Nemeroff with Credit Suisse.

Michael B. Nemeroff - Crédit Suisse AG, Research Division

I just -- I joined the call late, so I didn't hear. Sohaib, did you mention any qualitative or quantitative metrics regarding the launch of the Express product? And if not, maybe you can give us an update about that go-to-market strategy and how that's progressing? And then just on a housekeeping for Earl, just what the FX impact was on top and bottom line in the quarter?

Sohaib Abbasi

We are very encouraged by the uptake and the increasing interest in PowerCenter Express. Just as a reminder, we launched that at our customer conference in Q2. And PowerCenter Express is aimed at the departmental market, competing directly with some of the other lower-end alternatives. And the advantage that we offer is that it is completely compatible with our PowerCenter Enterprise product. Both of them embed the Vibe Data -- Virtual Data Machine's "Map Once. Deploy Anywhere." So it's completely compatible and scalable. There's been over 2,000 downloads to date, and it is the single most-popular component on the Informatica marketplace.

Earl E. Fry

Yes. And on the FX question, Mike. So versus a year ago kind of top line, a very, very slight headwind on revenues less than $0.5 million, so de minimis. And on quarter-over-quarter basis, again, a slight headwind, a little over $0.25 million on a quarter-over-quarter basis on the top line. On the bottom line with the strengthening dollar because of our expense exposure in, primarily in India, we actually have a slight benefit on -- from an EPS standpoint. But it's less -- a little less than $0.01, both on a year-over-year and a quarter-over-quarter basis on the bottom line.

Operator

Our next question comes from the line of Kash Rangan with Merryl Lynch. Our next question comes from the line of Abhey Lamba with Mizuho Securities.

Abhey Lamba - Mizuho Securities USA Inc., Research Division

It's -- Earl, can you give us your views on budget flush this year? Are you expecting a similar budget flush environment over the last few years, or do you expect people to be more cautious? And also your expectations for the frontal vertical for the fourth quarter?

Earl E. Fry

Sure. Of the Q4 -- I guess, my own expectation for our business, I expect pretty typical seasonality. So I don't expect anything extraordinary from a budget flush perspective. I think that's pretty similar to the environment that we've seen -- that we saw last year. Although it's kind of harder to tell for us, because our execution, I think, is much better this year. So again, nothing extraordinary from a budget flush standpoint. And I do continue to expect that from a public sector standpoint, that at least for the next quarter or 2, my expectation is that will continue to be less than kind of 10% contributor to our overall new license orders for the next couple of quarters just as it was this quarter, in large part, because of just concerns and, quite frankly, confusion over the federal budget. Again, state and local, I think, continues to be source of strength for us. And to the degree that we can start executing better internationally, that's where we could potentially see some upside in the public sector. Right now, I'm expecting that will continue to be less than 10% contributor.

Abhey Lamba - Mizuho Securities USA Inc., Research Division

Got it. And Sohaib, can you talk about your go-to-market strategies, the sales model you're using for your add-on solutions like MDM or ILM into your installed base? Is it primarily a maintenance renewal base activity, or do you have separate sales cycles for that? And what are your assumptions for their uptake in your 2014 outlook?

Sohaib Abbasi

I am very pleased and very impressed by the performance of both MDM and ILM. Both those product lines have either attained or exceeded our internal targets. And in both cases, we have sales specialists that are working very closely with the field organization. In both those cases, we are identifying and pursuing unique opportunities for those individual products. And the cross-sell oftentimes requires us to engage with business sponsors and with the different set of individuals within IT. The model that we implement, the specialization model coupled with the differentiation that we have in those products, has led to those strong results.

Operator

Our next question comes from the line of Derrick Wood with Susquehanna.

Rakesh Kumar - Susquehanna Financial Group, LLLP, Research Division

This is Rakesh Kumar for Derrick Wood. I was just curious, how much did Heiler contribute in the quarter and how should we think about the business going forward?

Earl E. Fry

So this would be the last quarter where we had -- where we don't have a direct year-over-year comp for Heiler. Now we don't break out contribution from specific acquisitions or specific product lines. And like I said, next quarter, we will fully lap the year-over-year results. That said, I can say that new -- that revenues from new acquisitions done in the last 12 months contributed to about 3% of our total revenue growth. So 3 of the 24% growth came from companies that were acquired in the last 12 months.

Operator

[Operator Instructions] Our next question comes from the line of Steve Ashley with Robert Baird.

Steven M. Ashley - Robert W. Baird & Co. Incorporated, Research Division

Just wanted to ask about your license from new customers versus existing. I mean, existing customer license growth was very strong, but then the new customer license growth lagged a little bit. I was just wondering if you had any color on that, especially just given your sales organization was recently restructured.

Earl E. Fry

Yes. So I think that's a direct function of having less strong contribution from our international areas like Latin America, Asia and some of the emerging markets in Europe. That's where most of our new customer count tends to come from. So in quarters when we have less contribution from those areas, that's going to directly affect the new customer count and the contribution from new customers. And again, so as we start to execute better in those areas, I would expect that to come back over the next, at least, 2 or 3 quarters to be more in line with historical averages.

Operator

I will now hand the call back over to Sohaib Abbasi for closing remarks.

Sohaib Abbasi

To sum up, we are in the strongest position for sustained growth with our expansive product portfolio and our innovation roadmap that is well aligned with the evolving customer priorities of today and tomorrow. Thank you.

Operator

Ladies and gentlemen, this concludes today's Informatica Q3 2013 Earnings Conference Call. We thank you for your participation. You may all disconnect.

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