S-1/A 1 d169828ds1a.htm S-1/A S-1/A
Table of Contents

As filed with the Securities and Exchange Commission on October 18, 2021

Registration No. 333-259963

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 1

to

FORM S-1

REGISTRATION STATEMENT

Under

The Securities Act of 1933

 

 

Informatica Inc.

(Exact name of Registrant as specified in its charter)

 

 

 

Delaware   7372  

61-1999534

(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

Informatica Inc.

2100 Seaport Boulevard

Redwood City, California 94063

(650) 385-5000

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

 

Amit Walia

Chief Executive Officer

Informatica Inc.

2100 Seaport Boulevard

Redwood City, California 94063

(650) 385-5000

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Jeffrey D. Saper

Steven V. Bernard

Andrew S. Gillman

Michael A. Moesel

Wilson Sonsini Goodrich & Rosati, P.C.

650 Page Mill Road

Palo Alto, California 94304

(650) 493-9300

 

Bradford Lewis

Bridget Logterman

Informatica Inc.

2100 Seaport Boulevard

Redwood City, California 94063

(650) 385-5000

 

Gordon K. Davidson

Michael A. Brown

Michael S. Pilo

Fenwick & West LLP

801 California Street

Mountain View, CA 94041

(650) 988-8500

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

   Accelerated filer

Non-accelerated filer

   Smaller reporting company

Emerging growth company

  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act.

 

 

CALCULATION OF REGISTRATION FEE

 

 

 

Title of Each Class of
Securities to be Registered
  Amount to be
Registered(1)
 

Proposed
Maximum
Aggregate
Offering Price

Per Share(2)

  Proposed
Maximum
Aggregate
Offering Price(1)(2)
 

Amount of

Registration Fee(3)

Class A Common Stock, $0.01 par value per share

  33,350,000   $32.00   $1,067,200,000   $98,930

 

 

(1)

Includes 4,350,000 shares of Class A common stock that the underwriters have the option to purchase from the registrant.

(2)

Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(a) under the Securities Act of 1933, as amended.

(3)

The registrant previously paid $9,270 of the registration fee with the initial filing of this registration statement.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant will file a further amendment which specifically states that this Registration Statement will thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement will become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


Table of Contents

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to Completion. Dated October 18, 2021

Preliminary Prospectus

29,000,000 Shares

 

 

LOGO

Class A Common Stock

 

 

This is an initial public offering of shares of Class A common stock of Informatica Inc.

Informatica Inc. is offering shares of its Class A common stock. This is our initial public offering and no public market currently exists for our shares of Class A common stock. It is currently estimated that the initial public offering price per share will be between $29.00 and $32.00 per share.

After giving effect to the Restructuring Transactions (as defined herein) and the completion of this offering, we will have three classes of common stock: Class A common stock; Class B-1 common stock; and Class B-2 common stock. The rights of the holders of Class A common stock and Class B-1 common stock are identical in all respects, except that our Class B-1 common stock will not vote on the election or removal of our directors. The rights of the holders of our Class B-2 common stock differ from the rights of the holders of our Class A common stock and Class B-1 common stock in that holders of our Class B-2 common stock have no rights (voting or otherwise), except for the right to vote on the election or removal of our directors.

Following this offering, Permira and CPP Investments (each as defined herein and, collectively, our “Sponsors”) will control approximately 88.5% of the voting power of our common stock (or approximately 87.2% of the voting power if the underwriters exercise in full, their option to purchase additional shares of our Class A common stock). As a result of this ownership, they will be able to control any action requiring the general approval of our stockholders, including the election of our board of directors, the adoption of amendments to our certificate of incorporation and bylaws, and the approval of any merger or sale of substantially all of our assets. We will be a “controlled company” within the meaning of the corporate governance rules of the New York Stock Exchange (NYSE). See the section titled “Restructuring Transactions” and “Management—Status as a Controlled Company.”

 

 

We have been approved to list our Class A common stock on the NYSE under the symbol “INFA.”

 

 

See the section titled “Risk Factors” beginning on page 23 to read about factors you should consider before buying shares of our Class A common stock.

 

 

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 

 

 

     Per Share      Total  

Initial public offering price

   $                    $                

Underwriting discount

   $        $    

Proceeds, before expenses

   $        $    

 

(1) 

See the section titled “Underwriting” beginning on page 225 of this prospectus for additional information regarding total underwriting compensation.

GIC Private Limited (GIC) has indicated an interest in purchasing an aggregate of up to $150.0 million in shares of Class A common stock offered in this offering at the initial public offering price. Because this indication of interest is not a binding agreement or commitment to purchase, GIC may decide to purchase more, less or no shares of our Class A common stock in this offering, or the underwriters may decide to sell more, less or no shares of our Class A common stock in this offering to GIC. The underwriters will receive the same discount from any shares of Class A common stock sold to GIC as they will from any other shares of Class A common stock sold to the public in this offering.

We have granted the underwriters an option for a period of 30 days to purchase from us up to 4,350,000 additional shares of Class A common stock at the initial public offering price, less the underwriting discount.

The underwriters expect to deliver the shares of Class A common stock to purchasers on                 , 2021.

(Lead Bookrunners listed in alphabetical order)

 

Goldman Sachs & Co. LLC   J.P. Morgan

 

BofA Securities   Citigroup

 

Credit Suisse   Deutsche Bank Securities   RBC Capital Markets

 

UBS Investment Bank   Wells Fargo Securities
Nomura   LionTree  

Macquarie Capital

Academy Securities   Siebert Williams Shank

 


Table of Contents

LOGO

Informatica Cloud First. Data Always.


Table of Contents

LOGO

Pioneered the Intelligent Data Management Cloud Platform Best of Breed Products AI-powered Intelligence & Automation Metadata System of Record DATA INTEGRATION API & APP INTEGRATION DATA QUALITY MASTER DATA MANAGEMENT CUSTOMER & BUSINESS 360 DATA CATALOG GOVERNANCE & PRIVACY Cloud Hybrid Self-Managed Intelligent Data Management Cloud Informatica


Table of Contents

LOGO

Unique Architecture Behind Intelligent Data Management Cloud IoT Cloud SaaS Hybrid Data Ingestion Data Integration Data Quality amazon S3 Google Cloud Storage Azure Data Lake Storage Gen2 snowflake databricksLanding Zone Data Enrichment Enterprise Zone CLAIRE: Intelligence and Automation Governance and Privacy Data Catalog API & Application Integration Stream Processing Stream Storage Google Cloud Pub/Sub Data Delivery and Marketplace IDMC Governance Data Line of Data Business Manager Scientist Engineer Business Analyst User Informatica Data Integration Data Science/AI Amazon SageMaker Azure Machine Learning Customer & Business 360 MDM kafka amazon kinesis Stream Storage Google Cloud Pub/Sub


Table of Contents

LOGO

High Growth Subscription ARR at Scale 34% Q2 2021 YoY Growth Dollars in millions. For the years ended December 31, 2018, 2019 and 2020, net loss was $168 million, $183 million, and $168 million, respectively Informatica


Table of Contents

LOGO

Our Success by the Numbers $1.24B 16% Q2 2021 Total ARR Q2 2021 YoY Total ARR Growth $686M 34% Q2 2021 Q2 2021 YoY Subscription ARR Subscription ARR Growth $264M 39% Q2 2021 Cloud ARR Q2 2021 YoY Cloud ARR Growth $44B 21.6T Total Addressable Cloud Transactions Market Per Month as of Q2 2021 Informatica


Table of Contents

LOGO

Destination of Choice for Leading Enterprises and Hyperscaler and GSI Partners 5 84 5,000+ Gartner Magic Of Fortune 1002 Customers2 Quadrant Leader Categories1 116 55% >$1M Subscription Net New Subscription ARR Customers2 Customers2 ECOSYSTEMS GLOBAL SYSTEM INTEGRATORS 1 As of Q1 2021; Gartner Magic Quadrants including: Enterprise Integration Platform as a Service, Data Quality Solutions, Master Data Management Solutions, Metadata Management Solutions, Data Integration Tools. 2 As of Q2 2021 Informatica


Table of Contents

TABLE OF CONTENTS

 

     Page  

Prospectus Summary

     1  

Risk Factors

     23  

Special Note Regarding Forward-Looking Statements

     76  

Industry and Market Data

     78  

Use of Proceeds

     79  

Dividend Policy

     80  

Restructuring Transactions

     81  

Capitalization

     82  

Dilution

     84  

Unaudited Pro Forma Consolidated Financial Information

     87  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     96  

Business

     140  

Management

     170  

Executive Compensation

     183  

Certain Relationships and Related Party Transactions

     219  

Principal Stockholders

     223  

Description of Capital Stock

     226  

Shares Eligible for Future Sale

     232  

Material U.S. Federal Income Tax Consequences to Non-U.S. Holders of Our Class A Common Stock

     235  

Underwriting

     240  

Legal Matters

     253  

Experts

     253  

Where You Can Find Additional Information

     253  

Index To Financial Statements

     F-1  

 

-i-


Table of Contents

 

Through and including                     , 2021 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

Neither we nor any of the underwriters have authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. Neither we nor any of the underwriters take responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date, regardless of the time of delivery of this prospectus or of any sale of our Class A common stock.

For investors outside the United States: Neither we nor any of the underwriters have done anything that would permit our initial public offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of our Class A common stock and the distribution of this prospectus outside the United States.

 

-ii-


Table of Contents

PROSPECTUS SUMMARY

This summary highlights selected information that is presented in greater detail elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our Class A common stock. You should read this entire prospectus carefully, including the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus, before making an investment decision. Unless the context otherwise requires, the terms “Informatica,” “the company,” “we,” “us” and “our” in this prospectus refer to (i) Ithacalux Topco S.C.A. and its consolidated subsidiaries for the periods prior to the completion of the Restructuring Transactions described in the section titled “Restructuring Transactions” and (ii) Informatica Inc. and its consolidated subsidiaries for the periods subsequent to the completion of the Restructuring Transactions. The term “Permira Funds” refers to EvomLux S.à r.l. and the affiliated investment entities that own an interest in EvomLux S.à r.l. and the term “Permira” refers to the global investment firm that advises the Permira Funds. The term “CPP Investments” refers to Canada Pension Plan Investment Board. The term “Sponsors” refers collectively to Permira and CPP Investments, together with the Permira Funds.

Informatica Inc.

Overview

We have pioneered a new category of software, the Intelligent Data Management Cloud, or IDMC. IDMC is our AI-powered platform that connects, manages, and unifies data across any multi-cloud, hybrid system, empowering enterprises to modernize and advance their data strategies.

Data is foundational to how digital enterprises run their businesses and make strategic decisions, including, creating new offerings, serving their customers and driving operational efficiency. Our platform enables enterprises to create a single source of truth for their data, allowing them to create compelling 360-degree customer experiences, automate data operations across enterprise-wide business processes like supply chain management, financial planning and operations, and provide governed and secure data access to their employees. It also enables our customers to pursue holistic data-driven digital strategies by accelerating workload migrations to the cloud, thus enabling all the advantages of cloud analytics.

As enterprises embrace data to modernize their business, data fragmentation has proliferated across a myriad of systems, including cloud and on-premise data warehouses, data lakes, databases and applications. This fragmentation is compounded by the increasing number of data consumers who require access to data from these heterogeneous data systems to perform their jobs. Legacy approaches to data management were simply not built to address the growing complexity and scale of the digital enterprise.

To address these challenges, we have pioneered a new way for businesses to accurately track where their data resides, understand what relationships exist across their different data repositories, and understand who is accessing the data and how it is being used – all at enterprise scale. Our cloud-native platform continuously scans our customers’ data to create rich and highly contextualized metadata to create and manage a metadata system of record that acts as a single source of truth about their data. This allows our AI engine, CLAIRE, to help customers access better data faster, make contextual recommendations about data relationships, uncover novel insights about their business and automate previously manual tasks.


 

-1-


Table of Contents

Our platform also consists of a wide range of interoperable data management products, including data integration, API and application integration, data quality, master data management, customer and business 360, data catalog and governance and privacy. These products leverage our platform’s shared services and can be consumed from our SaaS-based cloud offering, which is run on AWS, Microsoft Azure, and Google Cloud Platform, and can also be deployed as a self-managed service in our customers’ cloud, hybrid, or on-premise environments.

CLAIRE benefits from powerful network effects. As more customers adopt our platform, CLAIRE continuously analyzes new transactions, configurations, rules, and decisions and uses this increased intelligence to drive further automation and deliver better insights to our customers. We believe CLAIRE’s network effects will continue to accelerate the adoption of our platform as it drives efficiency, productivity, and intelligence gains for both existing and prospective customers, leading to better business outcomes.

In 2015, we set out an ambitious strategy to transform from an on-premise software company to a cloud-based company. As part of our transformation strategy, we undertook an innovation-led approach to build a novel and comprehensive cloud-native data management platform and develop new products to solve a growing set of data management challenges. Additionally, we re-engineered existing products to integrate with our cloud-native platform, creating interoperable data management capabilities that leverage the shared services and metadata of the underlying platform. The growth and adoption of our cloud platform has led to the number of cloud transactions on our platform, which is a measure of data processed, increasing from 0.2 trillion per month in 2015, to 17.0 trillion per month in 2020 and to 21.6 trillion per month as of June 30, 2021. Our cloud annual recurring revenue (ARR) as of June 30, 2021 was $264 million, compared to $189 million as of June 30, 2020, representing year-over-year growth of 39%.

We also transformed from a primarily perpetual license and maintenance revenue model to a primarily subscription-based revenue model supported by our new cloud products. As a result of this strategy and our efforts to rapidly expand our product offerings, we increased our addressable market significantly and scaled our subscription revenue from $118 million in 2016, to $594 million in 2020 and to $324 million for the six months ended June 30, 2021. Over this period, our subscription revenue has grown from 31% of our total software revenue in 2016, to 90% in 2020 and to 95% during the six months ended June 30, 2021. Our subscription ARR has correspondingly scaled from $99 million at December 31, 2015, to $139 million at December 31, 2016, to $607 million at December 31, 2020 and to $686 million at June 30, 2021, representing a compound annual growth rate (CAGR) of 42% over this time frame. To underscore the expansion of our business via growth in new products, as of June 30, 2021, $581 million in subscription ARR, or approximately 85% of our total subscription ARR, was derived from products other than our traditional PowerCenter offering. This $581 million in subscription ARR from new products at June 30, 2021 represented year-over-year growth of 36%.

As of June 30, 2021, we had approximately 5,700 customers1 in over 100 countries and territories worldwide. Such customers include 9 of the Fortune 10, 84 of the Fortune 100, and 923 of the Global 2000, which customers collectively accounted for approximately half of our revenue in 2020 and are representative of our overall customer base. As our customers generate more data, they typically increase their usage of our platform by adding new use cases, adopting more products, or adding more

 

1 

We compute the number of customers by assessing when we have a subscription contract or perpetual license maintenance contract sold to a unique entity. If we sell to several different divisions, segments or subsidiaries inside a company, we count each division, segment or subsidiary as a separate customer. If a customer has both a maintenance contract and a subscription contract, we count this as a single customer.


 

-2-


Table of Contents

users. Our ability to expand within our customer base has been demonstrated by our subscription net retention rate, which was 114% for the quarter ended December 31, 2020 and 116% for the quarter ended June 30, 2021.

We are a strategic partner to our customers in their modernization and digital transformation initiatives, which we believe is reflected by the number of customers that spend more than $1 million in subscription ARR with us, which has increased from 27 to 66 to 104 to 116 as of December 31, 2018, 2019, 2020 and June 30, 2021, respectively. Customers matter to us. We have an overall customer rating of 4.5 out of 5 in the 2021 Gartner’s Peer Insights ‘Voice of Customer’: Data Integration Tools report.

We go to market through a combination of our global direct sales team and a network of strategic partners. Our strategic partners, including cloud hyperscalers, cloud data platforms, global system integrators and value-added resellers, help extend our sales presence and accelerate the adoption of our platform. We collaborate with cloud hyperscalers and cloud data platforms to help our shared customers accelerate their migration to the cloud and modernize their data and analytics strategies.

For the years ended December 31, 2018, 2019 and 2020, revenue was $1,228 million, $1,307 million, and $1,323 million, respectively, representing year-over-year growth of 6% and 1%. For the six months ended June 30, 2020 and 2021, revenue was $619 million and $676 million, respectively, representing year-over-year growth of 9%. Total ARR, which consists of subscription ARR plus maintenance ARR, was $906 million, $1,021 million and $1,160 million at December 31, 2018, 2019 and 2020, respectively, representing year-over-year growth of 13% at December 31, 2019 and 14% at December 31, 2020. Total ARR was $1,070 million and $1,240 million as of June 30, 2020 and 2021, respectively, representing year-over-year growth of 16% at June 30, 2021. Subscription ARR was $310 million, $446 million, $607 million, $510 million, and $686 million as of December 31, 2018, 2019 and 2020 and June 30, 2020 and 2021, respectively, representing year-over-year growth in subscription ARR of 44% at December 31, 2019, 36% at December 31, 2020, and 34% at June 30, 2021. Maintenance ARR was $596 million, $575 million, and $553 million, $560 million and $554 million as of December 31, 2018, 2019 and 2020 and June 30, 2020 and 2021, respectively.

For the years ended December 31, 2018, 2019 and 2020, net loss was $168 million, $183 million, and $168 million, respectively, and Adjusted EBITDA was $337 million, $335 million, and $400 million, respectively. For the six months ended June 30, 2020 and 2021, net loss was $103 million and $36 million, respectively, and Adjusted EBITDA was $168 million and $175 million, respectively. See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measure” for a description of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable financial measure calculated in accordance with generally accepted accounting principles in the United States (GAAP).

Industry Overview: The Data-Driven Digital Enterprise

Challenges Facing Data-Driven Digital Enterprises

Businesses face a number of challenges in their drive to become data-driven digital enterprises. These include:

 

   

Data volumes are exploding, which leads to massive complexity.     The rise of cloud computing, low cost data storage and the proliferation of applications that generate and access data, combined with the increasing volume of data from mobile, social and IoT, creates opportunities to generate greater business insights and pursue new market opportunities, but is overwhelming for organizations to manage, aggregate and normalize.


 

-3-


Table of Contents
   

Workloads are moving to the cloud, creating a multi-cloud, hybrid world.     As enterprises undertake the massive transition to cloud, we believe a majority of their workloads will remain on-premise for the foreseeable future due to the mission-critical processes they support. As a result, we expect enterprises will require new technologies purpose-built to connect, analyze, manage and normalize data anywhere it resides using modern, cloud-native architectures that can seamlessly be deployed in any IT environment.

 

   

Data fragmentation is making data management more complex.     As businesses leverage more cloud-based services, data is being generated and stored across a fragmented landscape of SaaS applications, cloud storage repositories, cloud databases and cloud data lakes. This continued fragmentation magnifies the challenge of bringing together data from across the enterprise to derive new insights and inform critical business decision making.

 

   

The need to democratize data access creates a greater need for data governance and privacy support.     As more employees use data to perform their jobs, enterprises are struggling to provision user access to data, track and monitor who is accessing data, and protect sensitive data.

 

   

Mainstream adoption of AI and machine learning requires reliable and accurate data.     AI and ML technologies promise to influence nearly every facet of business operations. Automated data management technologies are critical to allow enterprises to reliably and accurately train data science models, enabling them to pursue AI-driven business strategies.

Limitations of Existing Approaches to Data Management

Historically, companies have utilized existing approaches to data management for tactical and discrete use cases, which only addressed a limited part of the data management lifecycle. These existing approaches to data management include the following:

 

   

Manual and custom hand coding by in-house or outsourced engineering resources to integrate data and applications for narrowly defined use cases;

 

   

Legacy on-premise tools designed primarily for structured data types from internal on-premise business systems;

 

   

Application-specific and platform-native data management tools designed only to work within their own native products and data formats; and

 

   

Point solutions that only address discrete data management use cases, such as data and application integration, data catalog, data governance or master data management.

These existing approaches to data management suffer from some or all of the below limitations:

 

   

Not natively built for the cloud.     Many legacy data management approaches have inherent flexibility, scalability, and capacity constraints as they were not originally designed for the adoption of cloud-based workloads. The inflexible and incompatible nature of non-native cloud approaches frequently results in knowledge loss, unwieldy and insecure data and slower innovation.

 

   

Lack of AI-driven automation.     Legacy data management approaches lack the AI capabilities necessary to automate data management tasks, accurately identify and emulate human actions, and automatically classify data assets, significantly limiting the applicability of AI technologies to basic data management processes.

 

   

Inability to scale and support new data types and processing frameworks.     Legacy data management approaches were designed for a limited set of structured data types. With


 

-4-


Table of Contents
 

enterprises generating and utilizing large volumes of disconnected, disorganized semi-structured and unstructured data, created by many users globally, enterprises struggle to scale and support their data management.

 

   

Inability to support the end-to-end data management lifecycle.     Legacy data management approaches are generally point solutions designed to address narrow aspects of data management.

 

   

High cost of ownership.     Manual, custom hand coding, legacy on-premise tools, and point solutions are often time-consuming, costly to operate and require extensive manual data preparation prior to use. Their architectures frequently require maintenance of the underlying infrastructure, upgrades and patches, and system configuration.

 

   

Inability to support hybrid multi-cloud environments.     Application-specific and platform-native data management approaches are generally only intended to run on specific environments and for a limited set of data types and use cases. These approaches limit the organization’s flexibility and can lead to vendor and technology lock-in and an inability to optimize functionality by selecting the best platform, application or infrastructure of choice for each use case.

 

   

Lack of extensibility to incorporate future technologies.     Organizations using proprietary or open source code can be forced to continually rework their data management architectures to accommodate constantly changing technologies and architectures, leading to substantial costs, risks, and increased time to market.

 

   

Inability to address the expanding breadth of data users.     Many existing solutions do not typically make their functionality accessible to all data management constituents within an organization, resulting in fragmented products and tools for an organization’s data management capabilities, which become a strong impediment to enterprise-wide digital transformation initiatives.

The Need for an Intelligent Data Management Cloud

Data has become one of the most valuable assets for enterprises. As data has become more mission-critical, the explosion of data volumes has led to massive complexity and fragmentation, creating challenges for enterprises that are looking to extend the use of data within their business as they drive their digital strategies.

In order for organizations to successfully become data-driven digital enterprises, we believe they must manage this growing scale, complexity and proliferation of data from a single platform that serves as a central data management layer that leverages AI and machine learning to unify data management across their ever-expanding number of clouds and enterprise systems. To address these challenges, we have pioneered the industry’s first AI-powered Intelligent Data Management Cloud (IDMC).

Our Platform: The Intelligent Data Management Cloud

Our platform is a new layer in the enterprise stack that allows our customers to connect, manage, unify, govern, and secure data across multi-cloud, hybrid environments. We offer our platform as a SaaS offering deployed on all major public cloud platforms (AWS, Microsoft Azure, and Google Cloud Platform) and also sell our products that customers deploy in their own self-managed private and public cloud environments.

Our platform is deployed across the enterprise data landscape to create a unified system of record of metadata, which is highly rich and contextualized information about enterprise data. Our


 

-5-


Table of Contents

platform leverages AI-powered algorithms to help customers utilize their data faster, make contextual recommendations about data relationships, uncover novel insights about their data and automate previously manual tasks. This helps our customers modernize and scale their data and analytics strategies, migrate their mission critical workloads to the cloud, create 360-degree business profiles across their customers and supply chains, and democratize data access to everyone in a secure and governed way.

