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Informatica (NASDAQ:INFA)

Q1 2012 Earnings Call

April 26, 2012 5:00 pm ET

Executives

Stephanie Wakefield - Vice President of Investor Relations

Sohaib Abbasi - Chairman, Chief Executive Officer and President

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

Analysts

Brent Thill - UBS Investment Bank, Research Division

Mark R. Murphy - Piper Jaffray Companies, Research Division

Michael Turits - Raymond James & Associates, Inc., Research Division

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

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

Kash G. Rangan - BofA Merrill Lynch, Research Division

Aaron Schwartz - Jefferies & Company, Inc., Research Division

Steven R. Koenig - Longbow Research LLC

James Derrick Wood - Susquehanna Financial Group, LLLP, Research Division

Operator

Good afternoon. My name is David, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q1 2012 Informatica Earnings Conference Call. [Operator Instructions] Thank you. I would now like to turn the call over to Ms. Stephanie Wakefield, Vice President of Investor Relations. Ma'am, you may begin your conference.

Stephanie Wakefield

Thank you, David. 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 2012 results and to talk about our outlook for the business. I'll read the Safe Harbor and then had it over to Sohaib for his comments.

Some of the comments we'll be making today are forward-looking statements, including statements concerning our projected financial results for future periods; our growth and operational strategies; our marketing growth opportunities; our technology, leadership and product development; our product portfolio and opportunities; customer adoption of and demand for our products and services including products upgrades, new releases and new products; the expected use of and benefits from our products and services; the expected benefit from our partnerships and acquisitions; our effective tax rate, our hiring plans, our International business and our expectations regarding industry trends and macroeconomic developments.

All forward-looking statements are based on current beliefs and expectations. 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 on Form 10-K for the year ended December 31, 2011, for detailed descriptions 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 and 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 metric section of our Investor Relations website at www.informatica.com/investor.

Before I hand it off to Sohaib, I'd like to remind you that this call is being webcast and will also be available for replay at www.informatica.com/investor. [Operator Instructions] Sohaib?

Sohaib Abbasi

Thank you, Stephanie. In Q1 2012, we attained a record first quarter revenues and record first quarter earnings. This afternoon, I will comment on the key business drivers for our first quarter results. After Earl's presentation of our financial results, I will describe our key initiatives for both our long term and more immediate growth plans.

Total revenues grew by 17% year-over-year to $196 million. New license revenues grew 12% to $80.1 million. With non-GAAP EPS of $0.35, we achieved the most profitable first quarter to date. Our Q1 results reflect both our compelling customer value proposition to maximize return on data and as reported by others as well, the continuing macroeconomic uncertainty in Europe.

In Europe, with the appointment of a seasoned new leader in April, we believe we are better positioned for the second half of 2012 and beyond. In the Americas, particularly in the financial services vertical, we benefited from the improving macroeconomic environment as well as from the leadership changes we implemented in the second half of last year. In Asia Pacific, our results vary by country from recovery in Japan to consistent growth in other countries. Our value proposition for customers is to maximize return on data by increasing the value of data and decreasing the cost of data.

As illustrated by our customer wins around the world, this value proposition is well aligned with our customers' top priorities across a variety of macroeconomic conditions. In Europe, Netbook Rail, the Association of Passenger Train Operating companies in Great Britain selected the Informatica Platform for its strategic project named ORBIS. The primary goal of ORBIS is to improve safety of its train tracks. Using Informatica, Netbook Rail will build a complete registry of all assets across its entire train-track infrastructure. Armed with trustworthy and authoritative data on assets and GPS-based locations, engineers will be more effective and efficient in detecting and correcting calls in a timely manner while reducing costs associated with penalties for safety oversights.

In the Americas, a CPG leader selected Informatica over other alternatives for its strategic enterprise-wide MDM initiative. To improve customer satisfaction and reduce costs, the customer plans to address the top 20 data quality issues that are costing millions of dollars due to a variety of consequences, such as lines were delayed or incorrect shipments and penalties for incorrect taxation. With Informatica, they expect to address these data quality issues and equally importantly, implement data governance procedures to proactively prevent rather than reactively remediate data quality issues. As another example, Condé Nast selected Informatica for managing mass data for both products and customers.

Our 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, 62% of our deals over $100,000 were with customers that plan to use Informatica for more than data warehousing.

