Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Informatica (NASDAQ:INFA)

Q1 2011 Earnings Call

April 21, 2011 5:00 pm ET

Executives

Earl Fry - Chief Administrative Officer, Chief Financial Officer, Principal Accounting Officer, Executive Vice President of Global Customer Support and Secretary

Stephanie Wakefield - Vice President of Investor Relations

Sohaib Abbasi - Chairman, Chief Executive Officer and President

Analysts

Patrick Walravens - JMP Securities LLC

Michael Nemeroff - Wedbush Securities Inc.

Brad Reback - Oppenheimer & Co. Inc.

Mitesh Dhruv - BofA Merrill Lynch

Thomas Ernst - Deutsche Bank AG

James Wood - Susquehanna Financial Group, LLLP

Nathan Schneiderman - Roth Capital Partners, LLC

Edward Maguire - Credit Agricole Securities (NYSE:USA) Inc.

Michael Turits - Raymond James & Associates, Inc.

Bradley Whitt - Gleacher & Company, Inc.

Mark Murphy - Piper Jaffray Companies

Tom Roderick - Stifel, Nicolaus & Co., Inc.

Operator

Good afternoon. My name is Kristen and I will be your conference operator today. At this time, I would like to welcome everyone to the Informatica First Quarter 2011 Earnings Conference Call. [Operator Instructions] At this time, I would like to turn the call over to our host, Ms. Stephanie Wakefield, Vice President of Investor Relations. Please go ahead.

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 Q1 2011 results as we talk about our outlook for the business. I'll read the Safe Harbor and then hand it over to Sohaib for his comments. Some of the comments we'll make today are forward-looking statements, including statements concerning our projected financial results for future periods, our growth and operational strategies, our marketing and growth opportunities, our technology leadership, our product portfolio and opportunities, planned product releases, customers' option and demand for our products and services, including product upgrades and new releases, the expected use of and benefits from our products and services by customers, the expected benefits of our partnerships, our hiring plans and our expectations regarding future industry trends and macroeconomic development.

All forward-looking statements are based upon current expectations and beliefs. However, actual results could differ materially. There are many reasons why actual results may differ from our current expectations. These forward-looking statements should not be relied upon as representing our views as of any subsequent date and Informatica undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date that they are made. Please refer to our recent SEC filings, including our annual report for the year ended December 31, 2010 for a detailed description of the risk factors that may affect our results. Copies of these documents may be obtained from the SEC or by contacting our Investor Relations department.

During this afternoon's discussion, we will be using GAAP and non-GAAP numbers. Our GAAP results in the reconciliation of the GAAP results to the non-GAAP results are attached in the earnings press release and are also available in the supplemental metrics section of the Informatica Investor Relations website at www.informatica.com/investor.

Before I hand it up to Sohaib, I'd like to remind you that this call is being webcast and will also be available for replay at the Informatica Investor Relations website. I would also like to ask you when we get to the question-and-answer period to please confine yourself to just 1 question. We will allow additional questions if time permits.

With that, I'll turn it over to Sohaib.

Sohaib Abbasi

Thank you, Stephanie. I am delighted to announce that in Q1 2011, we obtained record first quarter revenues and record first quarter non-GAAP operating income. This afternoon, I will highlight the key business drivers for our first quarter results. After Earl's presentation of our financial results, I will comment on our business outlook related to 2 secular technology trends, cloud computing and big data.

Total revenues grew by 24% year-over-year to $168 million. New license revenues grew 30% to $71.5 million. With non-GAAP EPS of $0.28, we achieved the most profitable first quarter to date. Our record Q1 results signify our compelling customer value proposition and the team's exceptional operational discipline.

Our Q1 results are further evidence that our value proposition aligns well with the top priorities of our customers. In these uncertain times of change, data matters more than ever and data integration offers a compelling value proposition to empower the data-centric enterprise.

Our successes across all the major geographic regions illustrate both customer demand and operational discipline of the Informatica team. In EMEA, the exceptional results attained by our team in U.K. underscore our value proposition even in times of austerity measures. In the Americas, we benefited from important wins across a broad range of vertical segment, including financial services, high-tech, healthcare and utilities. In Asia Pacific, our results varied by region. From robust customer demand in Greater China through disruptions from the tragic natural disasters in Japan. By enabling top business imperatives of our customers, data integration now has the most strategic growth than ever before as illustrated by our customer win around the world.

In Europe, the U.K. Department of Work and Pensions (sic) [Department for Work and Pensions], DWP expanded its use of Informatica for its key initiative called Universal Credit. To better manage taxpayer monies in these times of austerity measures, DWP plans to consolidate benefits data, such as pensions, into 1 universal payment system. Using Informatica, DWP will integrate large amounts of structured and unstructured data. The Universal Credit system will enable DWP to share its view of benefits with taxation agencies to help eliminate costly paper trails and reduce benefits fraud.