Our platform consists of a series of shared services combined with a wide range of interoperable data management products and is designed to be extensible to avoid vendor and technology lock-in.

IDMC Platform Services

 

   

Metadata System of Record.     Our platform enables organizations to create a metadata system of record for all data within an enterprise. Organizations can also understand who is using the data, the quality of the data, where the data resides, and how it is moving through applications, systems, databases and other data sources.

 

   

CLAIRE: AI-Powered Intelligence and Automation.     CLAIRE is our AI engine that powers intelligence and automation across our platform. CLAIRE’s AI algorithms automate tasks and data processes to deliver thousands of hours of time and cost savings for our customers.

 

   

Low Code / No Code Design Environment.     Our platform offers a low code / no code user interface that makes it quick and easy for non-technical users and technical users to design data pipelines, build integrations, deploy data quality checks and quickly bring disparate data sources together to build a single source of truth, with minimal IT support.

 

   

Single Pane of Glass.     Our platform includes a comprehensive, holistic and integrated Operations Insights monitoring service that, when combined with our extensive data connector libraries, allows for comprehensive monitoring of all data management workloads operated on our platform. Data users and business leaders have an in-depth view of all data pipelines and data management operations across the enterprise, and a single pane view of the health of their data processes.

IDMC Platform Products

Our platform includes a comprehensive suite of interoperable data management products that leverage the shared services and metadata of the underlying platform.

 

   

Data Integration products allow users to ingest, transform and integrate data; readying it for analytics, data science and enterprise reporting.

 

   

API & Application Integration products enable users to create and manage APIs and integration processes for app-to-app synchronization, business process orchestration, B2B partner management, application development, and API management.

 

   

Data Quality products allow users to profile, cleanse, standardize, and enrich data to deliver accurate, complete, and consistent data sets for analytics, data science, governance, and other initiatives.

 

   

Master Data Management products enable users to create an authoritative single source of truth of business-critical data to reduce data related errors and remove redundancies.

 

   

Customer and Business 360 products allow users to rapidly create, visualize and browse comprehensive 360-degree views of business-critical data that help drive customer experience, ecommerce, supply chain management, and other digital initiatives.


 

-6-


Table of Contents
   

Data Catalog products enable consumers of all experience levels to quickly find, access, and understand enterprise data using a simple Google-like search experience.

 

   

Governance and Privacy products help users govern data, enable compliance with regulatory and corporate policies, and drive broader data consumption.

Key Benefits to Our Customers

Our platform enables our customers to:

 

   

Embrace the full benefits of the public cloud.     Our platform modernizes customers’ applications and data management capabilities to accelerate migrations to the cloud; allowing them to embrace innovation, create digital-first business models, reduce operating costs, and generate new revenue streams.

 

   

Deliver rich 360-degree business experiences.     By enabling our customers to aggregate, consolidate and normalize their data to build a single source of truth, we empower them to deliver highly engaging and personalized customer experiences and modernize their supply chains by intelligently matching supply with demand patterns.

 

   

Democratize secure, governed data across the organization.     Our platform helps our customers provide their data consumers with governed, secure, and high-quality data for their business analytics or other use cases.

 

   

Transition from reactive and tactical to proactive and strategic data management.     Our approach to data management allows our customers to shift from deploying reactive tactical solutions to a proactive data management strategy.

 

   

Operationalize AI into business processes.     By eliminating data silos, reducing the complexity of data fragmentation and delivering trusted data, we enable our customers to build AI-powered and resilient business operations.

 

   

Faster time to market and lower total cost of ownership.     We allow organizations to standardize their enterprise data management needs on a single extensible platform with a unified metadata view, thereby accelerating their data-driven strategies and providing a cost-efficient, highly automated solution relative to a combination of unrelated vendor tools.

Our Competitive Strengths

 

   

We pioneered the industry’s first Intelligent Data Management Cloud.     We took a fundamentally different approach than the market by applying AI and machine learning algorithms to metadata to help customers discover, recommend, and automate data management. As CLAIRE analyzes more data and business rules, its recommendation engine becomes more accurate and the sophistication of its automation increases.

 

   

We offer best of breed products with a rich history of innovation.     We have a singular focus on the data management category and have dedicated significant resources, including a cumulative $1 billion in R&D spend over the last five years. We are a leader in all five of the Gartner’s Magic Quadrant reports relating to data management, including Enterprise Integration Platform-as-a-Service, Data Integration Tools, Data Quality Solutions, Master Data Management Solutions, and Metadata Management Solutions.

 

   

Independent platform vendor across multi-cloud, hybrid environments.     Since our inception, we have designed our platform and products to optimize performance across any


 

-7-


Table of Contents
 

database, data source, or third-party application. We believe this provides us with a sustainable competitive advantage in a world where almost every company is embracing a multi-cloud, hybrid strategy and where data fragmentation is a significant barrier to bringing together the breadth of an enterprise’s data to make intelligent decisions.

 

   

Strong, longstanding customer relationships with the largest global enterprises.     Our relationships with approximately 5,700 customers, including 9 of the Fortune 10 and 84 of the Fortune 100, as of June 30, 2021, are a competitive advantage as it demonstrates our ability to meet the most complex and demanding data management needs.

 

   

We have a robust ecosystem of partnerships including cloud hyperscalers.     We have strong strategic relationships with the three leading cloud hyperscalers—AWS, Microsoft Azure, and Google Cloud Platform—and sell our products on their marketplaces. We also partner with Snowflake and Databricks and our product integration and joint go-to-market deepens our position as a market leader in enterprise data management.

 

   

Ability to assist the full span of data users.     Our platform allows all key stakeholders throughout an organization to easily leverage the power of our comprehensive data management capabilities. We offer a user experience that reduces the technical skills required of users, driving the ubiquity of our platform throughout an organization as employees across departments and job functions leverage data to improve their performance.

Our Opportunity

Over the last five years, we have significantly expanded our addressable market by investing in our platform and launching several new products. Our products address the markets for Analytics Data Management and Integration Platforms, which IDC estimates at a value of $31 billion by the end of 2021 and $56 billion by the end of 2025, which represents a CAGR of 16%.

We estimate that our current global market opportunity is approximately $44 billion by estimating the 90th percentile of potential Informatica ARR per company and multiplying by the number of companies worldwide across all industries.

Our Growth Strategies

We are pursuing our large market opportunity with growth strategies that include:

 

   

Continue to advance IDMC by building new cloud products.

 

   

Expand within existing customers.

 

   

Expand our total customer base.

 

   

Continue to grow and develop our partner ecosystem.

 

   

Continue to expand our international business.

Preliminary Estimated Financial Results for the Three Months ended September 30, 2021

The data presented below reflects our preliminary estimated financial results for the three months ended September 30, 2021 based upon information available to us as of the date of this prospectus. This data is not a comprehensive statement of our financial results for the three months ended September 30, 2021. The preliminary results of operations are subject to revision as we prepare our financial statements and related disclosures for the three months ended September 30, 2021; however, such revisions are not expected to be significant.


 

-8-


Table of Contents

While we currently expect our results for the three months ended September 30, 2021 to be within the ranges set forth below, the review of our financial statements for the three months ended September 30, 2021 has not been completed. During the course of the preparation and review of our financial statements and related notes for the three months ended September 30, 2021, additional adjustments to the preliminary estimated financial results presented below may be identified. Our independent registered public accounting firm has not audited, reviewed, compiled or performed any procedures with respect to this preliminary financial data and, accordingly, does not express an opinion or any other form of assurance with respect thereto. We caution you that such preliminary estimates are not guarantees of future performance or outcomes and that actual results may differ materially from the estimates described below. See “Risk Factors,” “Special Note Regarding Forward-Looking Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information regarding factors that could result in differences between the preliminary estimated ranges of certain of our financial results presented below and the actual financial results and other information we will report for the three months ended September 30, 2021. These estimates are not necessarily indicative of the results to be achieved for the remainder of fiscal 2021 or any future period.

 

     Three Months Ended September 30,  
     2020     2021 Preliminary
Estimate
 
           Low      High  
     (in thousands)  

Revenue

   $ 327,243     $ 349,400      $ 375,200  

Operating expenses

     241,409       246,500        256,500  

Operating income

     8,138       25,200        35,200  

Net income (loss)

     (32,309     2,500        4,500  

Key Business Metrics and Non-GAAP Financial Measure

The following are our key business metrics and Non-GAAP financial measure for the three months ended September 30, 2020 and preliminary estimated key performance indicators and Non-GAAP financial measure for the three months ended September 30, 2021.

 

     Three Months Ended September 30,  
     2020     2021 Preliminary Estimate  
           Low     High  
     (in thousands, except percentages)  

Annual Recurring Revenue

   $ 1,099,637     $ 1,264,000     $ 1,304,000  

Subscription Annual Recurring Revenue

   $ 541,289     $ 719,000     $ 749,000  

Subscription Net Retention Rate

    
113

    115     116

Cloud Annual Recurring Revenue

   $
199,994
 
  $ 278,000     $ 298,000  

Adjusted EBITDA (Non-GAAP)

   $ 106,512     $ 95,000     $ 110,000  

 

-9-


Table of Contents

Adjusted EBITDA

The following table provides a reconciliation of Adjusted EBITDA to net loss for the three months ended September 30, 2020 and estimated net income to estimated Adjusted EBITDA for the three months ended September 30, 2021:

 

     Three Months Ended September 30,  
     2020     2021 Preliminary
Estimate
 
           Low     High  
     (in thousands)  

GAAP net income (loss)

   $ (32,309   $ 2,500     $ 4,500  

Income tax expense (benefit)

     (9,899     —         2,000  

Interest income

     (1,254     —         (1,000

Interest expense

     37,108       35,000       37,500  

Loss on debt refinancing

     1,299       —         —    

Other income (expense), net

     13,193       (10,500     (9,500

Stock-based compensation

     2,879       3,000       5,000  

Amortization of intangibles

     72,586       59,500       64,000  

Equity compensation payments

     392       —         —    

Acquisition transaction fees

     564       —         —    

Legal settlements, restructuring costs and executive severance

     14,982       —         —    

One-time impairment on restructured facilities

     —         —         —    

Sponsor-related costs

     500       —         1,000  

Depreciation

     6,471       5,500       6,500  
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 106,512     $ 95,000     $ 110,000  
  

 

 

   

 

 

   

 

 

 

We believe adjusted EBITDA is an important metric for understanding our business to assess our relative profitability adjusted for balance sheet debt levels. For more information regarding why we believe the non-GAAP financial measures to be beneficial, please refer to the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures.”


 

-10-


Table of Contents

Revenues

The following table sets forth our revenues for the three months ended September 30, 2020 and preliminary estimated revenues for the three months ended September 30, 2021:

 

     Three Months Ended September 30,  
     2020      2021 Preliminary
Estimate
 
            Low      High  
     (in thousands)  

Revenue:

        

Subscription

   $ 148,278      $ 186,100      $ 201,100  

Perpetual License

     13,693        3,000        3,800  
  

 

 

    

 

 

    

 

 

 

Total Software Revenue

     161,971        189,100        204,900  

Maintenance Revenue

     141,358        133,800        142,000  

Professional Services

     23,914        26,500        28,300  
  

 

 

    

 

 

    

 

 

 

Total Maintenance and Professional Services

     165,272        160,300        170,300  
  

 

 

    

 

 

    

 

 

 

Total Revenues

   $ 327,243      $ 349,400      $ 375,200  
  

 

 

    

 

 

    

 

 

 

Risk Factors Summary

Our business is subject to numerous risks and uncertainties that you should consider before investing in our company. These risks are described more fully in the section titled “Risk Factors” immediately following this prospectus summary. These risks include, but are not limited to, the following:

 

   

If we are unable to attract and retain customers, our future results of operations could be harmed.

 

   

If our existing customers terminate or do not renew their subscriptions, it could have an adverse effect on our business and results of operations.

 

   

If our existing customers terminate or do not renew their maintenance contracts, it could have an adverse effect on our business and results of operations.

 

   

A network or data security incident may compromise the integrity of our products, create service outages for our hosted products, or allow unauthorized access to our network or our customers’ data, harm our reputation, create additional liability and adversely impact our financial results.

 

   

We have experienced rapid subscription revenue growth in recent periods, and our recent growth rates may not be indicative of our future growth.

 

   

If we do not successfully manage our strategy and business model transition for our cloud- and subscription-based offerings, our business may become more difficult to predict and our results of operations may be adversely affected.

 

   

We may not be able to successfully manage the growth of our business if we are unable to scale our operations and enhance our internal systems, processes, and controls.

 

   

Our business and revenue have been adversely affected and could in the future be adversely affected by the COVID-19 pandemic.


 

-11-


Table of Contents
   

If we do not compete effectively, our revenues may not grow and could decline.

 

   

If we are unable to successfully respond to technological advances and evolving industry standards, we could experience a reduction in our future product sales, which would cause our revenues to decline.

 

   

Our current research and development efforts, including the introduction of new products, the integration of acquired products, and the enhancement of existing products, may not be successful or result in significant revenue, cost savings or other benefits in the near future, if at all.

Channels for Disclosure of Information

Investors, the media and others should note that, following the completion of this offering, we intend to announce material information to the public through filings with the Securities and Exchange Commission, or the SEC, the investor relations page on our website, press releases, public conference calls, and webcasts.

The information disclosed through the foregoing channels could be deemed to be material information. As such, we encourage investors, the media and others to follow the channels listed above and to review the information disclosed through such channels.

Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations page on our website.

Our Sponsors

Permira is a leading global investment firm founded in 1985 that invests in successful businesses with growth ambitions. The firm advises the Permira Funds with total committed capital of approximately US$50 billion (44 billion) and makes long-term majority and minority investments. The Permira Funds have made over 250 private equity investments in four key sectors: Technology, Consumer, Services and Healthcare. The Permira Funds have an extensive track record in tech investing, having invested US$13.4 billion in 52 companies across enterprise cloud, SaaS, fintech and online marketplaces. The Permira Funds have previously backed and helped scale some of the largest and fastest-growing internet and technology businesses globally, including Informatica, Genesys, G2, Klarna, Legalzoom, Allegro, Teamviewer and Zwift. Permira employs over 350 people in 15 offices across Europe, North America, and Asia.

Canada Pension Plan Investment Board (CPP Investments) is a professional investment management organization that manages the amounts transferred by the Canada Pension Plan (CPP) in the best interest of the more than 20 million contributors and beneficiaries of the CPP. In order to build diversified portfolios of assets, investments are made around the world in private equities, public equities, real estate, infrastructure and fixed income. At June 30, 2021, the fund totaled CAD$519.6 billion. In addition to Informatica, current and previous technology investments include Asurion, BGL Holdings, GlobalLogic, IMS Healthcare, Lytx, Refinitiv, Sportradar, Suddenlink, UKG, Unity Technologies, Virtusa, Waymo and Waystar.

Summary of the Restructuring Transactions

Prior to the completion of this offering, we have participated in certain transactions, which collectively had the net effect of reorganizing our corporate structure so that the top-tier entity in our


 

-12-


Table of Contents

corporate structure—the entity that is offering Class A common stock to the public in this offering—is a Delaware corporation rather than a Luxembourg société en commandite par actions.

We previously operated as a Luxembourg société en commandite par actions under the name Ithacalux Topco S.C.A. (Ithacalux). Following the Restructuring Transactions, Informatica Inc. became the owner of Ithacalux and Informatica Inc. indirectly holds all the property and assets of Ithacalux and assumes all the debts and obligations of Ithacalux. Except as otherwise noted herein, the consolidated financial statements included elsewhere in this prospectus are those of Ithacalux and its consolidated subsidiaries. The Restructuring Transactions did not have a material effect on the results of our operations. In this prospectus, we refer to these transactions as the “Restructuring Transactions.” For more information regarding the reorganization of our corporate structure, please see the section titled “Restructuring Transactions.”

Corporate Information

Informatica Inc. was incorporated in Delaware in June 2021 in connection with the proposed restructuring of Ithacalux Topco S.C.A. and its subsidiaries which was completed on September 30, 2021. Informatica Inc. has no material assets and has not engaged in any business activities except in connection with this offering and the Restructuring Transactions described above. Our principal executive offices are located at 2100 Seaport Boulevard, Redwood City, California 94063, and our telephone number is (650) 385-5000. Our website address is www.informatica.com. Information contained on, or that can be accessed through, our website does not constitute part of this prospectus and inclusions of our website address in this prospectus are inactive textual references only.

Informatica, the Informatica logo and our other registered or common law trademarks, service marks or trade names appearing in this prospectus are the property of Informatica Inc. and its consolidated subsidiaries. Other trademarks and trade names referred to in this prospectus are the property of their respective owners.


 

-13-


Table of Contents

The following chart shows our simplified organizational structure immediately following the consummation of this offering, assuming no exercise of the underwriters’ option to purchase additional shares.

 

 

LOGO


 

-14-


Table of Contents

THE OFFERING

 

Class A common stock offered by us

29,000,000 shares

 

Underwriters’ option to purchase additional shares of Class A common stock from us

4,350,000 shares

 

Class A common stock to be outstanding immediately after this offering

229,613,193 shares (233,963,193 shares, if the underwriters’ option to purchase additional shares of our Class A common stock from us is exercised in full)

 

Class B-1 common stock to be outstanding immediately after this offering

44,085,414 shares

 

Total Class A common stock and Class B-1 common stock to be outstanding immediately after this offering

273,698,607 shares (278,048,607 shares, if the underwriters’ option to purchase additional shares of our Class A common stock from us is exercised in full)

 

Use of proceeds

We estimate that the net proceeds to us from the sale of shares of our Class A common stock in this offering will be approximately $825.9 million (or approximately $951.2 million if the underwriters’ option to purchase additional shares of our Class A common stock from us is exercised in full), based upon the assumed initial public offering price of $30.50 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

 

We intend to use the proceeds from this offering, net of underwriting discounts and commissions and expenses payable by us, to repay the outstanding indebtedness under our First Lien Credit Agreement and our Second Lien Credit Agreement, as described in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” We intend to use the remainder of the net proceeds, if any, from this offering for working capital and other general corporate purposes, as well as the acquisition of, or investment in, complementary products, technologies, solutions or businesses, although we have no present commitments or


 

-15-


Table of Contents
 

agreements to enter into any material acquisitions or investments. See the section titled “Use of Proceeds” for additional information.

 

Voting rights

Shares of our Class A common stock will be entitled to one vote per share on all matters presented to our stockholders generally.

 

  Shares of our Class B-1 common stock will be entitled to one vote per share on all matters presented to our stockholders generally, except that shares of our Class B-1 common stock will not be entitled to vote in the election or removal of directors.

 

  Shares of our Class B-2 common stock will have no votes per share on any matters presented to our stockholders generally, except for the right to vote in the election or removal of directors.

 

  CPP Investments will beneficially own all outstanding shares of Class B-1 common stock and Class B-2 common stock.

 

  See the sections entitled “Principal Stockholders” and “Description of Capital Stock” for additional information.

 

Conversion rights

Each share of our Class A common stock will be convertible into one share of our Class B-1 common stock and one share of our Class B-2 common stock at any time and from time to time, at the option of the holder, so long as such holder holds one or more shares of Class B-1 common stock or Class B-2 common stock at the time of conversion. Each share of our Class B-1 common stock will be convertible into one share of our Class A common stock at the option of the holder; provided, that, as a condition to such conversion, the holder of the shares of Class B-1 common stock to be converted must direct a holder of Class B-2 common stock to surrender an equal number of shares of Class B-2 common stock to us. No public stockholders will have conversion rights because they will not be eligible to hold shares of our Class B-1 common stock or our Class B-2 common stock.

 

Controlled company

Because our Sponsors will beneficially own 198,390,476 shares of Class A common stock


 

-16-


Table of Contents
 

and 44,085,414 shares of Class B-2 common stock, which are the only classes of our common stock entitled to vote on director elections and which represent in the aggregate approximately 88.5% of the voting power with respect to director elections, we will be a controlled company as of the completion of this offering under the NYSE rules. See the section titled “Management—Status as a Controlled Company.”

 

Risk factors

See the section titled “Risk Factors” and the other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our Class A common stock.

 

Proposed trading symbol

“INFA”

 

Indication of interest

GIC has indicated an interest in purchasing an aggregate of up to $150.0 million in shares of Class A common stock offered in this offering at the initial public offering price. Because this indication of interest is not a binding agreement or commitment to purchase, GIC may decide to purchase more, less or no shares of our Class A common stock in this offering, or the underwriters may decide to sell more, less or no shares of our Class A common stock in this offering to GIC. The underwriters will receive the same discount from any shares of Class A common stock sold to GIC as they will from any other shares of Class A common stock sold to the public in this offering.

The number of shares of our Class A common stock and Class B-1 common stock that will be outstanding immediately after this offering is based on 200,613,193 shares of our Class A common stock and 44,085,414 shares of our Class B-1 common stock outstanding as of June 30, 2021, and excludes:

 

   

24,948,147 shares of our Class A common stock issuable upon the exercise of options to purchase shares of our Class A common stock that were outstanding as of June 30, 2021, with a weighted average exercise price of $15.70 per share;

 

   

2,211,143 shares of our Class A common stock issuable upon the exercise of options to purchase shares of our Class A common stock granted after June 30, 2021, with a weighted-average exercise price of $25.30 per share;

 

   

38,334,600 shares of our Class A common stock reserved for future issuance under our equity compensation plans, consisting of:

 

   

32,858,200 shares of our Class A common stock to be reserved for future issuance under our 2021 Equity Incentive Plan, or our 2021 Plan, which will become effective prior to the completion of this offering; and


 

-17-


Table of Contents

 

   

5,476,400 shares of our Class A common stock to be reserved for future issuance under our 2021 Employee Stock Purchase Plan, or our ESPP, which will become effective prior to the completion of this offering.

Our 2021 Plan and ESPP each provide for annual automatic increases in the number of shares of our Class A common stock reserved thereunder, and our 2021 Plan also provides for increases to the number of shares of our Class A common stock that may be granted thereunder based on shares under our 2015 Equity Plan that expire, are forfeited, or otherwise repurchased by us, as more fully described in the section titled “Executive Compensation—Employee Benefits and Stock Plans.”

Except as otherwise indicated, all information in this prospectus assumes:

 

   

the consummation of the Restructuring Transactions, including the exchange of ten Ithacalux shareholder interests for one share of Class A common stock of Informatica Inc. or one share of Class B-1 common stock and one share of Class B-2 common stock of Informatica Inc., as applicable;

 

   

the filing and effectiveness of our amended and restated certificate of incorporation in Delaware and our amended and restated bylaws, which will occur immediately prior to the completion of this offering;

 

   

no exercise of outstanding stock options subsequent to June 30, 2021;

 

   

no conversion of shares of Class B-1 common stock into shares of Class A common stock; and

 

   

no exercise by the underwriters of their option to purchase additional shares of Class A common stock from us in this offering.


 

-18-


Table of Contents

SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA

The following table sets forth the summary consolidated financial and other data of Ithacalux Topco S.C.A. (Ithacalux), a Luxembourg société en commandite par actions, for the periods presented and at the dates indicated below. Following the completion of the Restructuring Transactions, Ithacalux will be considered our legal predecessor.