In addition, in Q1, more than 90% of our Professional Services fees were from consulting engagements beyond traditional data warehousing. Our expansive product portfolio is driving both upsell opportunities for broader usage and cross-sell opportunities of our newer products.

As an example of our upsell opportunities, one of our top customers, an international bank based in the U.K., expanded their use of Informatica core data integration products from individual divisions to an enterprise-wide standard around the world. With their track record of success with Informatica in its investment banking division, it will expand use of our core products within retail banking despite an incumbent technology. With a centralized data shared service, the bank will be better organized to address both its current enterprise-wide requirements and their emerging big data requirements.

As a measure of our success in cross selling our new products, customer usage of these products has increased consistently from 4% in 2007 to 36% of the active projects in Q1 2012. In Q1, we won important opportunities to cross-sell products in the newer categories, including ultra messaging, application information lifecycle management and master data management.

In ultra messaging, a large international bank selected Informatica over other alternatives to power its new FX and equities trading platform. The bank selected Informatica as Ultra Messaging offered more functionality, required less labor-intensive hand coding and is well proven by a track record of successful customers. With these differentiated advantages, the bank expects that Informatica will expedite time-to-market and more importantly, deliver the fastest response times and highest throughputs for their trading platform.

In MDM, a large medical center selected Informatica to pursue its vision for personalized medicine that would improve patient care and reduce costs of care, by replacing a legacy homegrown provider database. Using Informatica MDM, the medical center expects to better manage master data for 150,000 providers and the relationships between these providers and their 1.6 million patient members. Informatica Data Masking will facilitate privacy protection of sensitive-patient information such as PHI. Informatica B2B will help process HL7 requirements, and complex event processing will help automate escalation of clinical conditions that require immediate attention.

Most encouragingly, our customers are beginning to adopt our entire portfolio.

One of our long-term customers, a large U.S. bank, made an enterprise-wide decision to utilize the entire Informatica platform. By enabling shared services using our core Informatica products, the bank will reduce costs and facilitate consistency across business units.

With a single view of customer using Informatica MDM across multiple channels such as ATM, web, mobile and traditional branches, the bank will improve customer experience. The bank will benefit from Informatica ILM to mask sensitive customer data and Ultra Messaging to power its trading platform for FX and specialty products such as [indiscernible].

These customer wins underscore both growing adoption and more importantly, a bigger yet to be tapped cross-sell opportunity. In other words, our cross-sell opportunities include 64% of our customers that have not yet adopted even one of our newer products. Simply put, we are in the early stages of a multiyear product adoption and growth phase.

Finally, with the growing adoption of cloud computing as a business-critical platform, Informatica is enabling customers to retain control over their most important IT asset: big data both on premise and in the cloud. As one such example, British Telecommunications had a need to move and transform data from an in-house system into Salesforce.com. Using conventional development tools, the project took a 14 days development. However, using Informatica, the same functionality was delivered in 2 days.

To sum up, our record Q1 results again showcase our compelling customer value proposition and our broadest ever product portfolio. Now I'll turn it over to Earl to give you more details on our financial results. After Earl's comments, I'll discuss our key initiatives for both our long term and more immediate growth plans.

Earl Fry

Thanks, Sohaib. Q1 total revenues were a first quarter record at $196 million, up 17% on a year-over-year basis. License revenues were a first quarter record, $80.1 million, up 12% year-over-year. And Service revenues were another Q1 record at $115.9 million, up 20% year-over-year. Breaking down the components of Service revenues, maintenance revenues were $86 million, up 22% year-over-year; while consulting, education and subscription revenues came in at $29.9 million, up 14% year-over-year.

Turning to our deal metrics. Existing customers contributed 83% of our license order value, up from 79% in the year-ago quarter. We booked 11 transactions over $1 million compared to 13 a year ago and closed a first quarter record 63 deals over $300,000, up from 57 in the year-ago first quarter.

Our average transaction size for orders over $100,000 came in at 485k, and the average transaction size for orders over $50,000 was 335k, both up very nicely from year-ago levels of 399k and 291k, respectively. 29% of our license orders came from the indirect channel, and an additional 33% of our direct orders in Q1 were referred by partners or resellers. The overall total of indirect and referred orders was 62% compared to 61% from the year-ago first quarter.