In the Americas, Ochsner healthcare selected Informatica to improve and modernize their electronic medical record system. Using Informatica, Ochsner will improve the quality of data from their legacy system before migrating the data to the new epic EMR system. Armed with trustworthy data, Ochsner will be better prepared to improve safety, maximize efficiency and obtain positive outcomes for patients. In addition, Ochsner plans to use Informatica for HIPAA data privacy by masking patients' protected health information. These customer wins showcase our success in expanding our addressable market beyond the traditional data warehousing projects.

Over the past 5 years, our opportunity has grown from enabling a single discretionary IT project to being selected for multiple high priority IT projects. As a result of this trend, 58% of our deals over $100,000 or with customers that plan to use Informatica for more than data warehousing. In addition in Q1, more than 78% of our Professional Services team were from consulting engagements beyond traditional data warehousing.

Guided by our clear vision and then our expansive technology roadmap, we continue to expand and advance our product portfolio in a disciplined manner. As a reminder, our product portfolio now stands 8 software categories: Enterprise Data Integration, Data Quality, B2B Data Exchange, Application Information Lifecycle Management, Complex Event Processing, Master Data Management, Ultra Messaging and Cloud Computing Data Integration. Growing customers' options of the latest product releases within these categories is fueling our license revenue growth.

In the core categories of data integration and data quality, 46% of customers have upgraded to Informatica 9, with the planned discontinuation of support for version 8, we expect the vast majority of customers will upgrade to Informatica 9 by the end of this year. And with Informatica 9 upgrade, we are pursuing new cross-sell and upsell opportunities for our latest products.

As an example, Italian state-owned IT-services company, Concept [ph], selected Informatica data services for recording on human resources data representing all public sector employees. By eliminating time-consuming steps to maintain a traditional physical data warehouse, Informatica 9 data services will help deliver new reports in weeks instead of months. The Italian Public Administration officials will benefit from timely reports while reducing associated IT costs.

As another example of upsell opportunities, a global financial services leader expanded their use of Informatica to migrate data from more than 10 legacy systems to SAP's new core banking offer. Our license revenue growth reflects increasing customer adoption of our products in the 5 emerging categories of B2B Data Exchange, Application Information Lifecycle Management, Complex Event Processing, Master Data Management and Ultra Messaging.

In Ultra Messaging, we continue to advance our proven technology leadership as exemplified by customer successes. Last month, LMAX was recognized at the prestigious Financial Services Technology Awards event in London as the Best Trading System for their multilateral trading facility powered by Informatica Ultra Messaging.

Last quarter, a global leader in FX trading shows Informatica Ultra Messaging as a standard to gain a performance competitive advantage in the global $4 trillion a day FX market.

In MDM, we made encouraging progress with several important customer win across multiple vertical segments. As 1 example, Devon Energy, a global energy leader, selected Informatica multidomain MDM that will uniquely address multiple business goals. Their plan to build a vendor master data hub to improve supply chain efficiency. In addition, Devon Energy plans to build a well master data hub to analyze well life cycle profitability and adapt its production plans based on changing oil prices in a timely manner.

To sum up, our record Q1 results again showcased our compelling customer value proposition and the team's exceptional operational discipline. Now I will turn it over to Earl to give you more details in our financial results. After Earl's comments, I'll discuss our business outlook related to 2 technology trends, cloud computing and big data.

Earl Fry

Great. Thanks, Sohaib. Q1 total revenues were a first quarter record at $168 million, up 24% on a year-over-year basis and above the high-end of our guidance range. License revenues for first quarter record $71.5 million, up 30% year-over-year; and service revenues were another Q1 record at $96.5 million, up 21% year-over-year. Breaking down the components of service revenues: maintenance revenues were $70.4 million, up 22% year-over-year; while consulting, education and subscription revenues came in at $26.1 million, up 17% year-over-year.

Our deal metrics, once again, were solid. Existing customers contributed 79% of our license order value compared to 87% in the fourth quarter or 85% in the first quarter of 2010. We did license business with 252 existing customers and added 68 new customers during the quarter. We booked a first quarter record 13 transactions over $1 million, up from 7 in the year-ago first quarter, and we closed a first quarter record 57 deals over $300,000, up from 49 a year ago.

Our average transaction size for orders over $100,000 came in at 399k and the average transaction size for orders over $50,000 was 291k, both up nicely from year-ago levels of 337k and 247k, respectively. 25% of our license orders came from the indirect channel and then the additional 36% of our direct orders in Q1 were referred by partners or resellers. The overall total of indirect and referred orders was 61% compared to 70% last quarter and 63% in the first quarter of 2010. License revenue from our direct business was 73% in Q1 and 27% came from the indirect channel.