The consolidated statements of operations data for each of the years ended December 31, 2018, 2019 and 2020 and consolidated balance sheet data as of December 31, 2020 are derived from our audited consolidated financial statements that are included elsewhere in this prospectus. Our audited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). We derived the selected consolidated statements of operations data for the six months ended June 30, 2020 and 2021 and the consolidated balance sheet data as of June 30, 2021 from our unaudited consolidated financial statements that are included elsewhere in this prospectus. The unaudited consolidated financial data set forth below have been prepared on the same basis as our audited consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, that are necessary for the fair statement of such data. Our historical results are not necessarily indicative of the results to be expected in the future. The summary consolidated financial data in this section are not intended to replace the audited consolidated financial statements and related notes thereto included elsewhere in this prospectus and are qualified in their entirety by the consolidated financial statements and related notes thereto included elsewhere in this prospectus. The following summary consolidated financial data should be read in conjunction with the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes thereto included elsewhere in this prospectus.

 

    Year Ended December 31,     Six Months Ended June 30,  
    2018     2019     2020     2020     2021  
    (in thousands, except share and per share data)  

Consolidated Statements of Operations

         

Revenues:

         

Subscriptions

  $ 302,519     $ 471,707     $ 593,834     $ 259,516     $ 324,265  

Perpetual license

    241,237       143,392       63,126       23,889       16,239  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Software revenue

    543,756       615,099       656,960       283,405       340,504  

Maintenance and professional services

    684,606       691,431       666,136       335,923       335,034  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    1,228,362       1,306,530       1,323,096       619,328       675,538  

Cost of revenues(1):

         

Subscriptions

    37,294       46,867       54,454       25,404       37,067  

Perpetual license

    4,570       3,350       3,876       1,803       2,187  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Software costs

    41,864       50,217       58,330       27,207       39,254  

Maintenance and professional services

    158,769       173,166       161,197       82,218       80,282  

Amortization of acquired technology

    143,769       115,544       98,458       48,066       37,095  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenues

    344,402       338,927       317,985       157,491       156,631  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

    883,960       967,603       1,005,111       461,837       518,907  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

         

Research and development(1)

    203,071       234,879       230,151       111,870       123,831  

Sales and marketing(1)

    431,538       486,298       451,839       222,280       220,938  

General and administrative(1)

    87,644       101,638       93,548       46,842       55,178  

Amortization of intangible assets

  $ 226,607     $ 208,082     $ 189,309     $ 94,343     $ 86,386  

 

-19-


Table of Contents
    Year Ended December 31,     Six Months Ended June 30,  
    2018     2019     2020     2020     2021  
    (in thousands, except share and per share data)  

Acquisition, litigation settlement, and other charges

    22,517       749       3,001       2,270       128  

Restructuring charges

                16,476              
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

    971,377       1,031,646       984,324       477,605       486,461  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income/(loss) from operations

    (87,417     (64,043     20,787       (15,768     32,446  

Interest income

    5,059       4,062       2,254       742       534  

Interest expense

    (146,338     (161,877     (149,445     (75,860     (72,183

Loss on debt refinancing

    (23,628     (1,085     (37,400     (36,101      

Other income (expense), net

    40,385       16,722       (26,404     2,496       14,779  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income taxes

    (211,939     (206,221     (190,208     (124,491     (24,424

Income tax (benefit) expense

    (44,256     (22,996     (22,321     (21,673     11,900  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

  $ (167,683   $ (183,225   $ (167,887   $ (102,818   $ (36,324
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share, basic and diluted(2)

  $ (0.01   $ (0.01   $ (0.01   $ (0.01   $  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares, used in computing net loss per share, basic and diluted, before the completion of the Restructuring Transactions(2)

    24,343,951,397       23,205,811,514       21,989,820,781       21,986,803,847       22,019,215,633  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma net loss per share, basic and diluted(3)

      $ (0.63     $ (0.08
     

 

 

     

 

 

 

Weighted-average shares used in computing pro forma net loss per share, basic and diluted(4)

        271,096,998         271,423,607  
     

 

 

     

 

 

 

 

(1) 

Includes stock-based compensation expense as follows:

 

     Year Ended December 31,      Six Months Ended June 30,  
     2018      2019      2020          2020              2021      
     (in thousands)  

Cost of revenues

   $ 649      $ 1,724      $ 916      $ 403      $ 480  

Research and development

     1,689        4,367        2,531        894        1,804  

Sales and marketing

     1,542        3,341        3,035        1,293        1,870  

General and administrative

     3,057        5,977        5,562        4,058        1,731  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total stock-based compensation expense

   $ 6,937      $ 15,409      $ 12,044      $ 6,648      $ 5,885  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(2) 

Refer to Note 18 to our consolidated financial statements included elsewhere in this prospectus for an explanation of the method used to calculate our historical basic and diluted net loss per share and the weighted-average number of shares used in the computation of historical per share amounts before the completion of the Restructuring Transactions. For the purpose of providing a more meaningful comparison of equivalent weighted outstanding shares before and subsequent to the Restructuring Transactions, if the Restructuring Transactions had been completed on January 1, 2018, our historical weighted-average shares in computing net loss per share, basic and diluted, would have been 243,439,513 shares, 244,271,700 shares, and 244,331,342 shares for the years ended December 31, 2018, 2019 and 2020, respectively, and 244,297,820 shares and 244,657,951 shares for the six months ended June 30, 2020 and 2021, respectively.

(3) 

The unaudited pro forma net income (loss) per share, basic, and diluted gives effect to (i) the reorganization transactions described under “Restructuring Transactions,” including the filing and effectiveness of our amended and restated certificate of incorporation in Delaware that will become effective immediately prior to the completion of this offering and (ii) the planned change in our equity structure; (iii) the adjustments related to this offering, including the achievement of performance criteria in relation to our unvested performance-based option awards upon completion of this offering, the sale and issuance by us of


 

-20-


Table of Contents
  29,000,000 shares of our Class A common stock in this offering based upon the assumed initial public offering price of $30.50 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us; and (iv) the repayment in full of the total indebtedness outstanding under the First Lien Term Facility and Second Lien Term Facility and the payment of a 2.0% prepayment premium under our Second Lien Credit Facility, from the issuance of a new term loan facility (“New Term Loan Facility”), the proceeds from this offering and the use of available cash and cash equivalents, as described in “Use of Proceeds.” The borrowing on the New Term Loan Facility is expected to bear interest at LIBOR plus 2.75% with a maturity date of October 29, 2028.
(4) 

Pro forma weighted-average shares includes Class A and Class B-1 shares to be owned by existing stockholders and the Class A shares of common stock assumed to be issued in the offering to new stockholders to be used for the repayment of debt, at an assumed initial public offering price of $30.50 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus. The issuance of such shares is assumed to have occurred as of the beginning of the period.

 

     As of June 30, 2021  
     Actual     Pro Forma(2)  
     (in thousands)  

Consolidated Balance Sheet

    

Cash and cash equivalents

   $ 408,553     $ 290,845  

Working capital(1)

     139,864       24,485  

Total assets

     4,850,846       4,733,138  

Total liabilities

     3,727,171       2,809,660  

Contract liabilities, current and non-current

     524,709       524,709  

Long term debt, current and non-current

     2,773,895       1,870,210  

Additional paid-in capital

     1,933,761       2,993,619  

Accumulated other comprehensive income

     33,194       33,194  

Accumulated deficit

     (1,063,509     (1,106,072

Total stockholder’s equity

     1,123,675       1,923,478  

 

(1) 

Working capital is defined as current assets less current liabilities.

(2) 

The pro forma consolidated balance sheet data gives effect to (i) the reorganization transactions described under “Restructuring Transactions,” including the filing and effectiveness of our amended and restated certificate of incorporation in Delaware that will become effective immediately prior to the completion of this offering and (ii) the planned change in our equity structure; (iii) the adjustments related to this offering, including the achievement of performance criteria in relation to our unvested performance-based option awards upon completion of this offering, the sale and issuance by us of 29,000,000 shares of our Class A common stock in this offering, based upon the assumed initial public offering price of $30.50 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us; and (iv) the repayment in full of the total indebtedness outstanding under the First Lien Term Facility and Second Lien Term Facility and the payment of a 2.0% prepayment premium under our Second Lien Credit Facility, from the issuance of a new term loan facility (“New Term Loan Facility”), the proceeds from this offering and the use of available cash and cash equivalents, as described in “Use of Proceeds.” The borrowing on the New Term Loan Facility is expected to bear interest at LIBOR plus 2.75% with a maturity date of October 29, 2028. Each $1.00 increase or decrease in the assumed initial public offering price of $30.50 per share, which is the midpoint of the offering price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, the amount of our pro forma cash and cash equivalents, working capital, total assets, and total stockholders’ equity by $27.4 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting estimated underwriting discounts and commissions. An increase or decrease of 1.0 million shares in the number of shares offered by us would increase or decrease, as applicable, the amount of our pro forma cash and cash equivalents, working capital, total assets, and total stockholders’ equity by $28.8 million, assuming the assumed initial public offering price remains the same, and after deducting estimated underwriting discounts and commissions.


 

-21-


Table of Contents

Key Business Metrics and Non-GAAP Financial Measure

In addition to the measures presented in our consolidated financial statements, we use the following key business metrics and non-GAAP financial measure to help us evaluate our business and operating performance, identify trends affecting our business, formulate business plans, and make strategic decisions:

 

     Year Ended
December 31,
    Six Months Ended
June 30,
 
     2018     2019     2020     2020     2021  
     (in millions, except percentages)  

Annual Recurring Revenue

   $ 906     $ 1,021     $ 1,160     $ 1,070     $ 1,240  

Subscription Annual Recurring Revenue

   $ 310     $ 446     $ 607     $ 510     $ 686  

Subscription Net Retention Rate

     106     113     114     113     116

Cloud Annual Recurring Revenue

   $ 140     $ 167     $ 227     $ 189     $ 264  

Adjusted EBITDA(1)

   $ 337     $ 335     $ 400     $ 168     $ 175  

 

(1) 

Adjusted EBITDA is a non-GAAP financial measure. For more information regarding our use of this measure and a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics and Non-GAAP Financial Measure.”

See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics and Non-GAAP Financial Measure” for a description of Annual Recurring Revenue, Subscription Annual Recurring Revenue, Subscription Net Retention Rate, Cloud Annual Recurring Revenue and Adjusted EBITDA.


 

-22-


Table of Contents

RISK FACTORS

Investing in our Class A common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information contained in this prospectus, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes thereto, before making a decision to invest in our Class A common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become factors that affect us. If any of the risks occur, our business, financial condition, operating results and prospects could be materially and adversely affected. In that event, the market price of our Class A common stock could decline, and you could lose part or all of your investment.

Risks Related to Our Business and Industry

If we are unable to attract and retain customers, our future results of operations could be harmed.

The success of our business depends on our ability to attract and retain customers. To do so, we must persuade decision makers at enterprises and other organizations that our products offer significant advantages over those of our competitors. Other factors, many of which are out of our control, may now or in the future impact our ability to attract and retain customers, including:

 

   

our failure to generate sufficient awareness and demand for our products;

 

   

potential customers’ commitments to existing vendors;

 

   

potential customers’ greater familiarity and/or comfort with our competitors’ products;

 

   

real or perceived switching costs;

 

   

real or perceived complexity deploying our products;

 

   

our failure to help our customers successfully deploy and use our products;

 

   

our failure to satisfy customer demand for new features, products and services;

 

   

our failure to expand sales via additional new products with existing customers;

 

   

potential customers’ failure to appreciate the benefits of our platform relative to their existing data management products;

 

   

our competitors’ product offerings and pricing strategies being considered favorable to ours;

 

   

our failure to expand, retain and motivate our sales and marketing personnel;

 

   

our failure to develop or expand relationships with existing sales partners or to attract new sales partners;

 

   

the adoption of new, or amendment of existing, laws, rules and regulations that negatively impact the utility of our products;

 

   

the perceived risk, commencement or outcome of litigation against us; and

 

   

deteriorating general economic conditions.

If our efforts to attract and retain customers are not successful, our revenue and rate of revenue growth may decline, we may not be able to achieve, or successfully sustain, profitability, our business may become more difficult to predict, and our future results of operations could be materially harmed.

 

-23-


Table of Contents

If our existing customers terminate or do not renew their subscriptions, it could have an adverse effect on our business and results of operations.

We expect to derive a significant portion of our subscription ARR from our existing subscription customer base. In the year ended December 31, 2020 and the six months ended June 30, 2021, approximately 85% and 94% of our total subscription ARR was generated from existing subscription customers, respectively. As a result, achieving a high renewal rate of our subscriptions is critical to our business. Our customers typically have no contractual obligation to renew their subscriptions after the completion of their then current subscription term, which is typically one to three years, and certain of our customers have a right to terminate during the subscription term. Our customers’ renewal rates may decline or fluctuate, and termination rates may increase or fluctuate, as a result of a number of factors, including their lack of satisfaction with our platform or our customer support, our products’ inability to integrate with new and changing technologies, the perception of frequent or severe subscription outages, delays or lags in our product uptime or latency, and a mismatch in the pricing of our products and competing offerings.

Even if our customers renew their subscriptions, they may renew for shorter subscription terms than we anticipate, they may not expand the usage of our products at the rate we are expecting, or they may insist on other renewal terms that are less economically beneficial to us. We cannot be certain that our customers will renew their subscriptions or expand their subscriptions nor can we be certain that our customers will not terminate their subscriptions in whole or in part. If our customers terminate or do not renew their subscriptions, or renew on less favorable terms, our revenue may grow more slowly than expected or decline, our subscription renewal rate and subscription net retention rate may decline, and we may not accurately predict future revenue from existing customers.

If our existing customers terminate or do not renew their maintenance contracts, it could have an adverse effect on our business and results of operations.

In 2020, we had $561 million of maintenance revenue, which was 42% of our total revenue of $1,323 million. During the six months ended June 30, 2021, we had $283 million of maintenance revenue, which was 42% of our total revenue of $676 million. Achieving a high renewal rate on our maintenance contracts is critical to our business. Our customers have no contractual obligation to renew their maintenance contracts after the completion of their then current contract term, which is typically one to three years, and certain of our customers have a right to terminate during the term. Our customers’ renewal rates may decline or fluctuate, and termination rates may increase or fluctuate, as a result of a number of factors, including their lack of satisfaction with our products or our customer support, our products’ inability to integrate with new and changing technologies and a mismatch in the pricing of our products and competing offerings.

Even if our customers renew their maintenance, they may renew for shorter terms than we anticipate or on other terms that are less economically beneficial to us. Customers may also not renew their maintenance if they want to move their perpetual licenses to a cloud architecture and we are unable to accommodate them with an acceptable migration plan. We cannot be certain that our customers will renew their maintenance nor can we be certain that our customers will not terminate their maintenance in whole or in part. If our customers terminate or do not renew their maintenance, or renew on less favorable terms, our revenue may grow more slowly than expected or decline, our maintenance renewal rate may decline, and we may not accurately predict future revenue from existing customers.

 

-24-


Table of Contents

A network or data security incident may compromise the integrity of our products, create service outages for our hosted products, or allow unauthorized access to our network or our customers’ data, harm our reputation, create additional liability and adversely impact our financial results.

We make significant efforts to maintain the security and integrity of our product source code and the computer systems that are used to develop and host our products. However, the threats to computer systems, networks and data security are increasingly diverse and sophisticated. In addition to traditional computer “hackers,” ransomware attacks, malicious code (such as viruses and worms), employee theft or misuse, and denial of service attacks, sophisticated nation-state and nation-state supported actors now engage in intrusions and attacks (including advanced persistent threat intrusions), and fundamental software vulnerabilities add to the risks to our products and computer systems, including our internal network, and the information they store and process. Despite significant efforts to create security barriers to such threats, it is virtually impossible for us to entirely mitigate these risks. Like all software products, our software is vulnerable to such incidents. The impact of such an incident could disrupt the proper functioning of our products, create a service outage for our cloud services, cause errors in the output of our customers’ work, allow unauthorized access to sensitive, proprietary or confidential information of ours or our customers, and cause other destructive outcomes. If this were to occur, our reputation may suffer, customers may stop buying our products, we could face lawsuits and potential liability and our financial performance could be negatively affected. 

In addition, as we continue to devote more resources to evaluate our computer systems, networks and products for security vulnerabilities, the cost of addressing these vulnerabilities could reduce our operating margins. If we do not address security vulnerabilities or otherwise provide adequate security features in our products and cloud services, certain customers, particularly government and other public sector customers, may delay or stop purchasing our products and cloud services. Furthermore, we expect the risks related to computer system, network or security incidents to increase as we continue to develop our cloud products and services, which may store, transmit and process our customers’ sensitive, proprietary or confidential data, including personal or identifying information, in cloud-based IT environments. We also engage third-party vendors and service providers to store and otherwise process some of our and our customers’ data, including sensitive and personal information. Our vendors and service providers may also be the targets of cyberattacks, malicious software, phishing schemes, and fraud. Our ability to monitor our vendors and service providers’ data security is limited, and, in any event, third parties may be able to circumvent those security measures, resulting in the unauthorized access to, misuse, disclosure, loss or destruction of our and our customers’ data, including sensitive and personal information. For example, in October 2019, Informatica’s travel and expense management service provider notified Informatica that data fields from nine Informatica employees’ travel profiles may have been mixed into other users’ profiles. The service provider restored the profiles and indicated that the risk of harm was low because there was no way to link mixed data back to the original profile. Informatica nevertheless notified all of the impacted employees as well as the applicable European supervisory authorities.

In addition, we have acquired a number of companies, products, services and technologies and may continue to do so in the future. As a result, we may inherit additional IT security issues when we integrate these acquisitions. Throughout our 25-year history, our on-premise products have accrued historical potential security vulnerabilities. As we migrate these products and underlying features and components to our cloud platform, many of these vulnerabilities are addressed, but some may persist. These potential vulnerabilities are reviewed according to our risk-based process that considers the residual risk based on compensating controls and other factors. Within our on-premise products, some existing vulnerabilities may become more impactful over time and some vulnerabilities may be newly discovered along with the normal course of security vulnerability disclosure. These vulnerabilities may create significant unplanned engineering effort and cost to resolve and redistribute to customers who remain on the on-premise version of our software.

 

-25-


Table of Contents

Techniques used to sabotage or obtain unauthorized access to computers systems or networks are constantly evolving and, in some instances, are not identified until launched against a target. We and our service providers may be unable to anticipate these techniques, react in a timely manner, or implement adequate preventative measures. Further, we cannot assure that any limitations of liability provisions in our customer and user agreements, contracts with third-party vendors and service providers or other contracts would be enforceable or adequate or would otherwise protect us from any liabilities or damages with respect to any particular claim relating to a security breach or other security-related matter. We also cannot be sure that our existing insurance coverage will continue to be available on acceptable terms, if at all, or will be available in sufficient amounts, if at all, to cover claims related to a security incident or breach, or that the insurer will not deny coverage as to any future claim. The successful assertion of claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our financial condition, operating results, and reputation.

We have experienced rapid subscription revenue growth in recent periods, and our recent growth rates may not be indicative of our future growth.

We have experienced rapid subscription revenue growth in recent periods. We recognized subscription revenues of $302.5 million, $471.7 million and $593.8 million for the years ended December 31, 2018, 2019 and 2020, respectively. Over this period, our subscription revenue has grown from 56% of total software revenue in 2018, to 77% in 2019 and to 90% in 2020. We recognized subscription revenues of $259.5 million and $324.3 million during the six months ended June 30, 2020 and 2021, respectively. Over this period, our subscription revenue has grown from 92% of total software revenue during the six months ended June 30, 2020, to 95% of total software revenue during the six months ended June 30, 2021. This subscription revenue growth may not be indicative of our future subscription revenue growth and we may not be able to sustain revenue growth consistent with recent history, or at all. We believe our ability to continue to increase our subscription revenue depends on a number of factors, including, but not limited to:

 

   

our ability to attract and retain subscription customers;

 

   

our ability to expand within our existing subscription customer basis;

 

   

our ability to continue to expand customer adoption of our platform;

 

   

our ability to compete effectively against a variety of different vendors who offer data management products;

 

   

continued growth of cloud-based services; and

 

   

our ability to continue to develop new products to expand the offerings in our platform.

If we are unable to achieve any of these requirements, our subscription revenue growth may decline, and our business and results of operations would be adversely affected.

If we do not successfully manage our strategy and business model transition for our cloud- and subscription-based offerings, our business may become more difficult to predict and our results of operations may be adversely affected.

The continued adoption of cloud services, the increasing customer demand for subscription-based licensing, the accelerating volume and diversity of data creation, and the critical importance of data security continue to redefine business computing. We offer our products on a subscription-based license model including our cloud data management products that provide our customers with functionality within a cloud-based IT environment. Our strategy and business model for these

 

-26-


Table of Contents

subscription-based offerings, which differs from our legacy perpetual license-based model, continue to evolve and are subject to risks and uncertainties. It is difficult to forecast the revenue mix for our new sales and this makes it challenging to predict what portion of our new sales will be recognized as revenue in the current period versus recognized ratably over multiple periods.

We have continued to build on our cloud-focused strategy with the development of our Intelligent Data Management Cloud (IDMC) platform. As a result, we are deriving an increasing portion of our revenues over time from our subscription-based offerings. For example, we are aggressively investing in our go-to-market strategies and customer success organization for our cloud- and on-premise subscription products. These go-to-market strategies and efforts may differ from those we have used for perpetual license software products, may be temporarily disruptive and result in reduced sales productivity in addition to increased costs. The market for subscription-based offerings is not as mature as the market for perpetual license products and it may not develop as anticipated. In addition, market acceptance of subscription-based offerings, particularly cloud-based solutions, may be affected by a variety of factors, including concerns regarding the data security, privacy, cost, reliability, performance and perceived value associated with such offerings. Many customers have invested substantial resources on traditional, perpetually licensed, on-premise software solutions, and the related ongoing support services, and they may be unwilling or reluctant to migrate to cloud-based solutions or other subscription-based offerings. We may not be able to compete effectively or generate significant demand for or revenues from our subscription-based offerings. Also, we expect demand for our subscription-based offerings to unfavorably impact demand for certain of our other products and services, such as support services on perpetually licensed products. In addition, our subscription offering strategy will require continued investment in product development and operations, including cloud-based IT infrastructure. Additionally, our future success depends in part on the growth of the market for cloud data management solutions and an increase in the desire to ingest, store and process data in the cloud, and the market for cloud data management solutions and applications may not grow as expected and, even if such growth occurs, our business may not grow at similar rates, or at all. We may incur costs at a higher than expected rate as our subscription business continues to expand, adversely affecting our financial performance. In addition, we will incur costs associated with the investments in our subscription business in advance of our ability to recognize the revenue associated with our subscription offerings, which will have an adverse impact on our margins. If we are unable to successfully establish our subscription offerings and navigate our business model transition in light of the foregoing risks and uncertainties, our results of operations could be negatively affected.

We may not be able to successfully manage the growth of our business if we are unable to scale our operations and enhance our internal systems, processes, and controls.