Moving to geographic mix. License orders as a percentage of total license orders from EMEA and the rest of the world was 38%, down from 43% a year ago, while the license orders from North America came in at 62%, up from 57% in the year-ago first quarter. License orders grew by healthy double-digit percentages in North America, Asia Pac and Latin America, with EMEA being the lone exception to those growth rates. Revenue from EMEA and the rest of the world was 35% of total revenue in Q1 compared to 34% a year ago, and North America revenue was 65% of total revenue in Q1 compared to 66% a year ago.

Similar to the license booking story, total revenue grew by healthy double or even triple-digit percentages in North America, Asia Pac and Latin America, with EMEA revenue growing only slightly year-over-year. From a vertical industry perspective, financial services, public sector and healthcare were our top contributors to new license orders.

Non-GAAP gross profit, which includes $5.6 million in amortization of acquired technology and $1.1 million of stock comp, came in at $165.5 million or 84% in Q1, up slightly from 83% a year ago and seasonally down from 85% in Q4. License margins were consistent at 99% in Q1, while service margins driven by better than 95% maintenance renewal rates and increasing contribution from our subscription services were 75%, up from 73% in the year-ago first quarter.

Excluding the charges for stock comp amortization of intangible assets and facilities, restructuring and acquisition-related adjustments which totaled $11.9 million, Q1 non-GAAP operating expenses were $108.9 million, down seasonally from $120.4 million in the fourth quarter and up from $95.6 million in the year-ago first quarter. As a percentage of revenue, non-GAAP operating expenses were 56% of revenue for the first quarter better than 57% in the year-ago quarter.

Non-GAAP operating income as a percentage of revenue was 28.9%, up over 200 basis points from a year ago. Now looking forward, we plan to hire aggressively throughout the remainder of 2012, particularly in customer-facing functions. So therefore, I don't want anybody anticipating operating margin expansion beyond about 100 basis points for the full year 2012. Bottom line, Q1, we delivered another record first quarter with GAAP fully diluted EPS of $0.24 and non-GAAP fully diluted earnings per share of $0.35, which was a full $0.01 per share better than the high end of our guidance.

Total headcount was 2,574 at the end of Q1, an increase of 20 from the end of Q4 and up 337 from a year ago. Sales and marketing headcount ended the quarter at 872, up only 3 from Q4 and up 96 from a year ago. Now many of our new quota-carrying sales hires started in April and across the company, we expect to add well over 100 people in total in Q2 with, as I've mentioned before, most of them are focused in customer-facing functions.

Cash flow was strong again this quarter, reflecting excellent collection activity and continued strength in our business model. We ended the quarter with $567 million in cash and investments, and this is even after the purchase of our new corporate headquarters in Pacific Shores. We generated $70 million in cash flow from operations in Q1, up from $44 million generated in Q4 and up from $62 million generated in the year-ago first quarter. DSOs were 58 days in Q1, well within our target DSO range of 55 to 65 days.

Based on our Q1 order flow, our potential future revenue disclosure, which includes deferred revenue balances as well as orders not yet taken to revenue as of March 31, will be $251.9 million, up 600k sequentially and up $36.6 million from a year ago. Our deferred revenue balance increased to an all-time record $235 million and is comprised of $227 million in current deferred and $8 million in long-term deferreds. Deferred revenue was up over $46 million on a year-over-year basis and up sequentially over $20 million. And it's worth highlighting here that both the perpetual license and subscription license components of deferred revenue were both up on a year-over-year basis and up on a sequential basis.

We ended the quarter with 112.8 million shares outstanding on a fully diluted basis. Our tax rate for the quarter was just under 32%. And assuming the R&D tax credit is not renewed, we continue to expect our 2012 effective tax rate to be approximately 32% on both the GAAP and non-GAAP basis before the impact of certain discrete items. Our income tax provision will have some variability and will continue to be very sensitive to our quarterly geographic mix of earnings.

On a macro level, we are planning for a relatively benign environment but with continued near-term uncertainty in Europe, particularly the European public sector. And while we will continue to focus on delivering strong revenue growth in 2012 and beyond and in delivering measured improvement in operating margins, in the near term, we will be increasing our investment in sales and marketing. We plan to add sales headcount throughout the year and in Q2, we will incur the additional cost of hosting our Informatica World User Conference. So for Q2, we are setting a revenue target range of $210 million to $220 million and a non-GAAP EPS range of $0.35 to $0.37.