Moving to geographic mix. North America license orders as a percentage of total license orders were 57% compared to 62% a year ago and consistent with Q4. The mix of license orders from EMEA and the rest of the world was 43%, up from 38% a year ago and consistent with last quarter. North America revenue was 66% of total revenue in Q1 compared to 65% a year ago and 62% a quarter ago. Revenue from EMEA and the rest of the world was 34% of total revenue in Q1 compared to 35% a year ago and 38% a quarter ago. From a vertical industry perspective, financial services, public sector and the services industry were our top contributors to new license orders in Q1.

Non-GAAP gross profit, which excludes $4.3 million in amortization of acquired technology and $0.9 million of stock comp, came in at $140.1 million or 83% of revenue in Q1, consistent with 83% a year ago and seasonally down from 86% in Q4. License margins were consistent at 98% in Q1 while service margins, driven by better than 95% maintenance renewal rate, were 73%, consistent with 72% last year and 73% in Q4.

Excluding charges for stock comp, amortization of intangible assets and facilities restructuring and acquisition-related adjustments totaling $7.5 million, Q1 non-GAAP operating expenses were $95.6 million, down from $109.5 million in the fourth quarter and up from $81.6 million in the year-ago first quarter. As a percentage of revenue, non-GAAP operating expenses were 57% of revenue for the first quarter, better than 60% in the year-ago quarter.

As we've stated many times, our goal is to strike a balance between investing for continued growth and driving measured improvement in our operating model. The Informatica team continues to execute brilliantly on the operating improvement side of the equation. However, we didn't add as many new hire employees as we would have liked in Q1. And as a result, while Q1 revenue was up 24% year-over-year, Q1 non-GAAP operating income was up a higher-than-expected 48% from a year ago. Non-GAAP operating income as a percentage of revenue was 26.5%, up over 400 basis points from a year ago.

Please do not get used to that kind of operating margin improvement as we plan to continue to hire aggressively throughout 2011 and as a result, I would anticipate that operating income as a percentage of revenue will grow but at a much more measured pace through the remainder of the year. GAAP, net interest and other income and expense came in at $1.6 million loss in Q1 and our tax provision was approximately 28% on both the GAAP and non-GAAP basis.

Bottom line, we delivered another record first quarter with GAAP fully diluted EPS of $0.20 and non-GAAP fully diluted earnings per share of $0.28, which was $0.02 per share better than the high-end of our guidance.

Based on Q1 orders, our potential future revenues disclosure, which includes deferred revenue balances as well as orders not yet taken to revenue as of March 31 will be $215.4 million, down only $0.5 million sequentially and up by a record $46 million year-over-year.

Total headcount was 2,237 at the end of Q1, an increase of 111 from the end of Q4 and up 320 from a year ago. Sales and marketing headcount ended the quarter at 776, an increase of 56 from the end of Q4 and up 111 from a year ago. The continued headcount growth reflects increasing confidence in our business and continued investment to accelerate our development roadmap in key long-term growth areas. We plan to add at least 100 new employees per quarter for the remainder of the year.

Cash flow was strong again this quarter reflecting excellent collection activity and strength in our business model. We ended Q1 with $553 million in cash and investments, an $82 million increase from Q4 as we generated $62 million in cash flow from operations in Q1, up from $44 million generated in Q4 and up from $43 million generated in the first quarter a year ago. DSOs were 50 days in Q1, seasonally better than 68 days in Q4, better than 52 days a year ago and better than our target DSO range of 55 to 65 days.

Our deferred revenue balance increased to an all-time record $188 million and is comprised of $182 million in current deferreds and $6 million in long-term deferreds. Total deferred revenues are up 26% from a year ago and the license component of deferreds is up over 60% compared to a year ago.

We ended the quarter with 112.3 million shares outstanding on a fully diluted if-converted basis reflective of the impact of our share price increase of the treasury stock method compensation. During the quarter, we called our convertible bond or redemption in the approximately $201 million balance converted into shares by March 18. The bond conversion increases the amount of basic shares outstanding but as a reminder, our fully diluted share count already includes the converts on an if-converted basis, so there was no impact of fully diluted EPS. With the bond retire, any future periods will no longer need to be adjusted to an if-converted basis.

Also looking forward, while our quarter-to-quarter income tax provision has some variability and will continue to be very sensitive to our quarterly geographic mix of earnings, we continue to expect our effective tax rate for the year to be no more than 30% on both the GAAP and non-GAAP basis before the impact of certain discrete tax items.