We continue to experience growth in our customer base and operations, which may place a strain on our management, administrative, operational and financial infrastructure. We anticipate that additional investments in our infrastructure will be necessary to scale our operations and increase productivity. These additional investments will increase our costs and may adversely affect our operating margins if we are unable to sufficiently increase revenues to cover these additional costs. If we are unable to successfully scale our operations and increase productivity, we may be unable to execute our business strategies. Our business has grown in recent years, as evidenced by headcount growth in India, Japan and EMEA, through internal expansion and through acquisitions, and we expect such growth to continue. As a result, we may need to enter into additional lease commitments, expand existing facilities, or purchase new facilities or undeveloped real estate, which may adversely affect our cash flows and results of operations. We moved our existing data center from our corporate headquarters to an external third-party facility, and also utilize other third-party data center facilities and public cloud providers, including Amazon Web Services, Microsoft Azure and Google Cloud, to host certain of our services, systems and data. Each of our commercial agreements with AWS, Microsoft Azure and Google Cloud have 3-year terms through 2024 and will remain in effect until

 

-27-


Table of Contents

terminated by us or the respective counterparty. AWS may terminate the agreement for convenience by providing us at least 30 days advanced notice or for cause upon a material breach of the agreement, subject to AWS providing prior written notice and a 30-day cure period. Microsoft Azure may terminate the agreement without cause upon 60 days’ notice or for material breach, subject to such party providing 30 days’ notice and a 30-day cure period. Google Cloud may terminate the agreement for material breach with a 30-day cure period, if we cease operations or become subject to insolvency proceedings and the proceedings are not dismissed within 90 days, or we are in material breach more than twice notwithstanding any cure of such breaches. While we believe that we could transition among these cloud infrastructure providers or to alternative providers on commercially reasonable terms if needed, in the event any of these third-party facilities or public cloud providers become unavailable due to outages, interruptions or other unanticipated problems, or because they are no longer available on commercially reasonable terms or prices, our costs may increase and our operations may be impaired, which would adversely affect our business.

In addition, we need to continue to enhance our internal systems, processes, and controls to effectively manage our operations and growth. We are continually investing resources to upgrade and improve our internal systems, processes and controls, human resources information systems and our enterprise resource planning systems, in order to meet the growing requirements of our business, but we cannot guarantee we will do so effectively or efficiently.

Upgrades to our internal systems, processes, and controls may require us to implement incremental reconciliation or additional reporting measures to evaluate the effectiveness of such upgrade or improvement, or to adopt new processes or procedures in connection with the upgrade or improvement. We may not be able to successfully implement upgrades and improvements to our systems, processes, and controls in an efficient or timely manner, if at all, and we may discover deficiencies in existing systems, processes, and controls, which could adversely affect our business. We have licensed technology and utilized support services from various third parties to help us implement upgrades and improvements. We may experience difficulties in managing upgrades and improvements to our systems, processes, and controls or in connection with third-party software, which could disrupt existing customer relationships, causing us to lose customers, limit us to smaller deployments of our products, or increase our technical support costs. The support services available for such third-party technology also may be negatively affected by mergers and consolidation in the software industry, and support services for such technology may not be available to us in the future. In addition, we use both on-premise and cloud resources, and any security or other flaws in such resources could have a negative impact on our internal systems, processes, or controls.

We may also need to realign resources from time to time to more efficiently address market or product requirements. To the extent any realignment requires changes to our internal systems, processes, and controls or organizational structure, we could experience disruption in customer relationships, increases in cost, and increased employee turnover. Furthermore, as we expand our geographic presence and capabilities, we may also need to implement additional or enhance our existing systems, processes and controls to comply with U.S. and international laws.

Our business and revenue have been adversely affected and could in the future be adversely affected by the COVID-19 pandemic.

Continuing concerns over economic and business prospects in the United States and throughout the world, including the ongoing COVID-19 pandemic, have contributed to increased volatility and diminished expectations for the global economy. These factors have had a material impact on the global economy and have adversely impacted and may further impact our workforce, our operations, and the operations of our customers, which could materially adversely affect our business and financial condition. Our customers have experienced, and may continue to experience, disruptions in their

 

-28-


Table of Contents

operations, which have resulted in delayed, reduced, or canceled orders and requests for renegotiation or extended payment terms. Due to our subscription-based business model, the effect of COVID-19 may not be fully reflected in our results of operations until future periods. Work-from-home and other measures we have undertaken for our global workforce have affected the way we conduct our product development, customer support, and other activities. Further, the COVID-19 pandemic may continue to impact our operations outside the United States even if local containment efforts are successful. For example, we have a significant number of research and development, customer support and general and administrative personnel located in India, which continues to be heavily impacted by the pandemic.

The full extent of the impact of the COVID-19 pandemic on the Company’s operational and financial performance remains uncertain and will depend on many factors outside the Company’s control. To the extent the COVID-19 pandemic adversely affects the Company’s business, results of operation, and financial condition, it may also have the effect of heightening many of the other risks described in this section.

If we do not compete effectively, our revenues may not grow and could decline.

The market for our products is highly competitive, quickly evolving, and subject to rapidly changing technology, which may expand the alternatives available to our current and potential customers for their data management requirements. Our competition consists of:

 

   

hand-coded custom-built solutions developed by internal IT teams;

 

   

point solution vendors that compete with one of our products, such as Talend and Collibra;

 

   

cloud service providers (CSPs) with limited platform-specific capabilities in data management, such as AWS, Microsoft Azure and Google Cloud Platform; and

 

   

stack vendors that compete across in many of our markets with data management solutions, such as IBM and Oracle.

From time to time, we compete with business intelligence and analytics vendors, such as Alteryx, that offer, or may develop, products with functionalities that compete with our products.

Certain of our competitors have substantially greater financial, technical, marketing, and other resources, greater name recognition, specialized sales or domain expertise, broader product portfolios and stronger customer relationships than we do and may be able to exert greater influence on customer purchasing decisions. New or emerging technologies, technological trends or changes in customer requirements may result in certain of our strategic partners, including CSPs, becoming potential competitors in the future. Our competitors may be able to respond more quickly than we can to new or emerging technologies, technological trends and changes in customer requirements. Our current and potential competitors may develop and market new technologies that render our existing or future products obsolete, unmarketable, or less competitive. In addition, new products or enhancements of existing products that we introduce may not adequately address or respond to new or emerging technologies, technological trends or changes in customer requirements. Moreover, competition from new and emerging technologies and changes in technological trends, particularly the shift to cloud-based solutions, has increased market confusion about the benefits of our products compared to other solutions.

We expect competition to increase as other established and emerging companies enter the data management and data integration software market, as customer requirements evolve and as new products and technologies are introduced. Our ability to compete depends upon many factors both within and beyond our control, including the following:

 

   

ability to offer a comprehensive platform with best of breed products;

 

-29-


Table of Contents
   

interoperability with multi-cloud, hybrid environments and applications;

 

   

ability to embed advanced AI and machine learning in our platform;

 

   

performance, reliability and security;

 

   

ease of deployment and ease of use by the full breadth of data practitioners;

 

   

elasticity and ability to quickly scale services;

 

   

strength of cloud ecosystem partnerships;

 

   

responsiveness to evolving customer needs and use cases;

 

   

success of sales & marketing efforts;

 

   

quality of customer support; and

 

   

brand awareness and reputation.

We may have difficulty competing on the basis of price in circumstances where our competitors develop and market products with similar or superior functionality and pursue an aggressive pricing strategy. For example, some of our competitors may provide guarantees of prices and product implementation, offer data management products at no cost in order to charge a premium for additional functionality, or bundle data management products with other products at no cost to the customer or at deeply discounted prices for promotional purposes or as a long-term pricing strategy. These difficulties may increase as larger companies target the data management markets. A customer may be unwilling to pay a separate cost for our data management products if the customer has a bundled pricing arrangement with a company that offers a wider variety of products than us. As a result, increased competition, alternate pricing models and bundling strategies could seriously impede our ability to sell additional products and services on terms favorable to us.

In addition, consolidation among vendors in the software industry is continuing at a rapid pace. Our current and potential competitors may make additional strategic acquisitions, consolidate their operations, or establish cooperative relationships among themselves or with other solution providers, thereby increasing their ability to provide a broader suite of software products or solutions and more effectively address the needs of our current and prospective customers. Such acquisitions could cause potential customers to defer or not proceed with purchasing our products. Our current and potential competitors may also establish or strengthen cooperative relationships with our current or future strategic partners, thereby limiting our ability to sell products through these channels. If any of this were to occur, our ability to market and sell our software products would be impaired. In addition, competitive pressures could reduce our market share or require us to reduce our prices, either of which could harm our business, results of operations, and financial condition.

Furthermore, during periods of U.S. or global economic uncertainty, our customers’ capital spending may be significantly reduced. As a result, there is significantly increased competition for the allocation of IT budget dollars, and other IT implementations may take priority over the use of our products and services.

If we are unable to successfully respond to technological advances and evolving industry standards, we could experience a reduction in our future product sales, which would cause our revenues to decline.

The market for our products is characterized by continuing technological development, the emergence of new technologies, evolving industry standards, changing customer needs, and frequent new product introductions and enhancements. The introduction of products by our competitors or

 

-30-


Table of Contents

others incorporating new technologies, the emergence of new industry standards, or changes in customer requirements could render our existing products obsolete, unmarketable, or less competitive. In addition, industry-wide adoption or increased use of hand-coding, open source standards or other uniform open standards across heterogeneous applications could minimize the importance of the integration functionality of our products and materially adversely affect the competitiveness and market acceptance of our products. Furthermore, the standards on which we choose to develop new products or enhancements may not allow us to compete effectively for business opportunities.

Our success depends upon our ability to enhance existing products, to respond to changing customer requirements, and to develop and introduce new products in a timely manner that keep pace with technological and competitive developments and emerging industry standards. We have in the past experienced delays in releasing new products and product enhancements and may experience similar delays in the future. As a result, in the past, some of our customers deferred purchasing our products until the next upgrade was released. Future delays or problems in the installation or implementation of our new releases may cause customers to forgo purchases of our products and purchase those of our competitors instead. Additionally, even if we are able to develop new products and product enhancements, we cannot ensure that they will achieve market acceptance.

Our current research and development efforts, including the introduction of new products, the integration of acquired products, and the enhancement of existing products, may not be successful or result in significant revenue, cost savings or other benefits in the near future, if at all.

Rapid technological changes, including changes in customer requirements and preferences, are characteristic in the software industry. In particular, in the market for enterprise data management software and services, especially for broader data management initiatives, we have experienced increased competition from new and emerging technologies and increased market confusion from our customers or prospective customers about the benefits of our products compared to other solutions. In order to address the expanding data management needs of our customers and prospective customers, and to respond to rapid technological changes, technological trends and customer concerns, we introduce new products and technology enhancements on a regular basis, including products we acquire. For example, in August 2020, we acquired GreenBay Technologies, a provider of advanced AI/ML (artificial intelligence and machine learning) solutions that complement our CLAIRE-powered Intelligent Cloud Data Management platform, and in July 2020, we acquired Compact Solutions, a provider of advanced metadata connectivity tools. We intend to continue our investments to develop and introduce new products and product enhancements.

The introduction of new products, integration of acquired products and enhancement of existing products is a complex and costly process involving inherent risks, such as:

 

   

the failure to accurately anticipate the impact of new and emerging technologies or changes in technological trends;

 

   

the failure to accurately anticipate changes in customer requirements and preferences;

 

   

delays in completion, launch, delivery, or availability;

 

   

delays in customer adoption or market acceptance;

 

   

delays in customer purchases in anticipation of products not yet released;

 

   

product quality issues, including the possibility of defects and the costs of remediating any such defects;

 

   

market confusion based on changes to the product packaging and pricing as a result of a new product release;

 

-31-


Table of Contents
   

market confusion based on the introduction of new and emerging technologies by us and our competitors or changes in technological trends, particularly the shift to cloud-based solutions;

 

   

interoperability and integration issues between our existing products and newly acquired products or technologies, and the costs of remediating any such issues;

 

   

interoperability and integration issues with third-party technologies and the costs of remediating any such issues;

 

   

customer issues with migrating or upgrading from previous product versions and the costs of remediating any such issues;

 

   

bugs, errors, or other defects or deficiencies in the early stages of introduction;

 

   

loss of existing customers that choose a competitor’s product instead of upgrading or migrating to the new or enhanced product; and

 

   

loss of maintenance revenues from existing customers that do not upgrade or migrate.

Developing our products and related enhancements is expensive. We devote significant resources to the development of new products, the acquisition of products, and the enhancement of existing products, as well as to the integration of these products with each other. We recognized $203.1 million, $234.9 million, and $230.2 million of research and development expense in the years ended December 31, 2018, 2019 and 2020, respectively, and $111.9 million and $123.8 million in the six months ended June 30, 2020 and 2021, respectively. Our investments in research and development may not result in significant design improvements, marketable products or features, or may result in products that are more expensive than anticipated. Additionally, we may not achieve the cost savings or the anticipated performance improvements we expect, and we may take longer to generate revenue, or generate less revenue, than we anticipate. Our future plans include significant investments in research and development and related product opportunities. We believe that we must continue to dedicate a significant amount of resources to our research and development efforts to maintain our competitive position. However, we may not receive significant revenue from these investments in the near future, if at all, or these investments may not yield the expected benefits, either of which could adversely affect our business and results of operations. In addition, as we develop new products, particularly those based on new or emerging technologies, we may need to develop sales and marketing strategies that differ from the strategies we currently utilize, which may result in increased levels of investment and additional costs. For example, we are continuing to evolve our business model to increase subscription revenue and aggressively investing in our go-to-market strategies for our newer products.

Additionally, we have in the past experienced bugs, errors, or other defects or deficiencies in new products, including cloud products, and product updates and may have similar experiences in the future. Furthermore, our ability to increase the usage of our products depends, in part, on the development of new use cases for our products and may be outside of our control. We also have invested, and may continue to invest, in the acquisition of complementary businesses, technologies, services, products and other assets that expand the products that we can offer our customers. We may make these investments without being certain that they will result in products or enhancements that will be accepted by existing or prospective customers. Additionally, even if we are able to develop new products and product enhancements, we cannot ensure that they will achieve market acceptance. If we are unable to successfully enhance our existing products to meet evolving customer requirements, increase adoption and usage of our products, develop new products, or if our efforts to increase the usage of our products are more expensive than we expect, then our business, results of operations and financial condition would be adversely affected.

 

-32-


Table of Contents

The loss of our key personnel, an increase in our sales force personnel turnover rate or decrease in sales force productivity, or the inability to attract and retain additional personnel could adversely affect our ability to grow our company successfully and may negatively impact our results of operations.

We believe our ability to attract and retain highly skilled personnel and key members of our management team is critical to our long-term success. Historically, there has been a significant level of competition to attract these individuals, and we have experienced significant changes in our senior management team. As new senior personnel join our company and become familiar with our business strategy and systems, or as existing senior personnel assume new roles within the company, their integration or transition could result in disruption to our ongoing operations.

The market for talent has become increasingly competitive and hiring has become more difficult and costly, and our personnel-related costs are likely to increase as we compete to attract and retain employees. Our employees are increasingly becoming more attractive to other companies. Certain of our competitors have greater financial and other resources than us for attracting experienced personnel. Our plan for continued growth requires us to add personnel to meet our growth objectives and places increased importance on our ability to attract, train, and retain new personnel, in particular, new sales personnel. In addition, we have significantly expanded our subscription sales force and increased sales specialist staffing and marketing efforts around our newer products. Continued leadership transitions in our worldwide sales, marketing and field operations may adversely affect our ability to manage and grow our business. As we continue to implement further changes to our worldwide sales, marketing and field operations organizations, including the implementation of more rigorous sales planning and process measures and continued investment in sales specialists and domain experts, we may experience increased sales force turnover and additional disruption to our ongoing operations, and we may not experience the increases in sales force productivity that we anticipate. These changes may also take longer to implement than expected, which may adversely affect our sales force productivity. If we are unable to effectively attract and train new personnel on a timely basis, or if we experience an increase in the level of turnover, our results of operations may be negatively affected.

We continue to be substantially dependent on our sales force to obtain new customers and to drive additional usage and sales among our existing customers. We believe that there is significant competition for sales personnel, including enterprise sales representatives and sales engineers, with the skills and technical knowledge that we require. In particular, there is significant demand for sales engineers with data management and cloud-based software expertise. Our ability to achieve significant revenue growth will depend, in large part, on our success in recruiting, training and retaining sufficient numbers of sales personnel to support our growth. Further, from time to time, we have experienced an increased level of turnover in our direct sales force, particularly in the first quarter of a year. Such increase in the turnover rate affects our ability to generate software revenues. Although we have hired replacements in our sales force and are continuing to hire additional sales personnel to grow our business, we typically experience lower productivity from newly hired sales personnel for a period of approximately nine months. We continue to invest in training for our sales personnel, including updates to cover new, acquired, or enhanced products, as we broaden our product platform. In addition, we periodically make adjustments to our sales organization in response to a variety of internal and external factors, such as market opportunities, competitive threats, management changes, product introductions or enhancements, acquisitions, sales performance, increases in sales headcount and cost levels. Such adjustments may be temporarily disruptive and result in reduced productivity. If we are unable to effectively attract, train and retain new sales personnel, particularly sales specialists or domain experts, or if we experience an increase in the level of sales force turnover or decrease in sales force productivity, our ability to generate license revenues from both new and existing customers and our growth rate may be negatively affected.

 

-33-


Table of Contents

We currently do not have any key-man life insurance relating to our key personnel, and the employment of key personnel in the United States is generally at will and not subject to employment contracts.

We have relied on our ability to grant equity awards as one mechanism for recruiting and retaining highly skilled talent. If we are unable to grant such awards, we may not be able to attract and retain outstanding and highly skilled individuals in the extremely competitive labor markets in which we compete. Additionally, the liquidity available to our employee securityholders following this offering could make it more difficult to retain employees who are fully vested in their equity awards.

We may experience fluctuations in our quarterly or annual operating results, especially in the amount of license revenues we recognize.

Our quarterly and annual operating results, particularly our perpetual license revenues and the upfront portion of revenue from our on-premise subscription license (i.e., term license), have fluctuated in the past and may do so in the future. Our on-premise products, predominantly sold under a subscription-based license and to a lesser extent sold on a perpetual license basis, are difficult to forecast accurately and are vulnerable to short-term shifts in customer demand. Also, we may experience order deferrals by customers in anticipation of future new product introductions or product enhancements, as well as a result of their particular budgeting and purchase cycles. The continued global economic and geopolitical uncertainty may also cause further customer order deferrals or reductions, stricter customer purchasing controls and approval processes, and adversely affect budgeting and purchase cycles. By comparison, our short-term expenses are relatively fixed and based in part on our expectations of future revenues. We generally recognize a substantial portion of our on-premise product license revenues in the last month of each quarter and, sometimes in the last few weeks or days of each quarter. As a result, we cannot predict the adverse impact caused by cancellations or delays in prospective orders until the end of each quarter.

Moreover, the expansion of our product portfolio through the introduction of new products and enhancements has increased the complexity of our transactions and this may increase the length of our sales cycles and reduce the predictability of the timing and the amount of future sales.

Due to the difficulty we experience in predicting our quarterly license revenues, we believe that period-to-period comparisons of our operating results are not necessarily a good indication of our future performance.

In addition, a number of the other factors discussed in this section may cause fluctuations in our quarterly or annual operating results. As a result, our future operating results or forecasts of future operating results could fail to meet the expectations of investors, which could cause our stock price to decline.

Market adoption of cloud-based data management solutions may not grow as we expect, which may harm our business, financial condition and results of operations.

The market for cloud-based data management solutions is not as mature as the market for on-premise products, and it may not develop as anticipated. In addition, market acceptance of cloud-based solutions may be affected by a variety of factors, including concerns regarding the data security, privacy, cost, reliability, performance and perceived value associated with such offerings. Many customers have invested substantial resources on traditional, on-premise software solutions and the related ongoing support services, and they may be unwilling or reluctant to migrate to cloud-based solutions. If our cloud-based solutions do not achieve widespread adoption or the market for cloud-based data management solutions generally does not evolve as expected, it could result in reduced

 

-34-


Table of Contents

customer purchases, reduced renewal rates and decreased revenue, any of which will adversely affect our business, financial condition and results of operations.

If we are unable to accurately forecast sales and trends in our business, we may fail to meet expectations.

We use a “pipeline” system, a common industry practice, to forecast sales and trends in our business. Our sales personnel monitor the status of all potential sales of our products and estimate when a customer will make a purchase decision and the potential dollar amount of the sale. We aggregate these estimates periodically in order to generate a sales pipeline. We assess the pipeline at various points in time to look for trends in our business. While this pipeline analysis may provide us with some guidance in business planning and budgeting, these pipeline estimates are necessarily speculative. Our pipeline estimates may not correlate to revenues in a particular quarter or over a longer period of time, particularly in a weak or uncertain global macroeconomic environment, such as that experienced during the COVID-19 pandemic. In addition, our pipeline estimates can prove to be unreliable in a particular quarter or over a longer period of time, in part because both the “conversion rate” of the pipeline into actual sales and the quality and timing of pipeline generation can be very difficult to estimate.

The conversion of the sales pipeline into actual license or subscription sales may also be affected by the tendency of some of our customers to wait until the end of a fiscal period in the hope of obtaining more favorable terms, which can also impede our ability to negotiate, execute and deliver on these contracts in a timely manner. Because we have historically converted a substantial portion of our pipeline into sales in the last month of each quarter and sometimes in the last few weeks of each quarter, we may not be able to adjust our cost structure in a timely manner in response to variations in the pipeline conversion rate. In addition, for newly acquired companies, we have limited ability to predict how their pipelines will convert into sales or revenues following acquisition. Any change in the conversion rate of the pipeline into customer sales or in the pipeline itself could cause us to improperly budget for future expenses that are in line with our expected future revenues, which would adversely affect our operating margins and results of operations.

A reduction in our sales pipeline and pipeline conversion rate could adversely affect the growth of our company.

In the past and recently, we have experienced a reduced conversion rate of our overall pipeline, primarily as a result of general economic slowdowns and general macroeconomic uncertainty due in part to the COVID-19 pandemic, which caused the amount of customer purchases to be reduced, deferred, or cancelled. Although the size of our sales pipeline and our pipeline conversion rate generally have increased as a result of our additional investments in sales personnel and a gradually improving IT spending environment, they are not consistent on a quarter-to-quarter basis. The recent global economic recession and continued macroeconomic uncertainty has had and will continue to have an adverse effect on our pipeline conversion rate in the near future. If we are unable to continue to increase the size of our sales pipeline and our pipeline conversion rate, our results of operations could fail to meet the expectations of investors, which could cause our stock price to decline.

We have expanded our international operations and opened sales offices in other countries. We have experienced and may continue to experience various leadership transitions in our worldwide sales organization.

We have also continued to make investments in our sales specialists and domain experts and to implement strategic changes in our worldwide sales, marketing and field operations to address recent sales execution challenges and improve performance, particularly with respect to our pipeline

 

-35-


Table of Contents

generation and management capabilities, the reliability of our pipeline estimates and our pipeline conversion rates. For example, in 2020, we shifted our go-to-market strategy within certain countries in APAC and Europe, reducing our direct sales headcount to align with local channel partners for distribution. As a result of our international expansion and these changes, as well as the increase in our direct sales headcount in the United States, we have invested heavily in our sales and marketing functions. We recognized $431.5 million, $486.3 million, and $451.8 million of sales and marketing expense in the years ended December 31, 2018, 2019 and 2020, respectively, and $222.3 million and $220.9 million in the six months ended June 30, 2020 and 2021, respectively. As our products become more complex and we target new customers for our software and services, we expect to broaden our go-to-market initiatives and, as a result, our sales and marketing expenses may increase. We expect these investments to increase our revenues, sales productivity, and eventually our profitability. However, if we experience an increase in sales personnel turnover, do not achieve expected increases in our sales pipeline, experience a decline in our sales pipeline conversion ratio, or do not achieve increases in productivity and efficiencies from our new sales personnel as they gain more experience, then we may not achieve our expected increases in revenue, sales productivity, and profitability.