And despite our slightly more cautious outlook for Europe for the year 2012, we are maintaining our revenue guidance for the year in the range of $880 million to $910 million and maintaining our non-GAAP EPS guidance in the range of $1.54 to $1.64. Just as a reminder, our non-GAAP EPS targets do not include the after-tax impact of an estimated $0.04 per share per quarter charge for the amortization of the intangibles and acquired technology, the tax effect impact of stock-based comp of approximately $0.08 per share per quarter and any major acquisition costs and expenses.

With that, let me turn it back over to Sohaib.

Sohaib Abbasi

Thanks, Earl. As we have discussed in the past, while balancing our long-term and near-term growth considerations, we continue to evolve our organization with the goal of becoming an even more strategic IT partner and trusted adviser for our customers. In recent customer meetings, senior IT executives across multiple industry verticals increasingly emphasize the business vertical value of data with observations such as data is foundational and that it is all about the data.

As organizations aspire to become data-centric enterprises, the role of data integration within the IT infrastructure is more critical than ever. And the secular technology mega trends of cloud, social, mobile computing and big data are further elevating the role of data integration. With growing adoption of our product portfolio, customers rely on Informatica as a more strategic technology partner.

Across the company, we are increasing our investments, including accelerating our hiring plans to address the associated higher customer expectations. To facilitate broader product adoption, we continue to build distribution capacity in our sales organization. To ensure the success of our customers with our newer products, we have increased the number of technology specialists within our customer support and professional services organizations.

To promote best technology practices, we have staffed subject matter experts with industry-specific knowledge within product business units. And to help ensure successful customer implementation projects, we significantly increased the number of technical architecture managers, or TAMs, in our professional services organizations. With deeper customer relationships across a broad range of business and IT requirements, we are better positioned for our longer-term growth plans.

At the upcoming Informatica World in Las Vegas, a record number of sponsors and exhibitors will showcase the value of the Informatica partner ecosystem. And we will highlight the progress on our technology road map and launch our latest platform release, Informatica 9.5, to help customers realize the promise of big data.

As a reminder, big data is confluence of 3 distinct but related technology trends: big transaction data, big interaction data and big data processing. With continuous data replication, Informatica 9.5 will enable timely analysis of big transaction data. With social MDM, Informatica 9.5 will help enrich mass data by authoritatively relating business and social relationships. And with native Hadoop transforms and visual ID, Informatica 9.5 will empower developers to productively leverage low-cost big data processing computing resources.

Building on years of pioneering innovation, Informatica 9.5 will help customers to maximize return on big data simply by increasing the value and reducing the cost. Informatica 9.5 will increase the value of big data in 8 specific ways, including comprehensive data governance for trustworthy data, data time line for authoritative data and embeddable cloud services for relevant data.

Informatica 9.5 will reduce the cost of big data in several ways, including Hadoop mass of use processing to reduce hardware costs, smart partition archiving to reduce storage costs and data discovery to reduce IT labor cost. With a compelling value proposition, Informatica 9.5 will open up new opportunities for us to further upsell our core products and cross-sell our newer products.

To reiterate, Informatica provides a compelling value proposition, maximize return on data. As the largest independent leader in data integration with a track record of continual innovation and customer success, Informatica is well positioned to pursue this growth opportunity.

So with that, I will open it up for your questions. As Stephanie said earlier, we would appreciate if you confine yourselves to one question. Thank you.

Operator, may we have the first question?

Stephanie Wakefield

Operator, we're ready for the first question, please.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Brent Thill of UBS.

Brent Thill - UBS Investment Bank, Research Division

I was wondering if you could just help provide some color around your comments around a slightly more cautious Europe. We've heard from some companies that have reported so far that Europe was hanging in. And maybe if you could just extend that on your new leader in April, and is this more macro or is this more Informatica-specific why you're a little more cautious?