On a macro level, we continue to expect modest but uneven recovery in North America and EMEA. However, we continue to see increasing evidence in our pipeline that data integration has become a high priority investment for our customers and prospects. With increasing confidence in our ability to execute against this growth opportunity, we will continue to invest in building the business for the long term. As I mentioned earlier, we expect to add 100 or more employees per quarter for the remainder of the year. We continue to have a dual focus, delivering strong revenue growth in 2011 and beyond and measured improvement in operating margins.

Based on these expectations as well as our internal indicators, for the second quarter, we are setting a revenue target range of $182 million to $187 million, with non-GAAP EPS in a range of $0.29 to $0.31. For the year 2011, we are increasing our target revenue by $10 million to a range of $745 million to $765 million, and we are increasing non-GAAP earnings per share by $0.03 to a range of $1.26 to $1.36.

As a reminder, our non-GAAP EPS targets do not include the after-tax impact of an estimated $3.5 per share per quarter charge for the amortization of intangibles in acquired technology, the facilities restructuring charge of roughly $0.005 per share per quarter, the tax effective impact of stock-based compensation of approximately $0.05 to $0.06 per share per quarter and any major acquisition costs and expenses.

Before I turn the call back over to Sohaib, I'd like to take just a moment to extend our deepest sympathy to our employees, customers and partners in Japan who have been affected by the earthquake and subsequent events. While we have not experienced, nor do we expect any material impact to our overall business as a result of these events, the Informatica team will continue to work with our customers in Japan to help minimize the disruption to their businesses.

With that, I'll turn it back over to Sohaib.

Sohaib Abbasi

Thanks, Earl. The secular technology trends of cloud computing and big data are expanding our addressable market as well as elevating the critical role of data integration within the IT infrastructure. Cloud computing is driving the next wave of data fragmentation and big data represents the next surge in data growth.

Informatica Cloud Summer 2011 release will enable hybrid IT by delivering enterprise cloud services to integrate data from both on-premise systems and the cloud. Informatica Platform 9.1 release will further enable big data initiatives with new capabilities, including support for Hadoop, the open source technology designed for highly scalable processing.

Informatica Cloud Summer 2011 release in corporate advances in security, manageability and in profitability required by customers to seamlessly open their production on premise enterprise systems with the latest cloud services. Customers are increasingly utilizing Informatica cloud for more business critical services that demand enterprise cloud infrastructure. Recent success of Dun & Bradstreet D&B360 service built using Informatica insight is an illustrative example of such business vertical usage by our partners and customers. With Informatica Cloud Summer 2011, Informatica will enable hybrid IT augmenting production on premise systems with the latest cloud services.

The upcoming Informatica 9.1 release will help customers to more fully leverage big data. Big data is a confluence of 3 related but distinct technology trends: big transaction data, big interaction data and big data processing. Big transaction data is managed by both traditional OLTP-relational databases such as Oracle and IBM DB2, an emerging analytic relational databases such as Teradata, Aster Data and IBM Netezza. Big interaction data is being captured and analyzed by the new generation of social networking services such as Facebook, Twitter and LinkedIn. And various distributions of Hadoop such as the 1 provided by Cloudera are designed for parallel processing our big data.

Informatica 9.1, the latest release, based on years of pioneering innovation will deliver long differentiated support for all 3 big data trends. First, the versatile and open Informatica Platform is designed for big transaction data, both for processing and analytics. The transaction data processing the Informatica Platform leverages the unique capabilities of the traditional OLTP databases. For transaction data analytics, Informatica Platform extends our near-universal connectivity with support for the emerging built-for-purpose analytic databases such as HP Vertica, IBM Netezza, Teradata Aster Data and EMC Greenplum.

Second, the Informatica Platform is being utilized by leading customers to enrich their Customer Master Data with the wealth of information from social networking sites such as Facebook, Twitter and LinkedIn. As an example, a leading retailer is enhancing its customer loyalty program to identify the key influencers on social networking sites who, in turn, help generate the most revenues.

Third, Informatica 9.1 will feature adapters from Hadoop file system, HTFS, to move data in for parallel processing by MapReduce and move results out for consumption. With our differentiated multifaceted approach, Informatica is well positioned to benefit from the unprecedented growth rates of big data.

To reiterate, by empowering the data-centric enterprise, data integration now has an even more compelling customer value proposition. As the largest independent leader in data integration with a track record of continuing innovation and customer success, Informatica is well prepared to pursue this growth opportunity.

So with that, I will open it up for your questions. As Stephanie said earlier, we would appreciate it if you confine yourselves to 1 question. Thank you. Operator, may we have the first question?

Question-and-Answer Session

Operator

[Operator Instructions] And your first question is from Tom Roderick with Stifel, Nicolaus.

Tom Roderick - Stifel, Nicolaus & Co., Inc.