As a result of our lengthy sales cycles, our expected revenues are susceptible to fluctuations, which could cause us to fail to meet expectations.

Due to the expense, broad functionality, and company-wide deployment of our products, our customers’ decisions to purchase our products typically require the approval of their executive decision makers. Also, macroeconomic uncertainty and challenging global economic conditions, such as those experienced due to the ongoing COVID-19 pandemic, can adversely affect the buying patterns of our customers and prospective customers, including the size of transactions, and lengthen our sales cycle. In addition, we frequently must educate our potential customers about the full benefits of our products, which also can require significant time. These trends toward greater customer executive level involvement or stricter customer purchasing controls and approval processes and increased customer education efforts are likely to increase, particularly as we expand our market focus to broader data management initiatives and experience increased competition from new or emerging technologies. Further, our sales cycle may lengthen as we continue to focus our sales efforts on large corporations. In addition, the purchase of our products may be delayed, or our sales cycle may become more complex, due to potential conflicts in our sales channels and sales processes if we increasingly sell our subscription-based offerings together with our perpetual license-based products or to accounts that have pre-existing perpetual license-based products. As a result of these factors, the length of time from our initial contact with a customer to the customer’s decision to purchase our products typically ranges from three to twelve months. We are subject to a number of significant risks as a result of our lengthy sales cycle that could delay, reduce or otherwise adversely affect the purchase of our products, including:

 

   

changes in our customers’ budgetary constraints and internal acceptance review procedures;

 

   

the timing of our customers’ budget cycles;

 

   

the seasonality of technology purchases, which historically has resulted in stronger sales of our products in the fourth quarter of the year, especially when compared to lighter sales in the first quarter of the year;

 

   

our customers’ concerns about the introduction of our products;

 

   

our customers’ concerns about managing a combination of perpetual license-based products and subscription-based products;

 

   

our customers’ concerns about migrating pre-existing perpetual license-based products to our cloud offerings;

 

-36-


Table of Contents
   

market confusion over the introduction of new or emerging technologies by us or our competitors or changes in technological trends, particularly the shift to cloud-based solutions; or

 

   

potential downturns in general economic or political conditions or potential tightening of credit markets that could occur during the sales cycle.

If our sales cycles lengthen unexpectedly, they could adversely affect the timing of our revenues or increase costs which may independently cause fluctuations in our revenues and results of operations. Finally, if we are unsuccessful in closing sales of our products after spending significant funds and management resources, our operating margins and results of operations could be adversely impacted.

The sales prices of our products may decrease, which may reduce our gross profits and adversely affect our financial results.

The sales prices for our subscription offerings and professional services may decline for a variety of reasons, including competitive pricing pressures, discounts, a change in our mix of subscription offerings, on-premise offerings and professional services and their respective margins, anticipation of the introduction of new subscription offerings or professional services, or promotional programs. Competition continues to increase in the market segments in which we participate, and we expect competition to further increase in the future, thereby leading to increased pricing pressures. Larger competitors with more diverse product and service offerings may reduce the price of products or services that compete with ours or may bundle them with other products and services. Additionally, currency fluctuations in certain countries and regions may negatively impact actual prices that channel partners and customers are willing to pay in those countries and regions. We cannot guarantee that we will be successful in developing and introducing new subscription offerings with enhanced functionality on a timely basis, or that any such new subscription offerings, if introduced, will enable us to maintain our prices and gross profits at levels that will allow us to achieve and maintain profitability.

We rely on our relationships with our strategic partners. If we do not establish, maintain and strengthen these relationships, our ability to generate revenue and control expenses could be adversely affected.

We believe that our ability to increase the sales of our products depends in part upon establishing, maintaining and strengthening relationships with our current strategic partners and any future strategic partners.

In addition to our direct sales force, we rely on established relationships with a variety of strategic partners, such as hyperscaler cloud partners, cloud data platforms, systems integrators, resellers, and distributors, for marketing, licensing, implementing, and supporting our products in the United States and internationally. We also rely on relationships with strategic technology partners, such as enterprise application providers, database vendors, data quality vendors, and enterprise information integration vendors, for the promotion and implementation of our products. In addition, as we develop new products, particularly those based on new or emerging technologies, we may need to establish relationships with new strategic partners, including those that may differ from the types of strategic partners we currently have. We may not be able to successfully establish such relationships, which may adversely affect the market acceptance of our products. In addition, given our limited history with our newer strategic partners, we cannot be certain these relationships will result in significant increases in sales of our products, particularly our newer products.

Our strategic partners offer products from several different companies, including, in some cases, products that compete with our products. We have limited control, if any, as to whether these strategic

 

-37-


Table of Contents

partners devote adequate resources to promoting, selling, and implementing our products as compared to our competitors’ products. Also, new or emerging technologies, technological trends or changes in customer requirements may result in certain of our strategic partners becoming potential competitors in the future. In addition, from time to time our strategic partners have acquired, and will likely continue to acquire, competitors of ours. Such consolidation makes it critical that we continue to develop, maintain and strengthen our relationships with other strategic partners. We may not be able to strengthen such relationships and successfully generate additional revenue.

Our Ready Partner Program agreements with our strategic partners typically have a duration of one year, and generally may be terminated for any reason by either party with advance notice prior to each renewal date. It should be noted that in some jurisdictions, even with a right to termination for convenience, partners may be entitled to compensation upon termination, depending on local law, their level of investment and the notice period given. We cannot assure you that we will retain these strategic partners or that we will be able to secure additional or replacement strategic partners. The loss of one or more of our significant strategic partners or a decline in the number or size of orders from any of them could harm our results of operations. In addition, many of our new strategic partners require extensive training and may take several months or more to achieve productivity. Our strategic partner sales structure could subject us to lawsuits, potential liability, and reputational harm if, for example, any of our strategic partners misrepresents the functionality of our offerings to customers or violates laws or our or their corporate policies. If our strategic partners are unsuccessful in fulfilling the orders for our offerings, or if we are unable to enter into arrangements with and retain high quality strategic partners, our ability to sell our offerings and results of operations could be harmed.

In addition, we may not be able to maintain strategic partnerships or attract sufficient additional strategic partners who have the ability to market our products effectively, are qualified to provide timely and cost-effective customer support and service, or have the technical expertise and personnel resources necessary to implement our products for our customers. In particular, if our strategic partners do not devote sufficient resources to implement our products, we may incur substantial additional costs associated with hiring and training additional qualified technical personnel to implement solutions for our customers in a timely manner.

Furthermore, our relationships with our strategic partners may not generate enough revenue to offset the significant resources used to develop these relationships. If we are unable to leverage the strength of our strategic partnerships to generate additional revenues, our revenues could decline.

Delivering certain of our products via the cloud increases our expenses and may pose other challenges to our business.

We offer and sell our products via both the cloud and on-premise using the customer’s own infrastructure. Our cloud solutions enable quick setup and subscription pricing. Historically, our products were developed in the context of the on-premise offering, and we have less operating experience offering and selling our products via our cloud offering. Although a majority of our subscription revenue is currently generated from customers using our on-premise products, we believe that over time more customers will move to the cloud offering. As more of our customers transition to the cloud, we may be subject to additional contractual obligations with respect to privacy and data protection, service level agreements, as well as competitive pressures and higher operating costs, any of which may harm our business. We are directing a significant portion of our financial and operating resources to implement a robust cloud offering for our products, but even if we continue to make these investments, we may be unsuccessful in growing or implementing our cloud offering competitively, and our business, results of operations and financial condition could be harmed. If our cloud offering does not develop as quickly as we expect, or if we are unable to continue to scale our systems to meet the requirements of a large cloud offering, our business may be harmed.

 

-38-


Table of Contents

We expect our revenue mix to vary over time, which could harm our gross margin and operating results.

We expect our revenue mix to vary over time due to a number of factors, including the mix of our perpetual license products and related support services, on premise subscription products, cloud products, and professional services revenue. Due to the differing revenue recognition policies applicable to our perpetual licenses, on premise subscriptions and cloud products, shifts in our business mix from quarter-to-quarter or period-to-period could produce substantial variation in revenue recognized. Further, our gross margins and operating results could be harmed by changes in revenue mix and costs, together with numerous other factors, including entry into new markets or growth in lower-margin markets; entry into markets with different pricing and cost structures; pricing discounts; and increased price competition. Any one of these factors or the cumulative effects of certain of these factors may result in significant fluctuations in our gross margin and operating results. This variability, unpredictability and varying revenue recognition methods could result in our failure to meet internal expectations or those of securities analysts or investors for a particular period. If we fail to meet or exceed such expectations for these or any other reasons, the market price of our Class A common stock could decline significantly.

We have a history of losses and may not be able to achieve profitability on a consistent basis. If we cannot achieve profitability, our business, financial condition, and results of operations may suffer.

We have incurred net losses since we were taken private in a 2015 transaction led by our Sponsors (the 2015 Privatization Transaction) as a result of recording $3.1 billion in acquired technology and intangible assets. The related amortization expense from these assets was $368.0 million, $320.5 million and $284.0 million for the years ended December 31, 2018, 2019 and 2020, respectively, and $141.0 million and $121.0 million in the six months ended June 30, 2020 and 2021, respectively. In addition, as a result of the 2015 Privatization Transaction and the debt incurred, we recognized interest expense of $146.3 million, $161.9 million and $149.5 million in the fiscal years 2018, 2019, and 2020, respectively, and $75.9 million and $72.2 million in the six months ended June 30, 2020 and 2021, respectively. As a result, we incurred net losses of $167.7 million, $183.2 million, and $167.9 million for the years ended December 31, 2018, 2019 and 2020, respectively, and $102.8 million and $36.3 million in the six months ended June 30, 2020 and 2021, respectively. As a result, we had an accumulated deficit of $1,063.5 million as of June 30, 2021. In addition, we anticipate that our operating expenses will increase in the foreseeable future as we continue to enhance our offerings, broaden our customer base, expand our sales and marketing activities particularly with regard to our subscription-based offerings, expand our operations, hire additional employees, and continue to develop our technology. These efforts may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenue sufficiently, or at all, to offset these higher expenses. Revenue growth may slow or revenue may decline for a number of possible reasons, including slowing demand for our products and services or increasing competition. Any failure to increase our revenue as we grow our business could prevent us from achieving profitability or positive cash flow at all or on a consistent basis, which would cause our business, financial condition, and results of operations to suffer.

Our ability to increase sales of our offerings is highly dependent on the quality of our customer support, and our failure to offer high quality support would have an adverse effect on our business, reputation and results of operations.

After our products are deployed within our customers’ IT environments, our customers depend on our maintenance and support services to resolve issues relating to our products, as well as our professional services, consisting of consulting and education services. If we do not succeed in helping

 

-39-


Table of Contents

our customers quickly resolve post-deployment issues or provide effective ongoing support and education on our products, our ability to sell additional subscriptions to existing customers or expand the value of existing customers’ subscriptions would be adversely affected and our reputation with potential customers could be damaged. Many larger enterprise and government entity customers have more complex IT environments and require higher levels of support than smaller customers. If we fail to meet the requirements of these enterprise customers, it may be more difficult to grow sales with them.

Additionally, it can take several months to recruit, hire, and train qualified technical support employees. We may not be able to hire such resources fast enough to keep up with demand, particularly if the sales of our offerings exceed our internal forecasts. To the extent that we are unsuccessful in hiring, training, and retaining adequate support resources, our ability to provide adequate and timely support to our customers, and our customers’ satisfaction with our offerings, will be adversely affected. Our failure to provide and maintain high-quality support services would have an adverse effect on our business, financial condition, and results of operations.

Products sold as a subscription may increase the difficulty of evaluating the performance of our business during a particular period.

We recognize a portion of our total subscription revenue ratably over the term of the subscription agreements, which are typically one to three years in length. As a result, the subscription revenue we report in each quarter is the result of subscription agreements entered into during previous quarters. Consequently, a decline in subscription agreements in any one quarter may not significantly affect, if at all, our results in that quarter but could result in a reduction of revenue recognized in future quarters. We may not be able to adjust our cost structure in response to changes in revenue. Accordingly, the effect of significant downturns in sales of products sold as a subscription may not be fully reflected in our results of operations until future periods. Also, since revenue from customers is recognized, in part, over the term of their subscription, it is difficult for us to rapidly increase revenue through additional sales in any period. The timing of such revenue recognition may make it more difficult to forecast sales and trends in our business, particularly changes in revenue, and could have a potentially negative impact on our financial performance. By contrast, a significant majority of our costs are expensed as incurred, including hosting costs which are incurred as soon as a customer starts using our cloud products. As a result, an increase in customers could result in our recognition of more costs than revenue in the earlier portion of the subscription contract term.

Furthermore, our customers have no obligation to renew their subscription agreement after the expiration of their then current subscription period, and in fact, some former customers have elected not to renew. As a result, we may not be able to accurately predict future renewal rates, and our customers’ renewal rates may decline or fluctuate as a result of a number of factors, including lack of satisfaction with our subscription-based offerings, the prices of our subscription-based offerings and being uncompetitive with the prices offered by competitors, perceived information security risks associated with our systems, reductions in customers’ spending levels, a competitor’s product being perceived as better than our product, and general economic conditions. If our customers do not renew their subscriptions, or if they renew on less favorable terms, our revenue may decline.

Acquisitions present many risks, which could adversely affect our business, operating results and financial condition.

From time to time, we evaluate potential acquisitions in complementary businesses, products, or technologies. For example, in August 2020, we acquired GreenBay Technologies, a provider of advanced AI/ML solutions that complement our CLAIRE-powered Intelligent Cloud Data Management platform, and in July 2020, we acquired Compact Solutions, a provider of advanced metadata connectivity tools.

 

-40-


Table of Contents

Acquisitions involve a number of risks, including:

 

   

the failure to capture the value of the business we acquired, including the loss of any key personnel, customers and business relationships, including strategic partnerships, or the failure of the transaction to advance our business strategy as anticipated;

 

   

the difficulties in and costs associated with successfully integrating or incorporating the acquired company’s products, technologies, services, employees, customers, partners, business operations and administrative systems with ours, particularly when the acquired company operates in international jurisdictions;

 

   

the disruption of our ongoing business and the diversion of management’s attention by transition or integration issues;

 

   

any difficulties in consolidating the acquired company’s financial results with ours, in particular as a result of different accounting principles or financial reporting standards, and the adverse consequences to us of any delay in obtaining the necessary financial information for such consolidation, any unanticipated change in financial information previously reported to us, or the impact the acquired company’s financial performance has on our financial performance as a result of such consolidation;

 

   

the failure to accurately predict how the acquired company’s pipeline will convert into sales or revenues following the acquisition, as conversion rates post-acquisition may be quite different from the acquired company’s historical conversion rates and can be affected by changes in business practices that we implement;

 

   

any inability to generate revenue from the acquired company’s products in an amount sufficient to offset the associated acquisition and maintenance costs, including addressing issues related to the availability of offerings on multiple platforms and from cross-selling and up-selling our products to the acquired company’s installed customer base or the acquired company’s products to our installed customer base; and

 

   

the failure to adequately identify or assess significant problems, liabilities or other issues, including issues with the acquired company’s technology or intellectual property, product quality, data security, privacy practices, accounting practices, employees, customers or partners, regulatory compliance, or legal or financial contingencies, particularly when the acquired company operates in international jurisdictions.

We may not be successful in overcoming these risks or any other problems encountered in connection with our acquisitions. To the extent that we are unable to successfully manage these risks, our business, operating results, or financial condition could be adversely affected.

In addition, the consideration paid in connection with an acquisition also affects our financial results. If we should proceed with one or more significant acquisitions in which the consideration includes cash, we could be required to use a substantial portion of our available cash to consummate any such acquisition.

In addition, acquisitions may result in our incurring additional taxes, unforeseen or higher than expected costs, debt, material one-time write-offs, or purchase accounting adjustments including the write-down of deferred revenue and restructuring charges. They may also result in recording goodwill and other intangible assets in our financial statements which may be subject to future impairment charges or ongoing amortization costs, thereby reducing future earnings. In addition, from time to time, we may enter into negotiations for acquisitions or investments that are not ultimately consummated. Such negotiations could result in significant diversion of management time, as well as incurring expenses that may impact operating results.

 

-41-


Table of Contents

Any significant defect, error or performance failure in our software or services could cause us to lose revenue and expose us to product or other liability claims.

The software and services we offer are inherently complex and, despite extensive testing and quality control, have in the past and may in the future contain defects or errors, especially when first introduced, or not perform as contemplated. These defects, errors or performance failures could cause damage to our reputation, data or privacy breaches, loss of customers or revenue, product returns, order cancellations, service terminations, or lack of market acceptance of our software and services. As the use of our software and services, including software or services recently acquired or developed, expands to more sensitive, secure, or mission critical uses by our customers, we may be subject to increased scrutiny, potential reputational risk, or potential liability should our software or services fail to perform as contemplated in such deployments. We have in the past and may in the future need to issue corrective releases of our software or services to fix these defects, errors or performance failures, which could require us to allocate significant research and development and customer support resources to address these problems.

Our license and subscription agreements with our customers typically contain provisions designed to limit our exposure to potential product liability claims or liability for data loss or security or privacy breaches. However, the limitation of liability provisions contained in our license agreements may not be effective as a result of existing or future national, federal, state, or local laws or ordinances or unfavorable judicial decisions. Those limitation of liability provisions may also not be sufficient to protect against material losses, if several different customers experienced data or privacy breaches related to the use of our software or services in the same year. Although we have not experienced any product liability claims to date, the sale and support of our products entail the risk of such claims, which could be substantial in light of the use of our products in enterprise-wide environments. In addition, our insurance against product liability may not be adequate to cover a potential claim.

If our products are unable to interoperate with database connectors developed and maintained by third parties that are not within our control, our ability to develop and sell our products to our customers could be adversely affected, which would result in harm to our business and operating results.

Our products are designed to interoperate with and provide access to a wide range of third-party developed and maintained database connectors, including hardware and software technologies, which are used by our customers. The future design and development plans of the third parties that maintain these technologies are not within our control and may not be in line with our future product development plans. We may also rely on such third parties to provide us with access to these technologies so that we can properly test and develop our products to interoperate with these third-party technologies. These third parties may in the future refuse or otherwise be unable to provide us with the necessary access to their technologies. In addition, these third parties may decide to design or develop their technologies in a manner that would not be interoperable with our own. The continued consolidation in the enterprise software market may heighten these risks. Furthermore, our expanding product line, including our combination of products delivered on a comprehensive, unified and open data management platform makes maintaining interoperability more difficult as various products may have different levels of interoperability and compatibility, which may change from version to version. If any of the situations described above were to occur, we would not be able to continue to market our products as interoperable with such third-party database connectors, which could adversely affect our ability to successfully sell our products to our customers.

 

-42-


Table of Contents

If our products and services do not achieve and/or maintain broad market acceptance, our revenues and revenue growth rate may be adversely affected.

Historically, a significant portion of our revenues have been derived from sales of our traditional data management products, such as PowerCenter and PowerExchange, and related services. We expect sales of our traditional data management products and services to continue to comprise a significant portion of our revenues for the foreseeable future. If these products and services do not maintain market acceptance, our revenues may decrease.

In addition to our traditional data management and data quality products, we have expanded our platform to include products and services in the emerging market for broader data management initiatives, such as cloud data integration, cloud application integration, cloud data quality and governance, enterprise data catalog (EDC), master data management (MDM), customer data platform (CDP), enterprise integration platform as a service (iPaaS), and data privacy management, among others. The market for our broader data management products and services remains relatively new and continues to change, and efforts to expand beyond our traditional data management products may not succeed and may not result in significant revenue. For example, we announced that we are increasing our investments to develop new products that continue to expand our offerings beyond our traditional data management products.

Our newer products may not achieve market acceptance if our customers or prospective customers:

 

   

do not fully value the benefits of using our products;

 

   

do not achieve favorable results using our products;

 

   

use their budgets for other products that have priority over our products;

 

   

defer or decrease product purchases due to macroeconomic uncertainty or global economic conditions;

 

   

experience technical difficulties in implementing our products; or

 

   

use alternative methods to solve the problems addressed by our products.

Market acceptance of our products may also be affected if, among other things, competition substantially increases in the data management market or transactional applications suppliers integrate their products to such a degree that the utility of the functionality that our products and services provide is minimized or rendered unnecessary. Market acceptance of our products may also be affected by customer confusion surrounding the introduction of new and emerging technologies by us and our competitors or changes in technological trends, particularly the shift to cloud-based solutions, and confusion about the benefits of our products compared to other solutions. In addition, in order to enable our sales personnel and our external distribution channels to sell these newer products effectively, we have continued to invest resources and incur additional costs in training programs on new product functionalities, key differentiators, and key business values. If these newer products do not achieve market acceptance, our revenues could be adversely affected and our revenue growth rate and profitability could decline.

If we are not able to maintain and enhance our brand, our business and results of operations may be adversely affected.

We believe that the brand identities that we have developed have contributed significantly to the success of our business. We also believe that maintaining and enhancing our brands is important to expanding our customer base and attracting talented employees. In order to maintain and enhance our

 

-43-


Table of Contents

brands, we may be required to make further investments that may not be successful. Maintaining our brands will depend in part on our ability to remain a leader in data integration and management technology, our ability to preserve our independence and neutrality, and our ability to continue to provide high-quality offerings and customer service. In addition, we could be the subject of a negative social media campaign beyond our control that could adversely affect the perception of our brand. If we fail to promote and maintain our brands, or if we incur excessive costs in doing so, our business, financial condition, results of operations and cash flows may be harmed.

Our corporate culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the innovation, creativity and entrepreneurial spirit we have worked to foster, which could harm our business.

We believe that our culture has been and will continue to be a key contributor to our success. We expect to continue our hiring as we expand. If we do not maintain our corporate culture as we grow, we may be unable to foster the innovation, creativity, and entrepreneurial spirit that we believe we need to support our growth and to maintain our leadership position in the data management market. Moreover, many of our existing employees with exercisable options or other equity awards may be able to receive significant proceeds from sales of shares our Class A common stock after this offering, which could lead to employee attrition and disparities of wealth among our employees that adversely affects relations among employees and our culture in general. Our anticipated headcount growth and our transition from a private company to a public company may result in a change to our corporate culture, which could harm our business.

We rely on a number of different distribution channels to sell and market our products. Any conflicts that we may experience within these various distribution channels could result in confusion for our customers and a decrease in revenue and operating margins.

We have a number of relationships with resellers, systems integrators, and distributors that assist us in obtaining broad market coverage for our products and services. Although our discount policies, sales commission structure, and reseller licensing programs are intended to support each distribution channel with a minimum level of channel conflicts, we may not be able to minimize these channel conflicts in the future. Any channel conflicts that we may experience could result in confusion for our customers and a decrease in revenue and operating margins.

The seasonality of our business can create variance in our quarterly bookings, subscription revenue and cash flows from operations.

Demand for our software products and services are generally highest in the fourth quarter and lowest in the first quarter of each year. We believe that this seasonality results from a number of factors, including companies using their IT budget at the end of the calendar year resulting in higher sales activity in the quarter ending December 31. The seasonality of our business may cause continued or increased fluctuations in our results of operations and cash flows, which may prevent us from achieving our quarterly or annual forecasts or meeting or exceeding the expectations of research analysts or investors, which in turn may cause a decline in the trading price of our Class A common stock.

Our future quarterly or annual results may fluctuate significantly, which could adversely affect the market price of our Class A common stock.

