The Offering

Company Overview

California-headquartered Informatica Inc. was founded in 1993. As an enterprise software developer, it enables enterprises to create a single reliable source for their data, thus, creating a compelling 360-degree customer experience. It also automates data operations across various business processes like supply chain management, financial planning & operations and provides data security services.

Source: IPO Prospectus

Key Highlights

• Net Proceeds: The company’s estimated net proceeds from the sale of shares for the Class A common stock in this offering will be approximately US$ 951.2 million, given that the underwriters’ option to purchase additional shares of the Class A common stock is exercised in full, at an assumed mid-point price of US$ 30.50 per share.
• Use of Proceeds: Primarily, the company intend to use the net proceeds from this offering to repay the outstanding indebtedness of US$ 916.4 million under their First Lien Credit Agreement and Second Lien Credit Agreement.
• Solid Liquidity Position: The company has a track record of financing its operations primarily through cash flows from operations and debt financing. As of December 31, 2020, and June 30, 2021, the company's liquidity position stood at US$367.0 million and US$438.0 million, which will be sufficient to meet their working capital and capital expenditure requirements for at least the next twelve months.
• Strong Clientele: As of June 30, 2021, the company has approximately 5,700 customers in over 100 countries and territories worldwide. Customers, including 9 of the Fortune 10 and 84 of the Fortune 100, shows their ability to meet the most complex and demanding data management needs.
• Dividend Policy: The company currently intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future.
• Industry Overview: The company’s products address the markets for Analytics Data Management and Integration Platforms, which is estimated to be valued at USD 31 billion by the end of 2021 and is expected to grow with a CAGR of 16% to become a USD 56 billion industry by 2025.
• Strong Growth Strategies: The company is pursuing large market opportunities with growth strategies that include a) continuous advancement IDMC by building new cloud products, b) expansion within existing customers, c) expansion of total customer base, d) focus on growth and development of their partner ecosystem and e) focus on increasing international business.

Financial Highlights: H1FY21 vs H1FY20  

Source: Company Prospectus

• During the six months ended on June 30, 2021, the company’s reported subscription revenues increased to US$324.3 million or 48% of total revenues compared to US$259.5 million or 42% of total revenues) for the six months ended June 30, 2020.
• The growth in subscription revenue was primarily due to growth in the installed customer base and an increase in demand for subscription offerings.
• In H1FY21, maintenance revenues increased to US$ 283.3 million or 42% of total revenues compared to US$ 279.8 million or 45% of total revenues for H1FY20.
• Professional services revenues decreased to US$ 51.7 million or 8% of total revenues for the six months ended June 30, 2021, compared to US$ 56.2 million or 9% of total revenues for the six months.
• Gross Profit during H1FY21 increased by 12.4% on a YoY basis to US$ 518.9 million.
• Reported operating income of US$ 32.44 million in H1FY21 vs losses of US$ 15.76 million in H1FY20.
• Net loss significantly narrowed to US$ 36.32 million in H1FY21, from US$ 102.8 million reported in H1FY20.

Key Management Highlights

Risk Associated (Moderate to High)

Investment in the "INFA" IPO is exposed to a variety of risks such as:

• Client Retention: Company's inability to retain customers on the back of fast production and services innovation in the cloud space.
• Termination of Existing Contracts: If the company’s existing customers terminate or do not renew their maintenance contracts, it could have an adverse effect on the business and the results of operations.
• Forex Risk: As the company is based out in the United States and customer base scattered across the globe, strength in the US Dollar index against the basket of majors could impact the company's financials.
• Talent Retention: Retaining the best talent money could find is crucial for the company.
• Others: The company’s operations are exposed to interruption by fire, earthquake, power loss, telecommunications or network failure, and other significant natural disasters or events beyond the company’s ability to control.

Conclusion

Informatica Inc. has pioneered the industry’s first Intelligent Data Management Cloud service and offers the best of breed products with a rich history of innovation.  The company has a strong, longstanding customer relationship with the largest global enterprises and has a robust ecosystem of partnerships, including cloud hyperscalers.

Further, the company has significantly scaled its subscription revenue from USD 118 million in 2016 to US$ 594 million in 2020. The company has ample liquidity to cover its working capital and capex requirements in the near term. In addition, it is committed to repay its outstanding debt post IPO, further strengthening its balance sheet quality.

Therefore, based on the solid financial performance over the last three years, strong client base, profitability at the operating level, dominant position in the Intelligent Data Management Cloud market and scalable market size, the IPO of Informatica Inc. is looking “Attractive’ at the current price band. However, the risk associated with this IPO ranges from Moderate to High Risk.