I wanted to ask a question here just with respect to the future revenues disclosure in the rise and deferred, particularly the license side of deferred. It seems like you're doing an abnormally large amount of big deals and we've seen this over the last several quarters. Can you talk about the trend that you're seeing with your customers making large sort of multi-period or multi-project type of commitments with you, how they're breaking those projects up over time? And as you go through those projects, how you're sort of upselling some of these newer installed solutions and what that's doing to the overall sort of ticket price on these deals?

Earl Fry

Yes. So Tom, Let me try to take maybe the first part of that. So our future revenues are up significantly year-over-year and there's always some seasonality in that course from Q4 to Q1, so this is essentially flat. So this is kind of the best Q4 to Q1 performance. And as I did mention, that kind of shows up maybe in a hidden way of the deferreds because even though deferred revenues were up significantly, the license fees of deferred revenues was up significantly faster, so we have kind of 60% year-over-year growth there. So yes, that's put us in a very good position coming out of Q1. That's kind of numerically that I think I'll let Sohaib address some of the trends we're seeing with our customers.

Sohaib Abbasi

All right, our customers are deploying Informatica for a variety of projects beyond data warehousing for data migration, data consolidation. Given that we have a very versatile platform, we're benefiting from broader uses across a variety of different to our business initiatives across the variety of different IT projects. In addition, with the vast [indiscernible] portfolio, we are also benefiting from our newer product. And in some of these product categories such as MDM, the ASP is much higher. The other trend that we're beginning to benefit from is the growing volumes of data. Big data trend is also contributing to that as well.

Operator

Your next question is from the line of Tom Ernst with Deutsche Bank.

Thomas Ernst - Deutsche Bank AG

Thanks for taking my question. So following up on that point, you've been speaking to us for a few years now about how you're going beyond data integration successfully and it's pretty clear that things like Master Data Management and Data Quality are selling well. How penetrated are you in you're installed base with the tools that go beyond data integration?

Sohaib Abbasi

We have a tremendous opportunity to cross-sell within our installed base. We have over 4,300 enterprises. Data quality is being utilized by likely about 20% or so of those customers and the numbers are much lower for all the newer product category. So some of that is evident and some of the numbers that we talked about for example with Informatica 9 we're benefiting from having a better adoption of data quality and in fact, close to half [indiscernible] over $300,000 included Data Quality products. But then beyond that in the case of Master Data Management and Ultra messaging, Complex Event Processing, the opportunity is even greater.

Thomas Ernst - Deutsche Bank AG

And 1 follow-up, if you'll permit, how often are you still able to sell things like Siperian outside your installed base on top of competitors' infrastructure?

Sohaib Abbasi

We had some very impressive wins in the recent quarter against other MDM vendors, and we continue to win both stand-alone Siperian deals as well as -- in the MDM deals as well as in conjunction with our platforms.

Operator

Your next question is from the line of Mark Murphy with Piper Jaffray.

Mark Murphy - Piper Jaffray Companies

Thank you. Sohaib, a question on the financial services vertical. It feels they're still spending fairly vigorously on technology here in early 2011. I think it's still, as you mentioned, 1 of your top verticals. And just thinking back on it, it seems like that cycle started to turn up, I believe, in the middle of 2009 and, Sohaib, I think you were 1 of the first people that identified that. And so it seems like it's surprisingly resilient. My question is, how much runway do you think is lapsed? Maybe what inning are we in based on that part of your deal pipeline?

Sohaib Abbasi

Let me give you my perspective on financial services spend and I'll also ask Earl to provide you with his perspective. In my conversations with CIOs in financial services, what I've sensed is there's been a shift in terms of priority. They're fairly -- there's a lot more focus around customer centricity and has been the case ever since the recovery has started. More recently, there's more discussion about regulatory compliance and risk mitigation. And in fact, 1 such project was looking at consumer lending and the risk associated with that and marketing on a big data initiative. So what has been driving our results in financial services has been a very different consideration from a business survival to the business survival to a business revival, customer centricity and now we're beginning to actually benefit from some of the big data trends associated with risk mitigation and regulatory compliance.

Earl Fry

Yes, and I think, Mark, just maybe to kind of tie it back to some of the macro things and things that we've seen over the last year and a half as we came out of the recession, the stronger financial services players clearly were the first ones in and that helped drive our business in the back half of '09 as well as through most of 2010. And while financial services is still our largest vertical, is our largest contributor in Q1, what was interesting from my perspective is, this was probably our best quarter ever in terms of breadth of different verticals. I mean, I highlighted financial services, public sector and services as our 3 largest vertical, yet, there were a number of verticals that have kind of between 5% to 10% of our business, including technology, communications, manufacturing, healthcare, retail, energy, utility, entertainment, media. So I think just from our kind of corner of the world, it kind of gives me a sense that there is general and broader based macro recovery, so the stronger players in all verticals are starting to lean in. And I think it also bodes well for, or say something about the breadth of our platform and its ability to be critical for all verticals. So I think from that perspective, the vertical element was 1 of the big strong takeaways for us in Q1.