Our results of operations, including the levels of our revenue, cost of revenue, gross margin, operating expenses, cash flow and deferred revenue, have fluctuated from quarter-to-quarter and year-to-year in the past and may continue to vary significantly in the future so that period-to-period

 

-44-


Table of Contents

comparisons of our results of operations may not be meaningful. Accordingly, our financial results in any one quarter or period should not be relied upon as indicative of future performance. Our quarterly or annual financial results may fluctuate as a result of a variety of factors, many of which are outside of our control, may be difficult to predict, and may or may not fully reflect the underlying performance of our business. Because the timing and amount of our revenue is difficult to forecast and because our operating costs and expenses are relatively fixed in the short term, if our revenue does not meet our expectations, we are unlikely to be able to adjust our spending to levels commensurate with our revenue. As a result, the effect of revenue shortfalls on our results of operations may be more accentuated, and these and other fluctuations in quarterly results may negatively affect the market price of our Class A common stock. Among the factors that may cause fluctuations in our quarterly financial results are those listed below:

 

   

our ability to attract and retain new customers;

 

   

the addition or loss of enterprise customers;

 

   

our ability to successfully expand our business domestically and internationally;

 

   

our ability to gain new channel partners and retain existing channel partners;

 

   

fluctuations in the growth rate of the overall market that our solution addresses;

 

   

fluctuations in the mix of our revenue;

 

   

the unpredictability of the timing of our receipt of orders for perpetual licenses and on-premise subscriptions-based licenses, the revenue for which we typically recognize the majority upfront;

 

   

the amount and timing of operating expenses related to the maintenance and expansion of our business and operations, including continued investments in sales and marketing, research and development and general and administrative resources;

 

   

network outages or performance degradation of our cloud service;

 

   

information security breaches;

 

   

general economic, industry and market conditions;

 

   

decreases in customer renewal rates;

 

   

increases or decreases in the number of elements of our subscription offerings or pricing changes upon any renewals of customer agreements;

 

   

changes in our pricing policies or those of our competitors;

 

   

the budgeting cycles and purchasing practices of customers;

 

   

decisions by potential customers to purchase alternative solutions from larger, more established vendors, including from their primary software vendors;

 

   

decisions by potential customers to develop in-house solutions as alternatives to our platform;

 

   

insolvency or credit difficulties confronting our customers, which could adversely affect their ability to purchase or pay for our software and services;

 

   

delays in our ability to fulfill our customers’ orders;

 

   

seasonal variations in sales of our solution;

 

   

the cost and potential outcomes of future litigation or other disputes;

 

   

future accounting pronouncements or changes in our accounting policies;

 

   

our overall effective tax rate, including impacts caused by any reorganization in our corporate tax structure and any new legislation or regulatory developments;

 

-45-


Table of Contents
   

fluctuations in stock-based compensation expense;

 

   

fluctuations in foreign currency exchange rates;

 

   

the timing and success of new products and service introductions by us or our competitors or any other change in the competitive dynamics of our industry, including consolidation among competitors, customers or strategic partners;

 

   

the timing of expenses related to the development or acquisition of technologies or businesses and potential future charges for impairment of goodwill from acquired companies; and

 

   

other risk factors described in this prospectus.

Our investment policy will allow an investment portfolio that may be subject to credit and liquidity risks and fluctuations in the market value of our investments and interest rates, which may result in impairment or loss of value of our investments, an inability to sell our investments or a decline in interest income.

We maintain an investment portfolio, which consists primarily of bank accounts, short-term time deposits, and money market funds. As a public company, our investment policy will allow us to invest in other instruments such as certificates of deposit, commercial paper, corporate notes and bonds, municipal securities, and U.S. government and agency notes and bonds. Although we will follow an established investment policy, which specifies credit quality standards for our investments and limits the amount of credit exposure to any single issue, issuer, or type of investment, and other criteria in order to help mitigate our exposure to interest rate and credit risk, the assets in our investment portfolio may lose value or become impaired, or our interest income may decline. We may be required to record impairment charges for other-than-temporary declines in fair market value in our investments. Future fluctuations in economic and market conditions could adversely affect the market value of our investments, and we could record additional impairment charges and lose some of the principal value of investments in our portfolio. A total loss of an investment or a significant decline in the value of our investment portfolio could adversely affect our operating results and financial condition.

In addition, from time to time we make strategic investments in private companies. Our strategic investments in private companies are subject to risk of loss of investment capital. Some of these investments may have been made to further our strategic objectives and support our key business initiatives. Our strategic investments in private companies are inherently risky because the markets for the technologies they have under development are typically in the early stages and may never materialize. We could lose the value of our entire investment in these companies.

If our solutions fail to help our customers achieve and maintain compliance with regulations and industry standards, our revenues and operating results could be harmed.

We generate a portion of our revenues from solutions that enable organizations to achieve and maintain compliance with regulations and industry standards. For example, many of our customers subscribe to our security and compliance solutions to help them comply with general security standards, such as those developed and maintained by the U.S. National Institute of Standards and Technology (NIST), and with industry-specific security standards such as the HIPAA Security Rule, which applies to entities that need to protect electronic protected health information. Standard setting agencies and industry organizations like the Institute of Electrical and Electronics Engineers (IEEE) may significantly change their security standards with little or no notice, including changes that could make their standards more or less onerous for businesses. Governments may also adopt new laws or regulations, or make changes to existing laws or regulations, that could impact the demand for or value of our solutions.

 

-46-


Table of Contents

If we are unable to adapt our solutions to changing regulatory standards in a timely manner, or if our solutions fail to assist with or expedite our customers’ compliance initiatives, our customers may lose confidence in our solutions and could switch to products offered by our competitors. In addition, if regulations and standards related to data security, vulnerability management and other IT security and compliance requirements are relaxed or the penalties for non-compliance are changed in a manner that makes them less onerous, our customers may view government and industry regulatory compliance as less critical to their businesses, and our customers may be less willing to purchase our solutions. In any of these cases, our revenues and operating results could be harmed.

Risks Related to Regulation

Our effective tax rate is difficult to project, and changes in such tax rate or adverse results of tax examinations could adversely affect our operating results.

Based on our corporate structure, we may be subject to taxation in several jurisdictions around the world with increasingly complex tax laws, the application of which can be uncertain. We are a United States-based multinational company subject to tax in multiple United States and foreign tax jurisdictions. Our results of operations would be adversely affected to the extent that our geographical mix of income becomes more weighted toward jurisdictions with higher tax rates and would be favorably affected to the extent the relative geographic mix of income shifts to lower tax jurisdictions. Any change in our mix of earnings is dependent upon many factors and is therefore difficult to predict. The amount of taxes we pay in these jurisdictions could increase substantially as a result of changes in the applicable tax principles, including increased tax rates, new tax laws or revised interpretations of existing tax laws and precedents. In the United States, newly enacted legislation commonly referred to as the Tax Cuts and Jobs Act introduced a number of changes to U.S. federal income tax laws, the impact of which is uncertain. In addition, the authorities in the jurisdictions in which we operate could review our tax returns or require us to file tax returns in jurisdictions in which we are not currently filing, and could impose additional tax, interest and penalties. These authorities could also claim that various withholding requirements apply to us or our subsidiaries, assert that benefits of tax treaties are not available to us or our subsidiaries, or challenge our methodologies for valuing developed technology or intercompany arrangements, including our transfer pricing. The relevant taxing authorities may determine that the manner in which we operate our business does not achieve the intended tax consequences. If such a disagreement was to occur, and our position was not sustained, we could be required to pay additional taxes, interest and penalties. Any increase in the amount of taxes we pay or that are imposed on us could increase our worldwide effective tax rate and harm our business and results of operations.

The process of determining our anticipated tax liabilities involves many calculations and estimates that are inherently complex and make the ultimate tax obligation determination uncertain. As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate prior to the completion and filing of tax returns for such periods. This process requires estimating both our geographic mix of income and our current tax exposures in each jurisdiction where we operate. These estimates involve complex issues, require extended periods of time to resolve, and require us to make judgments, such as anticipating the outcomes of audits with tax authorities and the positions that we will take on tax returns prior to actually preparing the returns. We also determine the need to record deferred tax liabilities and the recoverability of deferred tax assets. A valuation allowance is established to the extent recovery of deferred tax assets is not more likely than not based on our estimation of future taxable income and other factors in each jurisdiction.

Furthermore, our overall effective income tax rate and tax expenses may be affected by various factors in our business, including acquisitions, changes in our legal structure, changes in the

 

-47-


Table of Contents

geographic mix of income and expenses, changes in valuation allowances, and changes in applicable tax laws and accounting pronouncements. Further, the geographic mix of income and expense is impacted by the fluctuation in exchange rates between the U.S. dollar and the functional currencies of our subsidiaries.

We are under examination by various taxing authorities covering the past several years. We may receive additional assessments from domestic and foreign tax authorities that might exceed amounts reserved by us. In the event we are unsuccessful in reducing the amount of such assessment, our business, financial condition, or results of operations could be adversely affected. Specifically, if additional taxes and/or penalties are assessed as a result of these audits, there could be a material effect on our income tax provision, operating expenses, and net income in the period or periods when that determination is made.

Our failure to protect personal information adequately could have a significant adverse effect on our business.

A wide variety of provincial, state, national, and international laws and regulations apply to the collection, use, retention, protection, disclosure, transfer, and other processing of personal data. These data protection and privacy-related laws and regulations include the European General Data Protection Regulation, or GDPR, and the California Consumer Privacy Act, or CCPA, and are evolving and being tested in courts and may result in ever-increasing regulatory and public scrutiny as well as escalating levels of enforcement and sanctions. Any actual or perceived loss, improper retention or misuse of certain information or alleged violations of laws and regulations relating to privacy, data protection and data security, and any relevant claims, could result in enforcement action against us, including fines, imprisonment of company officials and public censure, claims for damages by customers and other affected individuals, damage to our reputation and loss of goodwill (both in relation to existing customers and prospective customers), any of which could have an adverse effect on our operations, financial performance, and business. Evolving and changing definitions of personal data and personal information, within the European Union, the United States, and elsewhere, especially relating to classification of IP addresses, machine identification, location data, and other information, may limit or inhibit our ability to operate or expand our business, including limiting strategic partnerships that may involve the sharing of data. Any perception of privacy or security concerns or an inability to comply with applicable laws, regulations, policies, industry standards, contractual obligations or other legal obligations, even if unfounded, may result in additional cost and liability to us, harm our reputation and inhibit adoption of our products by current and future customers, and adversely affect our business, financial condition, and operating results.

We have implemented and maintain security measures intended to protect personally identifiable information, and we require our service providers to implement and maintain such security measures as well. However, our security measures and those of our service providers remain vulnerable to various threats posed by hackers and criminals and by internal errors. If our security measures are overcome and any personally identifiable information that we collect or store with respect to our cloud-based solutions becomes subject to unauthorized access, we may be required to comply with costly and burdensome breach notification obligations. We may also be subject to investigations, enforcement actions and private lawsuits. For example, the CCPA, imposes a private right of action for security breaches that could lead to some form of remedy including regulatory scrutiny, fines, private action, settlements, and other consequences. In addition, any data security incident is likely to generate negative publicity and have a significant negative effect on our business.

 

-48-


Table of Contents

In connection with the operation of our business, we may collect, store, transfer and otherwise process certain personal data and personally identifiable information. As a result, our business is subject to a variety of government and industry regulations, as well as other obligations, related to privacy, data protection and information security.

Privacy, data protection and information security have become significant issues in various jurisdictions where we offer our products. The regulatory frameworks for privacy, data protection and information security issues worldwide are rapidly evolving and are likely to remain uncertain for the foreseeable future. Federal, state, or non-U.S. government bodies or agencies have in the past adopted, and may in the future adopt, new laws and regulations or may make amendments to existing laws and regulations affecting data protection, data privacy and/or information security and/or regulating the use of the Internet as a commercial medium. Industry organizations also regularly adopt and advocate for new standards in these areas. If we fail to comply with any of these laws or standards, we may be subject to investigations, enforcement actions, civil litigation, fines and other penalties, all of which may generate negative publicity and have a negative impact on our business.

In the United States, we may be subject to investigation and/or enforcement actions brought by federal agencies and state attorneys general and consumer protection agencies. We publicly post policies and other documentation regarding our practices concerning the processing, use and disclosure of personally identifiable information. Although we endeavor to comply with our published policies and documentation, we may at times fail to do so or be alleged to have failed to do so. The publication of our privacy policy and other documentation that provide promises and assurances about privacy and security can subject us to potential state and federal action if they are found to be deceptive, unfair, or misrepresentative of our actual practices.

Internationally, virtually every jurisdiction in which we operate has established its own data security, privacy and data protection legal frameworks with which we or our customers must comply. Within the European Union, the GDPR became fully effective in May 2018 and applies to the processing (which includes the collection and use) of certain personal data. As compared to previously effective data protection law in the European Union, the GDPR imposes additional obligations and risk upon our business and increases substantially the penalties to which we could be subject in the event of any non-compliance. Administrative fines under the GDPR can amount up to 20 million Euros or four percent of the group’s annual global turnover, whichever is highest. We have incurred substantial expense in complying with the obligations imposed by the GDPR and we may be required to make further significant changes in our business operations as regulatory guidance changes, all of which may adversely affect our revenue and our business overall. Despite our efforts to attempt to comply with the GDPR, a regulator may determine that we have not done so and subject us to fines and public censure, which could harm our company.

Among other requirements, the GDPR regulates transfers of personal data subject to the GDPR to third countries that have not been found to provide adequate protection to such personal data, including the United States. We have undertaken certain efforts to conform transfers of personal data from the European Economic Area, or EEA, to the United States and other jurisdictions based on our understanding of current regulatory obligations and the guidance of data protection authorities. Despite this, we may be unsuccessful in establishing or maintaining conforming means of transferring such data from the EEA, in particular as a result of continued legal and legislative activity within the European Union that has challenged or called into question the legal basis for existing means of data transfers to countries that have not been found to provide adequate protection for personal data. For example, in July 2020 the European Court of Justice invalidated the EU-US Privacy Shield framework, which provided a mechanism for the transfer of data from European Union member states to the United States, on the grounds that the EU-US Privacy Shield failed to offer adequate protections to EU personal data transferred to the United States. We certified compliance with the Privacy-Shield

 

-49-


Table of Contents

Framework and Principles and relied, in part, on Privacy-Shield as one of its mechanisms for transferring data to the United States. The European Court has also advised that Standard Contractual Clauses (another transfer mechanism) were not alone sufficient to protect data transferred to the United States. The use of Standard Contractual Clauses for the transfer of personal information specifically to the United States also remains under review by a number of European data protection supervisory authorities. For example, German and Irish supervisory authorities have indicated that the Standard Contractual Clauses alone provide inadequate protection for EU-US data transfers. Use of the data transfer mechanisms must now be assessed on a case-by-case basis taking into account the legal regime applicable in the destination country, in particular applicable surveillance laws and rights of individuals. Further, on June 4, 2021, the European Commission finalized new versions of the Standard Contractual Clauses, with the Implementing Decision effective June 27, 2021. Under the Implementing Decision, we will have until December 27, 2022 to update any existing agreements, or any new agreements executed before September 27, 2021, that rely on Standard Contractual Clauses as the data transfer mechanism. To comply with the Implementing Decision and the new Standard Contractual Clauses, we may need to implement additional safeguards to further enhance the security of data transferred out of the EEA, which could increase our compliance costs, expose us to further regulatory scrutiny and liability, and adversely affect our business.

We may also experience hesitancy, reluctance, or refusal by European or multi-national customers to continue to use our products due to the potential risk exposure to such customers as a result of shifting business sentiment in the EEA regarding international data transfers and the data protection obligations imposed on them. We may find it necessary to establish systems to maintain personal data originating from the EEA in the EEA, which may involve substantial expense and may cause us to need to divert resources from other aspects of our business, all of which may adversely affect our business. We and our customers may face a risk of enforcement actions taken by European data protection authorities until the time, if any, that personal data transfers to us and by us from the EEA are legitimized under European law.

Additionally, Brexit has created additional uncertainty with regard to the regulation of data protection in the United Kingdom, or the UK. The UK implemented the Data Protection Act that contains provisions, including its own derogations, for how GDPR is applied in the UK. These developments in the European Union could increase the risk of non-compliance and the costs of providing our products and services in a compliant manner. From the beginning of 2021 (when the transitional period following Brexit expired), we have to continue to comply with the GDPR and also the Data Protection Act, with each regime having the ability to fine up to the greater of 20 million (£17 million) or 4% of global turnover. The relationship between the UK and the EU remains uncertain, for example how data transfers between the UK and the EU and other jurisdictions will be treated and the role of the UK’s supervisory authority. The EU has issued a draft adequacy decision for personal information transfers from the EEA to the UK on February 19, 2021. Although the European Data Protection Board (EDPB) issued an Opinion generally supportive of the draft adequacy decision, the EDPB urged further assessment of certain issues and continued monitoring of developments in UK law. If this adequacy decision is not passed by the EU, it would require that companies implement protection measures such as the Standard Contractual Clauses for data transfers between the EU and the UK. These changes will lead to additional costs as we try to ensure compliance with new privacy legislation and will increase our overall risk exposure.

We also expect that there will continue to be new laws, regulations, and industry standards concerning privacy, data protection, and information security proposed and enacted in various jurisdictions. For example, in the United States, various laws and regulations apply to the collection, processing, disclosure and security of certain types of data, including the Electronic Communications Privacy Act, the Computer Fraud and Abuse Act, the Health Insurance Portability and Accountability Act of 1996, the Gramm-Leach-Bliley Act and state laws relating to privacy and data security, including

 

-50-


Table of Contents

the CCPA, that, among other things, require covered companies to provide new disclosures to California consumers and afford such consumers new abilities to opt-out of certain sales of personal information. The CCPA became effective on January 1, 2020, and has been amended on multiple occasions, as recently as March 15, 2021. Certain aspects of the CCPA and its interpretation remain unclear. The effects of the CCPA are significant and may require us to modify our data processing practices and policies and to incur substantial costs and expenses in an effort to comply. Moreover, a new privacy law, the California Privacy Rights Act, or CPRA, was recently approved by California voters in connection with the election on November 3, 2020. The CPRA creates obligations relating to consumer data beginning on January 1, 2022, with implementing regulations expected on or before July 1, 2022, and enforcement beginning July 1, 2023. The CCPA requires (and the CPRA will require) covered companies to, among other things, provide new disclosures to California consumers, and affords such consumers new privacy rights such as the ability to opt-out of certain sales of personal information and expanded rights to access and require deletion of their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is collected, used and shared. The CCPA provides for civil penalties for violations, as well as a private right of action for security breaches that may increase security breach litigation. Potential uncertainty surrounding the CCPA and CPRA may increase our compliance costs and potential liability, particularly in the event of a data breach, and could have a material adverse effect on our business, including how we use personal information, our financial condition, the results of our operations or prospects. The CPRA significantly modifies the CCPA, potentially resulting in further uncertainty and requiring us to incur additional costs and expenses in an effort to comply. The CCPA and CPRA have also prompted a number of proposals for new federal and state privacy legislation that, if passed, could increase our potential liability, increase our compliance costs and adversely affect our business. The CPRA significantly modifies the CCPA, potentially resulting in further uncertainty and requiring us to incur additional costs and expenses in an effort to comply. More generally, the various privacy and data security legal obligations that apply to us may evolve in a manner that relates to our practices or the features of our applications or platform. We may need to take additional measures to comply with the changes in our legal obligations and to maintain and improve our information security posture in an effort to avoid information security incidents or breaches affecting personal information or other sensitive or proprietary data. Changing definitions of personal information and information may also limit or inhibit our ability to operate or expand our business, including limiting strategic partnerships that may involve the sharing of data. Also, some jurisdictions require that certain types of data be retained on servers within these jurisdictions. Our failure to comply with applicable laws, directives, and regulations may result in enforcement actions against us, including fines, and damage to our reputation, any of which may have an adverse effect on our business and operating results.

In addition to government regulation, privacy advocates and industry groups may propose new and different self-regulatory standards that may legally or contractually apply to us. One example of such a self-regulatory standard is the Payment Card Industry Data Security Standard, or PCI DSS, which relates to the processing of payment card information. In the event we are required to comply with the PCI DSS but fail to do so, fines and other penalties could result, and we may suffer reputational harm and damage to our business. Further, our customers may expect us to comply with more stringent privacy and data security requirements than those imposed by laws, regulations or self-regulatory requirements, and we may be obligated contractually to comply with additional or different standards relating to our handling or protection of data on or by our offerings. We also expect that there will continue to be changes in interpretations of existing laws and regulations, or new proposed laws, regulations, and other obligations concerning privacy, data protection and information security, which could impair our or our customers’ ability to collect, use or disclose information relating to consumers, which could decrease demand for our offerings, increase our costs and impair our ability to maintain and grow our customer base and increase our revenue.

 

-51-


Table of Contents

Because the interpretation and application of many laws and regulations relating to privacy, data protection and information security, along with industry standards, are uncertain, it is possible that these laws may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the features of our products, and we could face fines, lawsuits, regulatory investigations and other claims and penalties, and we could be required to fundamentally change our products or our business practices, which could have an adverse effect on our business. Any inability to adequately address privacy, data protection and data security concerns, even if unfounded, or any actual or perceived failure to comply with applicable privacy, data protection and information security laws, regulations and other obligations, could result in additional cost and liability to us, damage our reputation, inhibit sales and adversely affect our business. Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations and policies that are applicable to the businesses of our customers may limit the use and adoption of, and reduce the overall demand for, our products. Privacy, data protection and information security concerns, whether valid or not valid, may inhibit market adoption of our products, particularly in certain industries and countries outside of the United States. If we are not able to adjust to changing laws, regulations and standards related to the Internet, our business may be harmed.

As our business expands, we are subject to increasingly complex regulatory and compliance obligations and differing business practices, both foreign and domestic, which may strain our resources and divert management’s attention.

During the past few years, our organizational structure has increased in complexity due to compliance with financial reporting obligations, tax regulations and tax accounting requirements, acquisitions, and other regulatory and compliance requirements, including compliance with the rules and regulations related to anti-corruption and anti-bribery laws such as the U.S. Foreign Corrupt Practices Act. or FCPA, and the UK Bribery Act of 2010, or UK Bribery Act. In addition, new or changing rules and regulations, including those relating to corporate governance, securities laws and public disclosure, often create uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These practices may evolve over time upon new guidance from regulatory or governing bodies, resulting in continued uncertainty regarding compliance and higher costs to adopt or modify our practices accordingly. Also, as we expand internationally, we become subject to the various rules and regulations of foreign jurisdictions. If we are unable to effectively comply with the rules and regulations applicable to us, particularly those relating to financial reporting, investors may lose confidence in our ability to manage our compliance obligations. Furthermore, we continue to develop our cloud products and services, which may store, transmit and process our customers’ sensitive, proprietary or confidential data, including personal or identifying information, in cloud-based IT environments. These new cloud products and services may expose us to higher regulation than our traditional on-premise products and services, particularly with respect to privacy and data security. Privacy laws are changing and evolving globally, and many countries have more stringent data protection laws than those in the United States. As a result, new cloud products and services may increase our liability exposure, compliance requirements and costs associated with privacy and data security issues. Our efforts to comply with all of these requirements may result in an increase in expenses and a diversion of management’s time and attention from other business activities. If our efforts to comply differ from those intended by regulatory or governing bodies, such authorities may initiate proceedings against us and our business may be harmed.

