The Redwood City, California-headquartered data company is expected to make $841m on its return to the New York Stock Exchange, selling 29 million newly created shares priced at $29 (ticker INFA) – the bottom end of the range. This would value the firm’s 256m shares at $7.4bn: adding its current $2.4bn of debt produces a total enterprise value of $9.6bn. Trading will begin following the NYSE opening bell at 9:30 EST / 14:30 BST.
Informatica’s customers span sectors including pharmaceutical, retail, defence and transport and it counts the likes of Unilever, Kroger, Sanofi and the US Air Force among its client base.
In 2015 private equity firm Permira and the Canada Pension Plan Investment Board took Informatica private after 15 years as a public company, in a leveraged buyout that valued it at $5.3bn. Since then, the company has embarked on an overhaul of its business model.
In a UK exclusive interview ahead of the offering, Informatica CEO Amit Walia explained to Verdict why now is the right time to IPO, his expectations for the float and what the company will do with the IPO proceeds.
“We always wanted to go back to being a public company,” Walia says.
But before that could happen, the CEO had three goals for Informatica. The most “critical” target, he says, was transitioning from a license-based software business to a subscription-first business model.
“The beauty of the subscription model is that it’s very predictable,” Walia explains. The company now draws 95% of all net new business revenue from software subscriptions, up from 31% in 2016.
Founded in 1993, Informatica provides data integration products including data visualisation, data masking and data replica tools. In a previous interview with Verdict, Walia described Informatica as doing the “important but unsexy work” for other companies that use AI and big data.
Informatica’s tools, he said, “join the dots” between large volumes of disparate and unstructured data. According to GlobalData’s thematic analysts, Informatica’s top competitors include Dataiku, Qlik and Delphix.
Today more than 5,000 customers globally use Informatica’s products, including 84 of the Fortune 100.
Using the freedom of being private, Informatica set out to build a “cloud-native, AI-embedded data management platform”. That required a cumulative R&D spend of $1bn over the past five years, Walia says. The result was its flagship Intelligence Data Management Cloud (IDMC) platform.
“To spend that money ahead of revenue, to take a license business and convert that to a subscription business – which has an impact on the revenue line – those things are a lot easier done when you’re private and you don’t have to worry about the quarterly public company pressures,” Walia explains. “And that’s why going private made a lot of strategic sense.”
The buyout was overseen by Walia’s predecessor, Anil Chakravarthy, and the logic is echoed in the stories of other major technology companies that have gone private in recent times, including BMC and Dell.
Walia says Informatica’s third goal was to “grow the company with the foundation of cloud-first workloads”. Since 2015 it has moved from providing primarily on-premises solutions to cloud-based, software-as-a-service offerings.
Informatica says cloud is now its chief revenue driver and growing at 40% year on year. Its AI engine CLAIRE process over 22 trillion transactions on the cloud each month.
Informatica integrates with all the major cloud providers including AWS, Microsoft Azure, Google Cloud and Snowflake. It is vendor-neutral – or as Walia puts it “the Switzerland of data”.
“You name it – we work with all of them,” he added.
However, Walia says Informatica has no current plans to explore partnerships with Asia-based cloud providers such as Alibaba and Tencent.
“We’re going to look at that opportunistically,” he explained. “We have tremendous opportunities with these [existing] partnerships. That is something we’ll look into in the future. For now, we’re not focused on Alibaba or Tencent.”
Informatica IPO to pay off debt
Ahead of today’s IPO, existing investors did not sell any of their existing stakes and will control 85% of the voting power of Informatica common stock.
At the mid-point of the price range, Informatica had aimed to raise $884.5m in gross proceeds from the IPO. It will use the funds to pay off the heavy debts that it took to finance the move private in 2015 and subsequent transformation.
According to its Securities and Exchange Commission filing, Informatica reported net debt of $2.77bn as of 30 June.
“The money we are raising, we’ll use that to retire our debt,” says Walia, which will give it “more flexibility to run our business going forward”.
For the six months ended 30 June, Informatica reported a net loss of $36.3m on revenue of $675.5m. That marks a narrowing of its $102.8m loss the prior year period and also a modest revenue increase from $619.3m.
Informatica calculates its total addressable market to be $44bn, suggesting it sees high growth potential for its now-establish subscription business model.
What does success look like for the Informatica IPO?
When Walia spoke to Verdict ahead of the IPO he said he was not “wedded to a valuation number” and not worried about where the share price closes on opening day.
“Markets move up and markets move down,” he says, playing down the opening day pressures. “As long as your core business is fundamentally doing well in the long term you always come out better.”
But the pandemic “sped up” Informatica’s IPO plans thanks to customers increasing spend on digital transformation projects – in turn boosting Informatica’s revenues, with annual recurring revenues doubling from 2015 levels.
“Last year we accelerated a lot of stuff,” Walia says. “And this year, when I walked into the fiscal year, I felt the time was right. I had a discussion with my investors and we said: ‘let’s go.’”
He added that Informatica could have gone public sooner but there was a feeling that the company became “more ready” over the past year.
“[It’s like] I’m wearing a great tux, but now maybe I have a nice flower on my tux as well,” Walia says.
For Walia, the IPO is also a personal milestone. He joined the company in 2013 and prior to taking the reins as CEO he was president of product and marketing, overseeing the development of IDMC and CLAIRE.
IPO activity all but stopped in 2020, as the investment community grew wary of the effects of COVID-19 on economies. No matter how deserving a business was of flotation, momentum was halted by concerns of when a ‘new normal’ of working patterns and trade would set in.
Recently, sentiment has changed. Flotations picked up again during the second half of 2021, and now in 2022 the mood is decidedly optimistic. Business leaders have their eyes on fast rebounding economies, buoyant market indices and the opportunity once again to take their businesses public. As a result, global IPOs are expected to hit back this year.
With GlobalData’s new whitepaper, ‘IPOs in Consumer and Retail: 5 must-include elements for your prospectus industry report’, you can explore exactly what is needed in the essential literature. GlobalData’s focus lies in the critical areas to get right:
Macroeconomic and demographic environment
Route to market
Interested to learn more about what to include in your IPO Industry Assessment report? Download our free whitepaper.