Earl Fry

It's really a combination of both, I think, Brent. So we did coming into the year, we've had a more -- slightly more cautious outlook on Europe. And as we talked about, we did have a transition with our European leadership with Steven Rose actually starting on April 3, I believe, April 2 or April 3. So we did go through Q1 without a leader there. We had some -- we tried to shore that up. And it's -- we're giving it maybe a little bit of room to make sure that he can get up to speed. So I think it's a combination both of slightly tougher headwinds as we're looking at the macro, but also making sure that we set the expectations appropriately for the European team there and make sure that they've got runway to execute well. Again, I think this is a very modest change versus what we thought 3 months ago, and I think we'll, another quarter or 2, we'll be -- we'll work through that transition.

Sohaib Abbasi

Brent, let me provide a little bit of color. The key notable change that we noticed year-over-year was as a result of some of the austerity measures, specifically the public sector spending in Europe was affected by the austerity measures and that's reflected in our numbers. And let me also reiterate that our European team has consistently executed over several quarters, and I believe with the new leader, we are even better positioned. Thank you, Brent.

Operator

And your next question comes from the line of Mark Murphy of Piper Jaffray.

Mark R. Murphy - Piper Jaffray Companies, Research Division

Earl, I wanted to ask you regarding the financial services vertical, do you feel that it's on firmer footing coming into 2012 in any way? And if so, do you think that that's a function of the state of those end markets? Or do you think it kind of revolves more around Informatica's go-to-market strategy? And any adjustments that you've made there? And I have a quick follow-up after that.

Earl Fry

Sure. Thanks for asking that, actually following Brent's question because I think that's the flip side to EMEA. So I do think with the new leadership there, I think with the macro being a little more certain, we did see better performance out of financial services in Q1. We kind of went back to a much more typical mix where slightly more than half of the business came out of North America, a little less than half coming out of international. All regions of the world grew by a nice double-digit percentages, and so I do think we have more confidence in our ability to execute in that vertical.

Mark R. Murphy - Piper Jaffray Companies, Research Division

Okay. And then I wanted to ask as well, if you can comment, how do you feel about how the quarter closed toward the end of late March? I think we can see some of the positive developments in the services line. I think some of the deal metrics, the ASPs. But I think on the surface, it looks like the license bookings were down a little or maybe flattish year-over-year. Although I'm not -- it's hard to adjust for -- you commented on the deferred line itself, so there's probably an adjustment there. So I guess I'm just trying to get a sense of the -- how you felt about the quarter close.

Sohaib Abbasi

Mark, let me comment on it, and then I'll ask Earl for his observation as well. There was a marked difference in terms of what we saw in North America and what we saw in Europe. As Earl commented earlier, we saw a very good growth in North America, and we did -- and Europe, it was a little bit affected by the austerity measures and the linearity as well reflected the same trend. But we saw a very strong growth in North America and in Asia Pacific as well as in Latin America, and Europe was the one exception.

Earl Fry

Yes, just complete concur with that. A very typical Q1 from a linearity perspective from a close rate and kind of year-over-year growth perspective, with the one exception being slightly worse linearity in EMEA and slightly below quite frankly what we thought we might do in that geo.

Operator

Your next question comes from the line of Michael Turits of Raymond James.

Michael Turits - Raymond James & Associates, Inc., Research Division

Question about license growth. You delivered 12% license growth, which is solid in 1Q. But I think the expectation has been that you started to accelerate throughout the back half and hopefully start to grow license I think above the rate of revenue growth overall. So where are we falling in terms of that outlook now, Earl?

Earl Fry

So I think I'm going to hang on Europe again and say that's the one change where I do think it's going to be slightly tougher comps on a license versus service growth basis in the first half. I do think we can start to get to a point where license will grow at or better than the rate of services as we exit the year. But my expectation now for the year based on what's -- where we are in Q1 and making sure that we're setting targets appropriately for Q2, is that we may end up growing services slightly faster than license over the course of the year. But again, I think directionally, we'll see license grow faster toward the end of the year. I think part of that is actually good news from the perspective that we continue to get better-than-expected maintenance renewal rates. Our subscription lines continued to exceed internal plans, as well as our subscription renewals are better than planned. So those 2 things in particular are driving slightly better-than-expected performance on the services line. So I think license, that makes it a little bit tougher for the license line to catch up.

Michael Turits - Raymond James & Associates, Inc., Research Division

And I think I'll just ask some housekeeping questions on FX. What was the FX impact revenue year-over-year and quarter-over-quarter for both deferred revenue and for future revenues and maybe what you expect going forward?