Further, we maintain a presence in the Asia-Pacific region, where business practices can differ from those in other regions of the world and can create internal control risks. We provide business practices training to our sales teams. Overall, the combination of increased structural complexity and the ever-increasing regulatory complexity make it more critical for us to attract and retain qualified and technically competent employees in the United States and internationally.

 

-52-


Table of Contents

We are subject to governmental export and import controls that could impair our ability to compete in international markets or subject us to liability if we violate these controls.

Our software may be subject to U.S. export control laws and regulations including the Export Administration Regulations, or EAR, and trade and economic sanctions maintained by the Office of Foreign Assets Control, or OFAC. As such, an export license may be required to export or reexport our products to certain countries, end-users and end-uses. Because we incorporate encryption functionality into our products, we also are subject to certain U.S. export control laws that apply to encryption items. If we were to fail to comply with such U.S. export controls laws and regulations, U.S. economic sanctions, or other similar laws, we could be subject to both civil and criminal penalties, including substantial fines, possible incarceration for employees and managers for willful violations, and the possible loss of our export or import privileges. Obtaining the necessary export license for a particular sale or offering may not be possible and may be time-consuming and may result in the delay or loss of sales opportunities. Furthermore, U.S. export control laws and economic sanctions prohibit the export of products to certain U.S. embargoed or sanctioned countries, governments and persons, as well as for prohibited end-uses. Monitoring and ensuring compliance with these complex U.S. export control laws is particularly challenging because our offerings are widely distributed throughout the world and are available for download without registration. Even though we take precautions to ensure that we and our partners comply with all relevant export control laws and regulations, any failure by us or our partners to comply with such laws and regulations could have negative consequences for us, including reputational harm, government investigations and penalties.

In addition, various countries regulate the import of certain encryption technology, including through import permit and license requirements, and have enacted laws that could limit our ability to distribute our products or could limit our end-customers’ ability to implement our products in those countries. Changes in our products or changes in export and import regulations in such countries may create delays in the introduction of our products into international markets, prevent our end-customers with international operations from deploying our products globally or, in some cases, prevent or delay the export or import of our products to certain countries, governments or persons altogether. Any change in export or import laws or regulations, economic sanctions or related legislation, shift in the enforcement or scope of existing export, import or sanctions laws or regulations, or change in the countries, governments, persons, or technologies targeted by such export, import or sanctions laws or regulations, could result in decreased use of our products by, or in our decreased ability to export or sell our products to, existing or potential end-customers with international operations. Any decreased use of our products or limitation on our ability to export to or sell our products in international markets could adversely affect our business, financial condition and operating results.

If we fail to establish or maintain an effective system of internal controls, we may be unable to accurately report our financial results or prevent fraud, and investor confidence and the market price of our Class A common stock may, therefore, be adversely affected.

As a public company in the United States, we will be required to maintain internal control over financial reporting and to report any material weaknesses in such internal control. In addition, we will be required to furnish a report by management on the effectiveness of our internal control over financial reporting pursuant to Section 404 at the time of our second annual report filing. We are in the process of designing, implementing, and testing the internal control over financial reporting required to comply with these obligations. This process is time-consuming, costly, and complicated. In addition, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting beginning with our second annual report following our initial public offering. If we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner or assert that our

 

-53-


Table of Contents

internal control over financial reporting are effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting when required, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Class A common stock may be adversely affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, which could require additional financial and management resources.

Changes in existing financial accounting standards or practices may adversely affect our results of operations.

We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles, or GAAP. Changes in existing accounting rules or practices, new accounting pronouncements, or varying interpretations of current accounting pronouncements could have a significant adverse effect on our results of operations or the manner in which we conduct our business. A change in existing financial accounting standards or practices may even retroactively adversely affect previously reported transactions.

If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our results of operations could fall below expectations of securities analysts and investors, resulting in a decline in the market price of our Class A common stock.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus, the results of which form the basis for making judgments about the carrying values of assets, liabilities, equity, revenue, and expenses that are not readily apparent from other sources. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a decline in the market price of our Class A common stock. Significant assumptions and estimates used in preparing our consolidated financial statements include those related to revenue recognition, measurement of stock-based compensation expense, accounting for intangible assets, assessing indicators of potential goodwill impairment, and accounting for income taxes including deferred tax assets and liabilities.

The IRS or other taxing authorities could seek to recharacterize the Restructuring Transactions.

The Restructuring Transactions were intended to simplify our organizational structure in anticipation of this offering. There can be no assurance that the IRS or other taxing authorities in the United States, Europe and Asia will not seek to recharacterize or reorder the Restructuring Transactions or to assert a claim for withholding or other taxes in connection with the Restructuring Transactions, which if successful, could result in tax liabilities to us or our subsidiaries and/or impact our operations in the future.

 

-54-


Table of Contents

Risks Related to Our International Operations

Our operations outside of our North American region expose us to increased risks that could limit our future growth.

We have significant operations outside of our North American region, including sales and professional services operations, software development centers and customer support centers, and we have historically derived a significant portion of our revenue from outside the United States. We derived approximately 34%, 32% and 33% of our revenue from our customers outside of our North American region for the years ended December 31, 2018, 2019 and 2020, respectively. We derived approximately 31% and 33% of our revenue from outside our North America region during the six months ended June 30, 2020 and 2021, respectively. Our international operations are subject to numerous risks, including:

 

   

general economic and political conditions in these foreign markets;

 

   

fluctuations in exchange rates between the U.S. dollar and foreign currencies;

 

   

slower or impaired collections on accounts receivable;

 

   

increased operating costs, particularly in EMEA and India, and wage inflation, particularly in India and Brazil;

 

   

greater difficulty in protecting our ownership rights to intellectual property developed in foreign countries, which may have laws that materially differ from those in the United States;

 

   

higher risk of unexpected changes in regulatory practices, tariffs, and tax laws and treaties;

 

   

greater risk of a failure of our employees to comply with both U.S. and foreign laws, including the EU General Data Protection Regulation antitrust regulations, the U.S. Foreign Corrupt Practices Act, the UK Bribery Act of 2010, and any trade regulations ensuring fair trade practices;

 

   

potential changes in laws, regulations and costs affecting our UK operations and local employees due to Brexit;

 

   

increased expenses, delays and our limited experience in developing, testing and marketing localized versions of our products;

 

   

increased competition from companies in the industry segments that we target or other vendors of data management software products that are more established in a particular region than us;

 

   

potential conflicts with our established distributors in countries in which we elect to establish a direct sales presence, or the inability to enter into or maintain strategic distributor relationships with companies in certain international markets where we do not have a local presence;

 

   

our limited experience in establishing a sales, marketing and support presence and the appropriate internal systems, processes, and controls;

 

   

difficulties in recruiting, training, managing, and retaining our international staff, particularly our international sales management and sales personnel, which have adversely affected our ability to increase sales productivity, and the costs and expenses associated with such activities;

 

   

differing business practices, which may require us to enter into software license agreements that include non-standard terms related to payment, maintenance rates, warranties, or performance obligations that may affect our ability to recognize revenue ratably; and

 

   

communication delays between our main development and support center in California and our international development and support centers, which may delay the development, testing, release or support of new and existing products, and communication delays between our U.S. headquarters and our shared services center in India.

 

-55-


Table of Contents

These factors and other factors could harm our ability to grow international revenues and, consequently, materially impact our business, results of operations, and financial condition. The expansion of our existing international operations and entry into additional international markets will require significant management attention and financial resources. Our failure to manage our international operations and the associated risks effectively could limit the future growth of our business.

Continued uncertainty in the U.S. and global economies, particularly Europe, along with uncertain geopolitical conditions, could negatively affect sales of our products and services and could harm our operating results.

As our business has grown, we have become increasingly subject to the risks arising from adverse changes in the domestic and global economies, particularly Europe. We have experienced the adverse effect of economic slowdowns in the past, which resulted in a significant reduction in capital spending by our customers, as well as longer sales cycles and the deferral or delay of purchases of our products.

Uncertainty in the macroeconomic environment and associated global economic conditions, as well as geopolitical conditions, have resulted in extreme volatility in credit, equity, and foreign currency markets. These conditions have also adversely affected the buying patterns of our customers and prospective customers, including the size of transactions and length of sales cycles, and have adversely affected our overall pipeline conversion rate as well as our revenue growth expectations. If macroeconomic or geopolitical conditions deteriorate or if the pace of recovery slows or is uneven, our overall results of operations could be adversely affected, we may not be able to grow at the rates we have experienced in the past and we could fail to meet the expectations of investors.

We continue to invest in our international operations. There are significant risks with overseas investments, and our growth prospects in these regions are uncertain. Increased volatility, further declines in the European credit, equity and foreign currency markets or geopolitical conditions could cause delays in or cancellations of European orders. Deterioration of economic or geopolitical conditions in the countries in which we do business could also cause slower or impaired collections on accounts receivable. In addition, we could experience delays in the payment obligations of our worldwide reseller customers if they experience weakness in the end-user market, which would increase our credit risk exposure and harm our financial condition.

We may experience fluctuations in foreign currency exchange rates that could adversely impact our results of operations.

Our international sales and operations expose us to fluctuations in foreign currency exchange rates. An unfavorable change in the exchange rate of foreign currencies against the U.S. dollar would result in lower revenues when translated into U.S. dollars, although operating expenses would be lower as well. Our main revenue exposures are in Euro, Yen, and Sterling. On occasion, exchange rates have been particularly volatile and have affected quarterly revenue and profitability. Recent fluctuations in foreign currency exchange rates may negatively affect our revenues in the near term. As our international operations grow, if fluctuations in foreign currency exchange rates occur or increase, the effect of changes in foreign currency exchange rates could become material to revenue, operating expenses, and income. In particular, these unfavorable exchange rate changes could have a significant impact on the operating expenses of our international operations in India, where we had approximately 2,200 employees as of June 30, 2021.

 

-56-


Table of Contents

If we are not successful in sustaining and expanding our international business, we may incur additional losses and our revenue growth could be harmed.

Our future results depend, in part, on our ability to sustain and expand our penetration of the international markets in which we currently operate and to expand into additional international markets. We depend on direct sales and our channel partner relationships to sell our offerings in international markets. Our ability to expand internationally will depend upon our ability to deliver functionality and foreign language translations that reflect the needs of the international clients that we target. Our ability to expand internationally involves various risks, including the need to invest significant resources in such expansion, and the possibility that returns on such investments will not be achieved in the near future or at all in these less familiar competitive environments. We may also choose to conduct our international business through other partnerships. If we are unable to identify partners or negotiate favorable terms, our international growth may be limited. In addition, we have incurred and may continue to incur significant expenses in advance of generating material revenue as we attempt to establish our presence in particular international markets.

Sustaining and expanding our international business will also require significant attention from our management and will require us to add additional management and other resources in these new markets. Our ability to expand our business, attract talented employees and enter into partnerships in an increasing number of international markets requires considerable management attention and resources and is subject to the particular challenges of supporting a rapidly growing business in an environment of multiple languages, cultures, customs, legal systems, alternative dispute systems, regulatory systems, commercial infrastructures and technology infrastructure. If we are unable to grow our international operations in a timely and effective manner, we may incur additional losses and our revenue growth could be harmed.

Risks Related to Our Sales to Government Entities

A portion of our revenue is generated by sales to government entities, which are subject to a number of challenges and risks, including government investigations.

Sales to U.S. and foreign federal, state, and local governmental agency end-customers have historically accounted for approximately 10% of our revenue for each of the past three fiscal years and the six months ended June 30, 2021, and we may in the future increase sales to government entities. However, government entities have announced reductions in, or experienced increased pressure to reduce, government spending. In particular, such measures have adversely affected European public sector transactions. Furthermore, the continued U.S. debt, income tax and budget issues, including future delays in approving the U.S. budget or reductions in government spending, may adversely impact future U.S. public sector transactions. Such budgetary constraints or shifts in spending priorities of government entities may adversely affect sales of our products and services to such entities. We expect these conditions to continue to adversely affect public sector transactions in the near-term.

In addition, sales to government entities are subject to a number of risks. Selling to government entities can be highly competitive, expensive and time consuming, often requiring significant upfront time and expense without any assurance that we will successfully sell our products to such governmental entity. Government entities may require contract terms that differ from our standard arrangements. Government contracts may require the maintenance of certain security clearances for facilities and employees which can entail administrative time and effort possibly resulting in additional costs and delays. In addition, government demand and payment for our products may be more volatile as they are affected by public sector budgetary cycles, funding authorizations, and the potential for funding reductions or delays, making the time to close such transactions more difficult to predict. This risk is enhanced as the size of such sales to the government entities increases. As the use of our

 

-57-


Table of Contents

products, including products recently acquired or developed, expands to more sensitive, secure or mission critical uses by our government customers, we may be subject to increased scrutiny, potential reputational risk, or potential liability should our products fail to perform as contemplated in such deployments or should we not comply with the terms of our government contracts or government contracting requirements.

Most of our sales to government entities have been made indirectly through third-party providers that sell our products. Government entities may have contractual or other legal rights to terminate contracts with our providers for convenience or due to a default, and any such termination may adversely impact our future results of operations. For example, if the provider receives a significant portion of its revenue from sales to such governmental entity, the financial health of the provider could be substantially harmed which could negatively affect our future sales to such provider. Governments routinely audit and investigate government contractors, and we may be subject to such audits and investigations. If an audit or investigation uncovers improper or illegal activities, including any misuse of confidential or classified information by our employees, we may be subject to civil or criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines, and suspension or prohibition from doing business with such government entity, or enter into a settlement in lieu of the foregoing, which may not be on favorable terms to us. In addition, we could suffer serious reputational harm if allegations of impropriety were made against us or our employees or should our products not perform as contemplated in government deployments.

Our agreement with the U.S. Department of Defense limits our control over one of our subsidiaries. If this agreement is terminated, we may be suspended from selling our products for various projects or to various agencies within the U.S. government.

Our subsidiary, Informatica Federal Operations Corporation, which markets, sells and supports our products to various classified U.S. government agencies, is required by the National Industrial Security Program to maintain facility security clearances and to be insulated from foreign ownership, control or influence. To comply with the National Industrial Security Program requirements, in July 2016, we, our parent entities, Informatica Federal Operations Corporation and the Department of Defense entered into an agreement with respect to the ownership and operations of Informatica Federal Operations Corporation. Under the agreement, we, among other things, agreed to follow an Affiliated Operations Plan describing products and services that may be provided among affiliated entities while mitigating the risks of foreign ownership, control, or influence.

The agreement may be terminated and Informatica Federal Operations Corporation’s facility security clearance may be revoked in the event of a breach of the proxy agreement, or if it is determined by the Department of Defense that termination is in the national interest. If Informatica Federal Operations Corporation’s facility security clearance is revoked, we may lose a portion of our sales to U.S. government classified agencies and our business, financial condition and results of operations would be harmed.

Our government contracts contain unfavorable provisions that are not typical of commercial contracts.

Many of our government contracts contain provisions that give the government rights and remedies not typically found in private commercial contracts, including provisions enabling the government to:

 

   

terminate or cancel our existing contracts for convenience;

 

   

suspend us from doing business with a foreign government or prevent us from selling our products in certain countries;

 

-58-


Table of Contents
   

audit and object to our contract-related costs and expenses, including allocated indirect costs; and

 

   

change specific terms and conditions in our contracts, including changes that would reduce the value of our contracts.

In addition, many jurisdictions have laws and regulations that deem government contracts in those jurisdictions to include these types of provisions, even if the contract itself does not contain them. If a government terminates a contract with us for convenience, we may not recover our incurred or committed costs, any settlement expenses or profit on work completed prior to the termination. If a government terminates a contract for default, we may not recover even those amounts, and instead we may be liable for any costs incurred by a government in procuring undelivered items and services from another source.

If we fail to comply with complex procurement laws and regulations, we may be subject to civil and criminal penalties and administrative sanctions.

We must comply with domestic and foreign laws and regulations relating to the formation, administration and performance of government contracts. These laws and regulations affect how we do business with government agencies in various countries and may impose added costs on our business. For example, in the United States, we are subject to the Federal Acquisition Regulations, which comprehensively regulate the formation, administration and performance of federal government contracts, and to the Truth in Negotiations Act, which requires certification and disclosure of cost and pricing data in connection with contract negotiations. We are subject to similar regulations in foreign countries as well.

If a government review or investigation uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or debarment from doing business with government agencies, which could materially and adversely affect our business, financial condition and results of operations. For example, in March 2019, we reached a settlement of a civil False Claims Act investigation brought by the U.S. Attorney’s Office for the District of Columbia (DC USAO) and the Civil Fraud Section of the U.S. Department of Justice (together with the DC USAO, the DOJ) in August 2015. Under the terms of the settlement, we agreed to pay $21.9 million related to a dispute regarding the accuracy of information in our commercial sales practices submissions and statements regarding the country of origin of certain products between January 1, 2008 and March 31, 2017 in consideration for the release of the company by the DOJ and the U.S. General Services Administration with respect to the claims alleged in the investigation as set forth in the settlement agreement. In addition, a government may reform its procurement practices or adopt new contracting rules and regulations that could be costly to satisfy or that could impair our ability to obtain new contracts.

Risks Related to Our Intellectual Property

Our use of open source software could negatively affect our ability to sell our solution and subject us to possible litigation.

A portion of our technologies incorporate open source software, and we expect to continue to incorporate open source software in our solution in the future. Few of the licenses applicable to open source software have been interpreted by courts, and there is a risk that these licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize our products. Moreover, we cannot guarantee that we have not incorporated additional open source software in our software in a manner that is inconsistent with the terms of the applicable

 

-59-


Table of Contents

license or our current policies and procedures. If we fail to comply with these licenses, we may be subject to certain requirements, including requirements that we offer our solutions that incorporate the open source software for no cost, that we make available source code for modifications or derivative works we create based upon, incorporating or using the open source software and that we license such modifications or derivative works under the terms of applicable open source licenses. If an author or other third party that distributes such open source software were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expenses defending against such allegations and could be subject to significant damages, enjoined from the sale of our solutions that contained the open source software and required to comply with onerous conditions or restrictions on these solutions, which could disrupt the distribution and sale of these solutions. In addition, there have been claims challenging the ownership rights in open source software against companies that incorporate open source software into their products, and the licensors of such open source software provide no warranties or indemnities with respect to such claims. In any of these events, we and our customers could be required to seek licenses from third parties in order to continue offering our products, which may not be available on favorable terms or at all, and to re-engineer our products or discontinue the sale of our products in the event re-engineering cannot be accomplished on a timely basis. We and our customers may also be subject to suits by parties claiming infringement due to the reliance by our solutions on certain open source software, and such litigation could be costly for us to defend or subject us to an injunction. Any of the foregoing could require us to devote additional research and development resources to re-engineer our solutions, could result in customer dissatisfaction, and may adversely affect our business, results of operations and financial condition.

We may be unable to predict the future course of open source technology development, which could reduce the market appeal of our offerings, damage our reputation and adversely affect our business, financial condition, results of operations and cash flows.

We do not exercise control over many aspects of the development of open source technology. Different groups of open source software programmers compete with one another to develop new technology. Typically, the technology developed by one group will become more widely used than that developed by others. In some offerings, the race to innovate eclipses the responsibility to continuously patch security vulnerabilities and functional bugs. If an offering we rely on is unable to keep pace with our functional or non-functional requirements, we may be required to invest resources to keep it updated or to seek alternatives. If we acquire or adopt new technology and incorporate it into our offerings but competing technology becomes more widely used or accepted, the market appeal of our offerings may be reduced, which could harm our reputation, diminish our brands and adversely affect our business, financial condition, results of operations and cash flows.

We are currently facing and may face future intellectual property infringement claims that could be costly to defend and result in our loss of significant rights.

As is common in the software industry, we have received and may from time to time in the future receive notices from third parties claiming infringement by our products of third-party patent and other proprietary rights. For example, in the past three years, Informatica has been the subject of two such patent suits. On May 28, 2019, Blueprint IP Solutions LLC, a non-practicing entity, filed a patent infringement complaint accusing Informatica’s big data management technology of violating U.S. Pat. No. 8,089,980, and on March 18, 2020, Akoloutheo LLC, a non-practicing entity, filed a patent infringement complaint accusing Informatica’s master data management technology of infringing U.S. Pat. No. 7,426,730. Both suits were resolved in approximately three months or less for immaterial amounts.

As the number of software products in our target markets increases and the functionality of these products further overlaps, we may become increasingly subject to claims by a third party that our

 

-60-


Table of Contents

technology infringes such party’s proprietary rights. In addition, there is a growing occurrence of patent suits being brought by organizations that use patents to generate revenue without manufacturing, promoting, or marketing products or investing in research and development in bringing products to market. These organizations have been increasingly active in the enterprise software market and have targeted whole industries as defendants.

Any claims, with or without merit, could be time consuming, result in costly litigation, cause product shipment delays, or require us to enter into royalty or licensing agreements, any of which could adversely affect our business, financial condition, and operating results. Although we do not believe that we are currently infringing any proprietary rights of others, legal action claiming patent infringement could be commenced against us. We may not prevail in such litigation given the complex technical issues and inherent uncertainties in patent litigation. The potential effects on our business that may result from third-party infringement claims include the following:

 

   

we have been and could be in the future obligated to incur significant legal costs and expenses defending the patent infringement suit;

 

   

we may be forced to enter into royalty or licensing agreements, which may not be available on terms favorable to us;

 

   

we may be required to indemnify our customers or obtain replacement products or functionality for our customers;

 

   

we may be forced to significantly increase our development efforts and resources to redesign our products as a result of these claims; and

 

   

we may be forced to discontinue the sale of some or all of our products.

If we are not able to adequately protect our proprietary rights, third parties could develop and market products that are equivalent to our own, which would harm our sales efforts.

Our success depends upon our proprietary technology. We believe that our product development, product enhancements, name recognition, and the technological and innovative skills of our personnel are essential to establishing and maintaining a technology leadership position. We rely on a combination of patent, copyright, trademark, and trade secret rights, confidentiality procedures, and licensing arrangements designed to establish and protect our proprietary rights. As of June 22, 2021, we had 117 issued patents and 35 pending patent applications in the United States and abroad.

However, these legal rights and contractual agreements may provide only limited protection. Our pending patent applications may not be allowed or our competitors may successfully challenge the validity or scope of any of our issued patents or any future issued patents. Our patents alone may not provide us with any significant competitive advantage, and third parties may develop technologies that are similar or superior to our technology or design around our patents. Third parties could copy or otherwise obtain and use our products or technology without authorization or develop similar technology independently. We cannot easily monitor any unauthorized use of our products, and, although we are unable to determine the extent to which piracy of our software products exists, software piracy is a prevalent problem in our industry in general. We may be forced to initiate litigation to protect our proprietary rights. Litigating claims related to the enforcement of proprietary rights is very expensive and can be burdensome in terms of management time and resources, which could adversely affect our business and operating results. In addition, the risk of not adequately protecting our proprietary technology and our exposure to competitive pressures may be increased if a competitor should resort to unlawful means in competing against us.

We have entered into certain agreements with many of our customers and partners that require us to place the source code of our products into escrow. Such agreements generally provide that such

 

-61-


Table of Contents

parties will have a limited, non-exclusive right to continue use of such code if there is a bankruptcy proceeding by or against us, we cease to do business or we fail to meet our support obligations. Although our agreements with these third parties limit the scope of rights to use of the source code, we may be unable to effectively control such third parties’ actions.