Operator

Your next question is from Ed Maguire with CLSA.

Edward Maguire - Credit Agricole Securities (USA) Inc.

I have a simple question and I don't think will be a very simple answer. But given you were expecting nearly exponential growth of data in coming years, I mean, how will this translate into bigger opportunities? And will there be a need for you to adjust your current licensing models or essentially the way that you charge for your software as these volumes really start to grow?

Sohaib Abbasi

Clearly we are benefiting from some of that trend already but we're in the early days in terms of big data. Our customers are beginning to deploy Informatica for big transaction analytics-type projects in conjunction with some of the analytic databases that I've talked about. And for that reason, we are extending our connectivity to support all of those analytic databases. Now on the broader scale in terms of volumes of data, social media and interaction data represent a much greater volume of data and in that, we only have the early adopters that are beginning to use social media and asking questions such as how could they benefit from it, how could they mine it, and I gave 1 example of retailer that believes combining enterprise data that they may have on their customers with whatever data is available on social media gives them greater insights. So I believe we will continue to benefit for the next few years from relational databases, from national databases for big data and we'll start to benefit from adoption of social media across enterprises. In terms of licensing, our model is based on CPU capacity and that model, we expect that, that pricing model will continue to work well.

Operator

Your next question is from Nathan Schneiderman with Roth Capital.

Nathan Schneiderman - Roth Capital Partners, LLC

Thanks for taking my question. I wanted to ask you this question. So last year in Q1, you acquired Siperian and 21West (sic) [29West] inter-quarter and if I recall right, just got a little bit of revenue contribution versus the fourth quarter contribution you have this year. So when you look at the reported revenue growth, the 24%, what would be the apples-to-apples kind of organic growth? For example, if had you already had the Siperian and the 29West for the full quarter last year, what would this growth have been? And then also related to that, there's been significant dollar weakness, so I was just curious what kind of lift you got both year-over-year and sequentially from foreign exchange benefits, the weak dollar both on revenue and cost?

Sohaib Abbasi

Sure. So Recall that with 29West and Siperian are kind of in different camps. So Siperian, we announced at our Q1 earnings call -- excuse me, Q4 earnings call in January of last year so we -- if that's -- even though the revenue contribution wasn't particularly high in Q1, we did have that for essentially the whole quarter. 29West is kind of sitting at the other end of the spectrum which closed in mid to late March. So you're right there, that's 1 that we had very little of the quarter. So when you do the apples-to-apples and you say, "Okay, basically Siperian was there more or less the whole time, 29West wasn't." So instead of having a 24% year-over-year growth rate in total revenue in Q1, we would have a 23% total growth rate in Q1. Then relative to the exchange rates, you have the currency movements did happen and did have a little bit of impact particularly late in the quarter. From a revenue perspective, both sequentially and year-over-year, it helped us by about $1 million on the top line, and on the operating income line, it helped us by less than $0.5 million both on a sequential and year-over-year basis.

Operator

Your next question is from Mitesh Dhruv with Bank of America.

Mitesh Dhruv - BofA Merrill Lynch

Thanks for taking my question. A question for you, Sohaib, just want to focus on MDM for a little bit. Obviously, you've got good traction there and I was just curious what is the real competitive differentiation in Informatica has versus, say, an Oracle or IBM that's helping drive deals in MDM?

Sohaib Abbasi

Informatica offers the only Multidomain Master Data Management hub. And that's a very important differentiator because usually when a customer embarks in a data hub, they end up having to model multiple master data elements. I gave as an example Devon Energy where they are looking at how can they actually reduce their expenses with supply chain optimization by building a vendor hub. At the same time, they're also looking on how they can increase production based on changing oil pricing, and they built an oil life cycle hub. So having this ability to actually having a single Master Data Management product that works for all data types is a very important differentiator. And of course, we've got the track record, we've got a lot of the examples of customers across a variety of verticals that have had spectacular results.

Mitesh Dhruv - BofA Merrill Lynch

Got it. And just 1 for you, Earl. I just noticed that the maintenance revenue was down sequentially from $73 million to $70 million. Anything you'd like to call out there?