Earl Fry

Yes. So deferred revenue, you saw on the balance sheet, there was on a year-over-year basis, we got help by about $1.5 million or so on a year-over-year basis. On a sequential basis, we actually had almost $4 million headwind on deferred and future revenues. From a P&L perspective, there was negligible impact both on the revenue and the EPS line.

Michael Turits - Raymond James & Associates, Inc., Research Division

Okay. So to calculate our bookings, we should take that $4 million headwind into account. So on a constant currency basis that would probably be a little bit better.

Earl Fry

That is correct.

Operator

Your next question comes from the line of Ed Maguire of CLSA.

Edward Maguire - Credit Agricole Securities (USA) Inc., Research Division

I wanted to just to get -- wonder if you could provide an update on how your MDM pipeline is tracking. And also, with the Data Masking product, what your expectations might be? If that's a bit of a different market for your technology?

Sohaib Abbasi

Ed, both of those products are tracking extremely well. We've had a very good success with the ILM product in general. In fact, it was part most of our deals that were over $1 million, and we had several transaction over $300,000 that were primarily ILM. And the pipeline is very strong for ILM, specifically Data Masking. For data privacy, many examples we've highlighted in the past where customer information particularly needs to be protected, and Data Masking is becoming a more strategic initiative. MDM, we continue to have very good success building at the pipeline, and MDM was also part of most of the large transactions, million dollar plus. And in both cases, we are very well positioned to maintain our growth.

Operator

Your next question comes from the line of Tom Roderick of Stifel, Nicolaus.

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

So I wanted to get back to the topic of financial services because that -- we've centered a little bit around Europe with being maybe incrementally a bit more challenging. But this would seem to be the area that really started to pick up for you. I guess last quarter, it was down year-on-year as far as some new orders or license. I forget exactly what it was, but I think the commentary was down. Can you speak to financial services? Are we back in growth mode on this vertical? And when you look at the pipeline of opportunities, were there any -- can you kind of talk to what the pipeline generated this quarter versus how you look at it in that vertical going forward?

Sohaib Abbasi

Tom, let me give you a couple of anecdotal examples of customers that I personally had conversations with last quarter. One was in Europe, where it was an enterprise-wide decision. It was led primarily by economic reasons that they felt that rather than having several data integration technologies across the institution, they would be better off economically to choose one vendor. And because of our track record of success, that was a very big opportunity for us to upsell. So despite the comments about the macroeconomic environment, they chose Informatica as the economic alternative. And actually in a way, it helped us win that transaction. I'll give you another example of a conversation I had, which was in the U.S., where this particular large bank that had had success with Informatica had had growing interest in big data, and they had an interest in actually exploring the use of Informatica's entire platform for big data initiative and a variety of other big data initiatives in order to validate the credit [ph] worthiness of our individual's big data initiative in order for them to have a better sense of customer-related marketing activities. And in addition to that, the focus on regulatory compliance. And in that case, that customer decided to actually adopt the entire technology platform. So for a variety of reasons, we are seeing much better opportunities in financial services globally than we did a year ago.

Earl Fry

And just to reiterate, we did see growth in all regions, good double-digit growth in all regions in fin serv. So that's one that -- that was not a reason for the muted growth in EMEA.

Operator

Your next question comes from the line of Kash Rangan of Merrill Lynch.

Kash G. Rangan - BofA Merrill Lynch, Research Division

I'm probably going to ask some [indiscernible] questions since it's my first conference call with you guys, apologize for that. First, for you Earl, you commented that license and subscription revenues deferred on the balance sheet for up quarter-to-quarter sequentially. My recollection is that, that has not really happened in Q1. So if you could comment on what's driving better bookings trends on a sequential basis, that would be great. And one for you, Sohaib, but I apologize again if this question has been asked of you before. Your comments on in-memory computation and what that means for the ETL market. Does it add to it or detract from it? Any thoughts would be appreciated.

Earl Fry

Yes, you're right, Kash. This is really the first time where we've really had both the license subscription as well as kind of perpetual licenses being up sequentially and year-over-year, and that's especially unusual in a first quarter. So maybe different reasons for the subscription piece that it just continued growth in that part of the business. I think on the license, on the perpetual license side, that's more a function of having to record certain transactions and put them into deferred as opposed to in prior years. Maybe the nature of the transactions would've said that they would have stayed in -- in a sense [ph] off-balance-sheet backlog. So there's a little bit of a mix between on balance sheet versus kind of off balance sheet on the license side. For the subscription side, it's just pure -- that is the beauty of the subscription business.

Sohaib Abbasi

Kash, your second question in terms of in-memory technology is net incremental opportunities for Informatica. Whether it is in-memory databases such as the ones promoted by HANA -- by SAP in HANA or whether it's analytic databases for Agile BI as is promoted by QlikTech or whether it's the announcement from Oracle about Exalytics, they all require data to be aggregated from a variety of sources before it could be analyzed. And with our near-universal connectivity, that allows our customers to extract information from all the operation systems, including legacy mainframe systems in order to populate all these in-memory technologies. That is a net incremental opportunity for Informatica.

Kash G. Rangan - BofA Merrill Lynch, Research Division

And sorry, but would that change if the ERP system is going to be riding directly in-memory by-passing the traditional disk databases, or is it not a scenario that's feasible in your mind?

Sohaib Abbasi

Well, I know that there is a debate between Oracle and SAP, and I don't want to get in the middle of that debate about what it means to the ERP market. But what I would say is in terms of being able to analyze that operational data, you have to extract that information from ERP system and cleanse it and identify what is relevant, what is not, identify what's actionable, what is not, and being able to harmonize it and determine what is authoritative and what is not. And all of those steps that make it possible for you to analyze that data require Informatica. So whether there is an in-memory database that might replace the traditional relational databases, time will tell. However, in all those cases, you do have to aggregate information to gain value out of the data, and that is our opportunity.

Operator

And your next question comes from the line of Aaron Schwartz of Jefferies.

Aaron Schwartz - Jefferies & Company, Inc., Research Division

You talked a lot about the cross-sell opportunity for new products and your install base. I was just wondering if you could contrast that to the subscription business and the deferred. Are there certain product areas that you're seeing sort of better interest in pipeline build in that will sort of continue to aid that subscription component in deferred?

Sohaib Abbasi

Well, in terms of our overall product lines, clearly, cloud continues to be our single, biggest growth opportunity. However, it is starting off with a smaller revenue base. It is a subscription revenue, and the impact it has on our revenue model is not quite as material, but it continues to be our fastest-growing product line. In terms of deferred revenue and some of the balances that Earl was commenting on related to license business, we continue to see very good results in our newer product categories of MDM and ILM. And those are 2 of the most popular new products beyond data integration and data quality. So our top 4 product categories will continue to be data integration, the core integration, data quality, MDM and ILM.

Earl Fry

And I guess maybe another way to think about it, Aaron, is most of the cloud services or subscription services up until now have been focused on the core data integration and data quality spaces. Over time, I do think there is an opportunity to broaden that reach to other parts of the Informatica Platform.

Operator

Your next question comes from the line of Steve Koenig of Longbow Research.

Steven R. Koenig - Longbow Research LLC

I'd like to get a little bit of color on in terms of the leadership changes that happened in North America late last year and then Europe this month, first of all, in North America, just retrospectively, what kind of changes, if any, or initiatives were undertaken in conjunction with the leadership change? And what sorts of tweaks or adjustments might you expect in Europe here going forward?

Sohaib Abbasi

Steve, let me provide you with the context. We continue to evolve our organization as we've grown from $200 million to close to $800 million, and now we have plans and aspirations to grow beyond $1 billion. And we continue to make changes in terms of our organizational structure in order for us to be better positioned for the next phase of growth. The specific changes that we referred to at North America was in our verticals business. In order to skim [ph] our financial services business as well as some of the newer areas of interest, like health care, we brought in a new leader. And clearly, some of the results that we announced in Q1 are reflection that we're off to a very good start as a result of making those refinements. In the case of Europe, I would like to underscore that we have a strong management team with bench strength. And it's a testament to that strong management team that despite the concerns about economic changes and uncertainty in Europe, we have seen consistent results over several quarters. And of course, now with the new leader, Steven, our new leader in EMEA, we have an even stronger leader. Now having said that, EMEA obviously we did comment on the back of the economic uncertainty. We are factoring that in terms of the guidance we've provided for this quarter.