Earl Fry

Maintenance revenue does typically have a sequential design and actually I think the maintenance revenue, while the decline is from $70.6 million in Q4 to $70.4 million in Q1, and that -- so compared to a year ago, so that's down a couple of $100k. A year ago from Q4 to Q1, it was down $1.2 million. 2 years ago, it was down $1.2 million. So in fact, what happened is just a little bit of seasonality in the maintenance revenue and that's because with a lot of contracts that end up renewing in Q4, what happens is you have a lot of catch-up and things happen in Q4. So someone, if they're a little delinquent on their renewal or they want to pull something ahead, what happens is Q4 gets a little bit of lift from back maintenance renewals that get caught up at the end of the year. And that's happened consistently over the last several years.

Operator

Your next question is from Michael Nemeroff with Wedbush Securities.

Michael Nemeroff - Wedbush Securities Inc.

Thanks for taking my questions. Earl, just 1 for you and then 1 for Sohaib, if I may. In terms of the -- well, Sohaib has talked about the cloud opportunity for the last 2 quarters. I was wondering if you could maybe give us a size of what the deferred revenue look like on the subscriptions. And then for Sohaib, the second quarter in a row, you've called out big data and talked about it. I was wondering if the strategy is to continue to partner with all the different big data vendors or if there would be something, some lines that you would like to own some IT?

Earl Fry

Mike, I actually don't have and won't be breaking out the specific components of deferred, including what's in subscription. In terms of absolute dollars, I'll just say that the biggest increases in maintenance, first, and in license, second, with subscriptions being third, and then education and consulting is trailing. But from a percentage standpoint, as you might expect, it's the fastest growth.

Sohaib Abbasi

Michael, in terms of the question regarding our big data strategy, we are defining big data in a much broader way than a lot of other vendors that have a very narrow perspective. They're either focusing on analytics for structured data or they're looking at social media or they're looking at Hadoop. With our broad three-pronged approach, we are partnering with all of the transactional relational databases. And our view is that they won't not be a single analytic relation database that would be suitable for all kinds of analytics. There are distinct advantages of each of those databases, whether it's HP Vertica or IBM Netezza or EMC Greenplum or Teradata Aster Data. And for that reason, we expect that our customers will end up with a mix of transactional OLTP databases by Oracle and IBM DB2, and they may end up with 1 of many of the analytic databases. Our neutrality assures customers that they are able to move the data in whatever direction that they want. Now as we are not limiting our opportunity just to that world of structured relational databases but in fact, we've got some early adopters that are looking at enriching our MDM product with data that they are getting from social media, and we will be partnering with vendors that are in that space, and we will be extending to provide connectivity for that. And then finally, for highly scalable processing, we have talked about supporting Hadoop and that we will have that support available in 9.1. So across all 3 dimensions, we will continue to partner with a variety of vendors when our customers do fully leverage big data.

Operator

Your next question is from Brad Whitt with Gleacher & Company.

Bradley Whitt - Gleacher & Company, Inc.

I was wondering if you could kind of rank. You got the 8 major product categories there. If you could just kind of rank maybe the top 3 or 4 as far as year-over-year growth?

Sohaib Abbasi

Well, the most important categories for us, the core continues to be Data Integration. And we are seeing good growth in Data Integration partly because the focus on regulatory compliance is driving larger data warehousing. I expect that we are very well positioned in our core category of Data Integration as a result of big data. Data Quality, I commented on earlier, we're getting much better results as a result of Informatica 9 upgrade. And we have commented on how pleased we are with the performance of Master Data Management and IMF. And all of those product categories will have sustained our results. And of course, we've got a lot of growth opportunities in many of the other areas, including, of course, Cloud Data Integration. Thanks, Brad.

Operator

Your next question is from Michael Turits with Raymond James.

Michael Turits - Raymond James & Associates, Inc.

You've done a great job of migrating over to 9. It sounds like that'll be done this year. How much of a boost to revenues do you feel like you've got in terms of the upsell when customers move to 9 and pick up things like Data Quality that integrate better? So should we be concerned at all as you move past that, that you'll get less of a boost going forward as you move past the migration?

Sohaib Abbasi

We have not commented on Informatica 9 being more than just a product release. When we had the roadshow to promote Informatica 9, we, of course, highlighted the differentiated value that we delivered in our core Data Integration, Data Quality category as part of Informatica 9. But we also emphasized that, for the first time, that Informatica 9 was not just a product release but rather it was a complete platform. And that represented the fact that we were introducing and making available, not just 2 product categories in Data Integration and Data Quality, but rather the broader platform. And our results reflect both. Our results reflect that our newer emerging product categories are being adopted, Master Data Management, ILM, several of the other categories are being adopted by customers and of course, we're beginning to see benefits as customers upgrade through Informatica 9. We have features that are available with Informatica 9 like Informatica Data Services. So I expect that as a result of the way we have rolled our products, we have introduced at least 1 product effectively every quarter for the last 5 years. We will continue to benefit as a result of having a very disciplined approach of delivering more capability on a regular basis. Thank you, Michael.