Operator

And your next question comes from the line of Derrick Wood of Susquehanna International.

James Derrick Wood - Susquehanna Financial Group, LLLP, Research Division

Just wanted to discuss the decline on the 7-figure account. Is this really coming from the tougher environment in Europe? Or is this have anything to do with a change in product mix? And then just real quickly, I don't think you guys gave the new and existing customer transaction count in the quarter. Not sure if you're still giving that, but if you are, could you provide that?

Sohaib Abbasi

Derrick, let me comment on the million-dollar deals. As we have indicated in the past as well, million-dollar deals are very difficult to project in terms of when they will close. They clearly represents customers making decisions to either standardize or to use multiple products. The exact decrease attribute to the fact that in Europe, specifically in public sector, we did not see the same kind of deal metrics as we saw in Americas. So overall, the metric that we pay a lot more attention to is the deals over $300,000, and that metric clearly has gone up.

Earl Fry

Yes, and with regard to the customer count, we're actually starting a new year kind of from a marketing-driven initiative leading up Informatica. We're revising our standard boilerplate much more in line with what we're seeing from our peers and larger companies and just talking about in rough terms what our total number of customer count is. So that is one metric that I think is less meaningful going forward in terms of specific high count, specific numbers of new accounts. And for the longest time, we haven't even included all of our cloud-based subscription customers. So we've just decided to go to a much more general boilerplate on that.

Operator

And your next question comes from the line of Brent Thill of UBS.

Brent Thill - UBS Investment Bank, Research Division

When you look at the sales and marketing headcount, it looks like you guys got off to a pretty slow start. I think you added 3. And if you go back to Q1 of last year, you got out with I think 56 net-net new adds. Is there a reason why you got such a slow start when typically an industry uses Q1 to make sure they've got all their sales reps on board?

Sohaib Abbasi

We clearly are paying very close attention, Brent, to the headcount in sales and marketing. And more specifically, we're taking a look to make sure that we have the capacity that we need in order for us to make this quarter and next quarter's numbers, and we will continue to pay particular attention to it. As Earl commented on earlier, we did add quite a few new individuals on April 1. So going forward, I believe you will see a faster pace of hiring. But I would like to make one other observation, which is that we did start the year with a lot more people, and we have spent a lot more time ensuring that they are enabled, that they have been trained in order for them to be much more productive, much faster.

Earl Fry

That said, Brent, you can assume that, as I said in my formal comments, we will add well over 100 folks across the company. Most of those are going to be in customer-facing positions in the second quarter and likely continue near that kind of rate through the end of the -- through Q3 and Q4. And just reiterating what Sohaib said, there are many numbers of actually quota-carrying reps that started in early April.

Brent Thill - UBS Investment Bank, Research Division

Okay. And Earl, just to follow back on the guidance. For Q2, should we expect license growth? I know you don't guide to it, but should we expect that number to be slightly above or flat with what we saw in the growth rate year-on-year in Q1?

Earl Fry

Yes, I think you're thinking about that the right way. And I think the one change relative to how maybe we might have thought about it 3 months ago is just what we're -- what we saw in Q1, just very modest, more muted growth in EMEA. But I think overall, I think we feel good about our overall revenue growth, and actually feel much more positive about and have much more visibility in kind of the recurring revenue lines going forward.

Brent Thill - UBS Investment Bank, Research Division

Okay. So Europe is really the reason why you didn't take the full year off, that's why we're still at the same guidance range of what you gave in Q4?

Earl Fry

Yes, and if you look at -- there's -- I think there's room -- I guess the way to think about it is total revenues we're saying are the same. So if anything, there might be a very modest, if you want to think about it, tweak to license to more maintenance and subscription revenues. Other than that, it's pretty much the same as what we guided to 3 months ago.

Operator

And there are no additional questions in queue at this time. Are there any closing comments?

Sohaib Abbasi

Yes. For the remainder of 2012 and beyond, our singular mission remains the same: advance Informatica as the clear leader in data inflation. With secular mega trends elevating the importance of both our compelling value proposition and our expansive product portfolio, Informatica is well positioned to grow beyond $1 billion. Thank you.

Operator

Ladies and gentlemen, this does conclude today's conference. Thank you for your participation. You may now disconnect.

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