Operator

Your next question is from Derrick Wood with Susquehanna.

James Wood - Susquehanna Financial Group, LLLP

Sohaib, you guys acquired Agent Logic back in 2009. Where does this product sit today in the portfolio, and what are your thoughts on the Complex Event Processing market and how you guys fit in your ability to capitalize on it? And then Earl, if I could, if you could reconcile, you hired 111 people in the quarter. That seems relatively in line with this 100 per quarter. So if you could reconcile your comments that you hired a lot fewer people than expected, that'd be great.

Sohaib Abbasi

With Agent Logic, there are 2 key initiatives. The first 1 was that we wanted to grow beyond the initial success that Agent Logic had had in the federal market. And specifically, we've been positioning Complex Event Processing across a variety of different industries. I commented on 1 of the wins that we had in financial services where credit card issuer was providing services of notification and alerts if the spending thresholds were exceeded. So there are a lot of applications of Complex Events Processing across a variety of industries and we've had some success beyond the original focus which was in the federal market. Now clearly, there are lot of customers in federal sector -- public sector that continue to gain great value from the technology. And the second initiative that we have was to better integrate it with the rest of our platform. As part of Informatica 9, we are delivering a capability called proactive data quality, where we will be integrating Complex Event Processing to monitor the quality of the data and notify the appropriate people if the current thresholds were not being met. Similarly, we have proactive monitoring of data integration job. So there's two-pronged approach of positioning in across a variety of industries, as well as better integrating with our platform will lead to strong results.

Earl Fry

Yes, Derrick, and relative to hiring, we had anticipated that we were planning to hire well over north of 150 people in Q1, so we're little behind our internal hiring plan. We're actually in pretty good shape on the sales and marketing side. And there are things that, as we've talked about before, in terms of incremental investments on the development side to a more aggressively build out other capabilities in the platform and accelerate our development program. So we'll continue to be aggressive in hiring at least through the remainder of the year.

Operator

Your next question is from Brad Reback with Oppenheimer & Co.

Brad Reback - Oppenheimer & Co. Inc.

Thanks, guys. Earl, real quick on the hiring front. It's beginning to become increasingly clear that there's significant wage inflation going on. Number 1, are you seeing that? And number 2, how do you counteract that?

Earl Fry

Actually, we're not seeing that across the board. I think the 1 place where you continue to see that is in India. That's kind of not that much different than it was through almost every year over the past 5 years with maybe the exception of 2009. And I think we've done a good job of investing in not only in our key hires. We have built a certain culture here. We have good retention programs. We're investing and have invested a lot in terms of key employee and management development for high potential individuals as well. So we're not -- we continue to have turnover rates that are significantly below the industry averages. That's kind of across the board in every function and in every geography. So knock wood, I think we've built a good team here, I think we've done a good job and people see how they can contribute and how they can get rewarded as we continue to grow. So I anticipate being able to continue to have significantly better-than-average retention rate.

Operator

Your next question is from Pat Walravens with JMP.

Patrick Walravens - JMP Securities LLC

Thank you. Can you gentlemen comment a little bit on the growth drivers for 2012 once the majority of installed base is upgraded? Thank you.

Sohaib Abbasi

The growth drivers will continue to be the same as what we've talked about. We are positioning our technology for use across a variety of different projects. In the most recent quarter, 58% of the projects use Informatica for at least 1 project beyond data warehousing and, Pat, as you know, we've described about 8 new project types. So we have a lot of room for us to continue to position Informatica for data consolidation, data hubs, agility projects for Ultra Messaging. The second, our growth driver is continuing to advance or expand our product portfolio. And we now have 8 different categories of products. We've got a lot of opportunity to cross-sell and upsell, both with Informatica 9 upgrade as well as independent of Informatica 9 upgrade. And the third growth driver, of course, that we continue to build our sales and distribution capacity across all of the different regions, and I expect that we will benefit from good performance across all of the geographic regions. And again, as I have commented earlier on some of the secular trends, technology trends like cloud computing and like big data and I expect that we will benefit from those trends much more in 2012 and beyond. Thanks, Pat.

In closing state, that for the remainder of 2011 and beyond, our singular mission remains the same, advance Informatica as the clear leader in data integration. With cloud computing and big data elevating the importance of both our compelling value proposition and our expansive product portfolio, Informatica is in the strongest ever position to grow beyond $1 billion. Thank you.

Operator

And at this time, I would like to turn the floor back over to Mr. Abbasi.

Sohaib Abbasi

Thanks very much.

Operator

Thank you. This does conclude today's conference call. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Informatica's CEO Discusses Q1 2011 Results - Earnings Call Transcript
This Transcript
All Transcripts