Furthermore, effective protection of intellectual property rights is unavailable or limited in various foreign countries. The protection of our proprietary rights may be inadequate, and our competitors could independently develop similar technology, duplicate our products, or design around any patents or other intellectual property rights we hold.

Risks Related to Our Indebtedness

Our substantial indebtedness could materially adversely affect our financial condition and prevent us from fulfilling our obligations under our existing indebtedness.

We have a significant amount of indebtedness. As of June 30, 2021, our total indebtedness was approximately $2.77 billion. Subject to the limits contained in the credit agreement that governs our Senior Secured Credit Facilities and our other debt instruments, we may be able to incur substantial additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. If we do so, the risks related to our high level of debt could intensify. Specifically, our high level of debt could have important consequences to the holders of our common stock, including the following:

 

   

making it more difficult for us to satisfy our obligations with respect to our debt; and if we fail to comply with these requirements, an event of default could result;

 

   

limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements;

 

   

requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes;

 

   

increasing our vulnerability to general adverse economic and industry conditions;

 

   

exposing us to the risk of increased interest rates as certain of our borrowings, including borrowings under the Senior Secured Credit Facilities, are at variable rates of interest;

 

   

limiting our flexibility in planning for and reacting to changes in the industry in which we compete;

 

   

placing us at a disadvantage compared to other, less leveraged competitors; and

 

   

increasing our cost of borrowing.

In addition, the credit agreement that governs the Senior Secured Credit Facilities contains restrictive covenants that limit our ability to engage in activities that may be in our long-term best interest. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all our debt.

We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments on or refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control.

 

-62-


Table of Contents

We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness. For the year ended December 31, 2020, our cash flows dedicated for debt service requirements totaled $161.4 million, which includes principal payments of $17.6 million and interest payments of $143.8 million. For the year ended December 31, 2020, our net cash provided by operating activities was $167.8 million, which includes interest paid of $143.8 million. As such, our cash flows from operating activities, before giving effect to the payment of interest, amounted to $311.6 million. For the year ended December 31, 2020, approximately 52% of our net cash provided by operating activities, before giving effect to the payment of interest, was dedicated to debt service, both principal and interest. For the six months ended June 30, 2021, our cash flows dedicated for debt service requirements totaled $68.4 million, which includes principal payments of $11.9 million and interest payments of $56.5 million. For the six months ended June 30, 2021, our net cash provided by operating activities was $104.4 million, which includes interest paid of $56.5 million. As such, our cash flows from operating activities, before giving effect to the payment of interest, amounted to $160.9 million. For the six months ended June 30, 2021, approximately 42% of our net cash provided by operating activities, before giving effect to the payment of interest, was dedicated to debt service, both principal and interest.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance our indebtedness. We may not be able to effect any such alternative measures, if necessary, on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. The credit agreement that governs the Senior Secured Credit Facilities restricts our ability to dispose of assets and use the proceeds from those dispositions and may also restrict our ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due. Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially adversely affect our financial position and results of operations.

In addition, we conduct substantially all of our international operations through our subsidiaries. Accordingly, repayment of our indebtedness is dependent on the generation of cash flow by our restrictions may limit our ability to obtain cash from our subsidiaries. While the credit agreement that governs the Senior Secured Credit Facilities limits the ability of our subsidiaries to incur consensual restrictions on their ability to pay dividends or make other intercompany payments to us, these limitations are subject to qualifications and exceptions. In the event that we do not receive distributions from our subsidiaries, we may be unable to make required principal and interest payments on our indebtedness.

If we cannot make scheduled payments on our debt, we will be in default and the lenders under the Senior Secured Credit Facilities could terminate their commitments to loan money, the lenders could foreclose against the assets securing their borrowings and we could be forced into bankruptcy or liquidation. All of these events could result in your losing your investment in our Class A common stock.

Despite our current level of indebtedness, we and our subsidiaries may still be able to incur substantially more debt. This could further exacerbate the risks to our financial condition described above.

We and our subsidiaries may be able to incur significant additional indebtedness in the future. Although the credit agreement that governs the Senior Secured Credit Facilities contains restrictions

 

-63-


Table of Contents

on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial. These restrictions also will not prevent us from incurring obligations that do not constitute indebtedness. In addition, as of June 30, 2021, our Revolving Credit Facility would have provided for unused commitments of $150.0 million (with an exception of letters of credit of $1.2 million utilized under the Revolving Credit Facility), which could be increased, subject to certain conditions. If we incur any additional indebtedness, the holders of that indebtedness will be entitled to any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding up of our company before such proceeds are distributed to you. If new debt is added to our currently anticipated debt levels, the related risks that you now face could intensify.

The terms of the credit agreement that governs the Senior Secured Credit Facilities restricts our current and future operations, particularly our ability to respond to changes in the economy or our industry or to take certain actions.

The credit agreement that governs our Senior Secured Credit Facilities contains a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interest, including restrictions on our ability to:

 

   

incur additional indebtedness and guarantee indebtedness;

 

   

pay dividends or make other distributions or repurchase or redeem our capital stock;

 

   

prepay, redeem or repurchase certain subordinated debt;

 

   

issue certain preferred stock or similar equity securities;

 

   

make loans and investments;

 

   

sell assets;

 

   

incur liens;

 

   

enter into transactions with affiliates;

 

   

enter into agreements restricting our subsidiaries’ ability to pay dividends; and

 

   

consolidate, merge, sell or otherwise dispose of all or substantially all of our assets.

In addition, the credit agreement that governs the Revolving Credit Facility requires us to maintain a first lien net leverage ratio if borrowings outstanding thereunder exceed a specified threshold. Our ability to meet this leverage ratio can be affected by events beyond our control, and we may be unable to meet the ratio.

A breach of the covenants or restrictions under the credit agreement that governs the Senior Secured Credit Facilities could result in an event of default under the applicable indebtedness. Such default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. In addition, an event of default under the credit agreement that governs the Senior Secured Credit Facilities would permit the lenders under our Senior Secured Credit Facilities to terminate all commitments to extend further credit under those facilities. Furthermore, if we were unable to repay the amounts due and payable under the Senior Secured Credit Facilities, the lenders under each facility could proceed against the collateral granted to them to secure that indebtedness. In the event our lenders accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness. As a result of these restrictions, we may be:

 

   

limited in how we conduct our business;

 

-64-


Table of Contents
   

unable to raise additional debt or equity financing to operate during general economic or business downturns; or

 

   

unable to compete effectively or to take advantage of new business opportunities.

These restrictions may affect our ability to grow in accordance with our strategy. In addition, our financial results, substantial indebtedness and credit ratings could materially adversely affect the availability and terms of our financing.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

Borrowings under the Senior Secured Credit Facilities are at variable rates of interest and expose us to interest rate risk. If interest rates were to increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease. Assuming all loans under the Senior Secured Credit Facilities were fully drawn, each quarter point change in interest rates, excluding the effects of any interest rate swap agreements, would result in a $6.0 million change in annual interest expense on our indebtedness under the Senior Secured Credit Facilities. In the future, we may enter into interest rate swaps that involve the exchange of floating for fixed rate interest payments in order to reduce interest rate volatility. However, we may not maintain interest rate swaps with respect to all of our variable rate indebtedness, and any swaps we enter into may not fully mitigate our interest rate risk.

Risks Related to Ownership of Our Class A Common Stock and Our Capitalization Structure

An active trading market for our Class A common stock may never develop or be sustained.

We have been approved to list our Class A common stock on the NYSE under the symbol “INFA.” However, we cannot assure you that an active trading market for our Class A common stock will develop on that exchange or elsewhere or, if developed, that any market will be sustained. Accordingly, we cannot assure you of the likelihood that an active trading market for our Class A common stock will develop or be maintained, the liquidity of any trading market, your ability to sell your shares of our Class A common stock when desired or the prices that you may obtain for your shares.

The market price of our Class A common stock may be volatile, and you could lose all or part of your investment.

Prior to this offering, there has been no public market for shares of our Class A common stock. The initial public offering price of our Class A common stock will be determined through negotiation among us and the underwriters. This price will not necessarily reflect the price at which investors in the market will be willing to buy and sell shares of our Class A common stock following this offering. In addition, the market price of our Class A common stock following this offering is likely to be volatile and could be subject to fluctuations in response to various factors, some of which are beyond our control. These fluctuations could cause you to lose all or part of your investment in our Class A common stock since you might be unable to sell your shares at or above the price you paid in this offering. Factors that could cause fluctuations in the market price of our Class A common stock include the following:

 

   

price and volume fluctuations in the overall stock market from time to time;

 

   

volatility in the trading prices and trading volumes of technology stocks;

 

   

changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular;

 

-65-


Table of Contents
   

sales of shares of our Class A common stock by us or our stockholders;

 

   

failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;

 

   

the financial projections we may provide to the public, any changes in those projections, or our failure to meet those projections;

 

   

announcements by us or our competitors of new products, features, or services;

 

   

the public’s reaction to our press releases, other public announcements, and filings with the SEC;

 

   

rumors and market speculation involving us or other companies in our industry;

 

   

actual or anticipated changes in our results of operations or fluctuations in our results of operations;

 

   

actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally;

 

   

litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors;

 

   

developments or disputes concerning our intellectual property or other proprietary rights;

 

   

actual or perceived data security breaches or other data security incidents;

 

   

announced or completed acquisitions of businesses, products, services, or technologies by us or our competitors;

 

   

new laws or regulations or new interpretations of existing laws or regulations applicable to our business;

 

   

changes in accounting standards, policies, guidelines, interpretations, or principles;

 

   

any significant change in our management; and

 

   

general economic conditions and slow or negative growth of our markets.

In addition, in the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.

We may need additional capital, and we cannot be certain that additional financing will be available on favorable terms, or at all.

Historically, we have funded our operations and capital expenditures primarily through debt financings and subsequent refinancings as well as cash generated from our operations. Although we currently anticipate that our existing cash and cash equivalents, cash flow from operations and expected proceeds from this offering will be sufficient to meet our cash needs for at least the next twelve months, we may require additional financing. We evaluate financing opportunities from time to time, and our ability to obtain financing will depend, among other things, on our development efforts, business plans, operating performance, and condition of the capital markets at the time we seek financing. We cannot assure you that additional financing will be available to us on favorable terms when required, or at all. If we raise additional funds through the issuance of equity or equity-linked or debt securities, those securities may have rights, preferences or privileges senior to the rights of our Class A common stock, and our stockholders may experience dilution.

 

-66-


Table of Contents

A substantial portion of the outstanding shares of our Class A common stock and Class B common stock after this offering will be restricted from immediate resale but may be sold in the near future. The large number of shares of our capital stock eligible for public sale or subject to rights requiring us to register them for public sale could depress the market price of our Class A common stock.

The market price of our Class A common stock could decline as a result of sales of a large number of shares of our Class A common stock in the market after this offering, and the perception that these sales could occur may also depress the market price of our Class A common stock. Based on 200,768,636 shares of our Class A common stock and 44,049,523 shares of each of our Class B-1 common stock and Class B-2 common stock outstanding as of September 30, 2021, we will have 229,768,636 shares of our Class A common stock and 44,049,523 shares of our Class B-1 common stock outstanding after this offering. Our executive officers, directors, and the holders of substantially all of our capital stock and securities convertible into or exchangeable for our capital stock have entered into market standoff agreements with us or have entered into lock-up agreements with the underwriters under which they have agreed, subject to specific customary exceptions, not to sell any of our stock for 180 days following the date of this prospectus provided that if the 180-day lock-up period is scheduled to end during a broadly applicable period during which trading in our securities would not be permitted under our insider trading policy, or a blackout period, and we have publicly released our regular earnings announcement (which for this purpose shall not include “flash” numbers or preliminary, estimated financial results) for the fiscal year ended December 31, 2021 or the quarterly period in which this offering occurs (as applicable), then the lock-up period will instead end fifteen trading days prior to the regularly scheduled commencement of the blackout period, provided that in no event will the lock-up period end prior to 120 days after the date of this prospectus or more than 180 days after the date of this prospectus. We refer to such period as the lock-up period. We and the underwriters may release certain stockholders from the market standoff agreements or lock-up agreements prior to the end of the lock-up period.

As a result of these agreements and the provisions of our stockholders agreement described further in the section titled “Description of Capital Stock—Registration Rights,” and subject to the provisions of Rule 144 or Rule 701, shares of our Class A common stock and Class B common stock will be available for sale in the public market as follows:

 

   

beginning on the date of this prospectus, all shares of our Class A common stock sold in this offering will be immediately available for sale in the public market; and

 

   

beginning 181 days after the date of this prospectus (subject to the exceptions, provisions and other terms of the lock-up agreements and market standoff agreements described above), the remainder of the shares of our Class A common stock (including any Class B common stock converted into Class A common stock) will be eligible for sale in the public market from time to time thereafter, subject in some cases to the volume and other restrictions of Rule 144, as described below.

Upon completion of this offering, stockholders owning all of our shares of Class B-1 common stock and 198,390,476 shares of our Class A common stock will be entitled, under our amended and restated registration rights agreement, to require us to register shares of Class A common stock owned by them for public sale in the United States. In addition, we intend to file a registration statement to register shares reserved for future issuance under our equity compensation plans. Upon effectiveness of the registration statement, subject to the satisfaction of applicable exercise periods and the expiration or waiver of the market standoff agreements and lock-up agreements referred to above, the shares issued upon exercise of outstanding stock options will be available for immediate resale in the United States in the open market.

Sales of our shares as restrictions end or pursuant to registration rights may make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. These

 

-67-


Table of Contents

sales also could cause the market price of our Class A common stock to fall and make it more difficult for you to sell shares of our Class A common stock.

If you purchase our Class A common stock in this offering, you will incur immediate and substantial dilution.

The initial public offering price of the Class A common stock is substantially higher than the pro forma as adjusted net tangible book value deficit per share of our outstanding common stock of $5.88 per share as of June 30, 2021. Investors purchasing shares of our Class A common stock in this offering will pay a price per share that substantially exceeds the book value of our tangible assets after subtracting our liabilities. As a result, investors purchasing Class A common stock in this offering will incur immediate dilution of $36.38 per share, based on the assumed initial public offering price of $30.50 per share, which is the midpoint of the price range printed on the cover of this prospectus.

This dilution is due to the substantially lower price paid by our investors who purchased shares prior to this offering as compared to the price offered to the public in this offering, and any previous exercise of stock options granted to our service providers. In addition, as of June 30, 2021, options to purchase 24,948,147 shares of our Class A common stock, with a weighted-average exercise price of approximately $15.70 per share were outstanding. The exercise of any of these options would result in additional dilution. As a result of the dilution to investors purchasing shares in this offering, investors may receive less than the purchase price paid in this offering, if anything, in the event of our liquidation.

We have broad discretion over the use of the net proceeds from this offering and we may not use them effectively.

Other than the partial repayment of our Senior Secured Credit Facility, we cannot specify with any certainty the particular uses of the net proceeds that we will receive from this offering. Our management will have broad discretion in the application of the net proceeds from this offering, including for any of the purposes described in “Use of Proceeds,” and you will not have the opportunity as part of your investment decision to assess whether the net proceeds are being used appropriately. Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. The failure by our management to apply these proceeds effectively could adversely affect our business, results of operations, and financial condition. Pending their use, we may invest our proceeds in a manner that does not produce income or that loses value. Our investments may not yield a favorable return to our investors and may negatively impact the market price of our Class A common stock.

The Sponsors have a controlling influence over matters requiring stockholder approval, which could delay or prevent a change of control.

The funds advised by our Sponsors beneficially owned in the aggregate 98.8% of the combined voting power of our outstanding capital stock as of September 30, 2021, and immediately after this offering, will beneficially own in the aggregate 88.5% of the combined voting power of our outstanding capital stock (or 87.2% of the combined voting power of our outstanding capital stock if the underwriters’ option to purchase additional shares is exercised in full). The Sponsors have entered into a stockholders agreement whereby they each agreed, among other things, to vote the shares each beneficially owns and is entitled to vote thereon in favor of the director nominees designated by Permira and CPP Investments, respectively.

Under the stockholders agreement and subject to our certificate of incorporation and bylaws, as amended and restated in connection with this offering, and applicable law, for so long as a Sponsor

 

-68-


Table of Contents

owns or holds of record, directly or indirectly, in the aggregate at least 15% of the Company’s outstanding shares of our Class A and Class B-1 common stock, the following actions will require the affirmative vote of each such Sponsor:

 

   

any changes to the size of our board of directors;

 

   

any termination, appointment or replacement of our Chief Executive Officer;

 

   

any transactions that would result in a change of control;

 

   

any acquisitions, dispositions or the incurrence of indebtedness over $300 million; and

 

   

any changes in the Corporate Opportunity provisions in our certificate of incorporation, as amended and restated in connection with this offering.

Additionally, for so long as Permira and CPP Investments each beneficially own, in the aggregate, 20% or more of the shares of our Class A common stock and Class B-1 common stock held by them upon completion of this offering, each will have the right to designate two members of our board of directors. For so long as Permira and CPP Investments each beneficially own, in the aggregate, less than 20% but at least 10% of the shares of our Class A common stock and Class B-1 common stock held by them upon completion of this offering, each will have the right to designate one member of our board of directors. Further, for so long as the Sponsors have a right to appoint, in the aggregate, four members of our board of directors, the Sponsors will have a right to jointly appoint one additional member of our board of directors. For so long as a Sponsor has the right to designate at least one member of our board of directors, such Sponsor is entitled to appoint at least one nominee to serve on each committee of our board of directors, other than the audit committee, and the chair of each of the committees, other than the audit committee, is expected to be a director serving on such committee who is designated by the Sponsors. However, as soon as we are no longer a “controlled company” under the rules of the NYSE, our committee membership will comply with all applicable requirements of those standards and a majority of our board of directors will be “independent directors,” as defined under the rules of the NYSE, subject to any phase-in provisions.

Certain of our directors have relationships with the Sponsors, which may cause conflicts of interest with respect to our business.

Following this offering, three of our ten directors will be affiliated with Permira and two of our directors will be employees of CPP Investments. These directors have fiduciary duties to us and, in addition, have duties to the respective Sponsor and their affiliates, respectively. As a result, these directors may face real or apparent conflicts of interest with respect to matters affecting both us and the Sponsors, whose interests may be adverse to ours in some circumstances.

The Sponsors and their affiliates may pursue corporate opportunities independent of us that could present conflicts with our and our stockholders’ interests.

The Sponsors and their affiliates are in the business of making or advising on investments in companies and hold (and may from time to time in the future acquire) interests in or provide advice to businesses that directly or indirectly compete with certain portions of our business or are suppliers or customers of ours. The Sponsors and their affiliates may also pursue acquisitions that may be complementary to our business and, as a result, those acquisition opportunities may not be available to us.

We cannot predict the effect our multi-class structure may have on the market price of our Class A common stock.

We cannot predict whether our multi-class structure will result in a lower or more volatile market price of our Class A common stock, in adverse publicity, or other adverse consequences. For example,

 

-69-


Table of Contents

certain index providers have announced restrictions on including companies with multi-class share structures in certain of their indices. In July 2017, FTSE Russell announced that it plans to require new constituents of its indices to have greater than 5% of the company’s voting rights in the hands of public stockholders, and S&P Dow Jones announced that it will no longer admit companies with multi-class share structures to certain of its indices. Affected indices include the Russell 2000 and the S&P 500, S&P MidCap 400, and S&P SmallCap 600, which together make up the S&P Composite 1500. Also in 2017, MSCI, a leading stock index provider, opened public consultations on their treatment of no-vote and multi-class structures and temporarily barred new multi-class listings from certain of its indices and in October 2018, MSCI announced its decision to include equity securities “with unequal voting structures” in its indices and to launch a new index that specifically includes voting rights in its eligibility criteria. Under such announced policies, the multi-class structure of our common stock could make us ineligible for inclusion in certain indices and, as a result, mutual funds, exchange-traded funds, and other investment vehicles that attempt to track those indices would not invest in our Class A common stock. These policies are relatively new and it is unclear what effect, if any, they will have on the valuations of publicly-traded companies excluded from such indices, but it is possible that they may depress valuations, as compared to similar companies that are included. Given the sustained flow of investment funds into passive strategies that seek to track certain indices, exclusion from certain stock indices would likely preclude investment by many of these funds and could make our Class A common stock less attractive to other investors. As a result, the market price of our Class A common stock could be adversely affected.

Delaware law and provisions in our restated certificate of incorporation and restated bylaws could make a merger, tender offer, or proxy contest difficult, thereby depressing the market price of our Class A common stock.

Our status as a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law may discourage, delay, or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested stockholder, even if a change of control would be beneficial to our existing stockholders. In addition, our restated certificate of incorporation and restated bylaws contain provisions that may make the acquisition of our company more difficult, including the following:

 

   

any transaction that would result in a change in control of our company requires the approval of a majority of our outstanding Class A common stock and Class B-1 common stock voting as a separate class;

 

   

our board of directors is classified into three classes of directors with staggered three-year terms and after the Sponsors cease to beneficially own, in the aggregate, at least 50% of the outstanding shares of our Class A common stock and Class B-1 common Stock, directors will only able to be removed from office for cause;

 

   

after the Sponsors cease to beneficially own, in the aggregate, at least 50% of the outstanding shares of our Class A common stock and Class B-1 common stock, our stockholders will only be able to take action at a meeting of stockholders and not by written consent;

 

   

vacancies on our board of directors will be able to be filled only by our board of directors and not by stockholders;

 

   

after the Sponsors cease to beneficially own, in the aggregate, at least 50% of the outstanding shares of our Class A common stock and Class B-1 common stock, only our chair of the board of directors or a majority of board of directors will be authorized to call a special meeting of stockholders;

 

   

certain litigation against us can only be brought in Delaware;

 

-70-


Table of Contents
   

our restated certificate of incorporation authorizes undesignated preferred stock, the terms of which may be established and shares of which may be issued without the approval of the holders of Class A common stock; and

 

   

advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders.

These anti-takeover defenses could discourage, delay, or prevent a transaction involving a change in control of our company. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and to cause us to take other corporate actions they desire, any of which, under certain circumstances, could limit the opportunity for our stockholders to receive a premium for their shares of our capital stock, and could also affect the price that some investors are willing to pay for our Class A common stock.

Our amended and restated bylaws will designate a state or federal court located within the State of Delaware as the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated bylaws, which will become effective immediately prior to the completion of this offering, will provide that the Court of Chancery of the State of Delaware is the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, stockholders, officers or other employees to us or our stockholders, (3) any action arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws or (4) any other action asserting a claim that is governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware), in all cases subject to the court having jurisdiction over indispensable parties named as defendants. The provisions would not apply to suits brought to enforce a duty or liability created by the Exchange Act, or any other claim for which the U.S. federal courts have exclusive jurisdiction.

Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated bylaws also provide that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. However, while the Delaware Supreme Court ruled in March 2020 that federal forum selection provisions purporting to require claims under the Securities Act be brought in federal court are “facially valid” under Delaware law, there is uncertainty as to whether other courts will enforce our federal forum provision. If the federal forum provision is found to be unenforceable, we may incur additional costs associated with resolving such matters.

Any person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to this provision. This exclusive-forum provision may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees. If a court were to find the exclusive-forum provision in our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could harm our results of operations.

 

-71-


Table of Contents

Our Class A common stock market price and trading volume could decline if securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business.

The trading market for our Class A common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. The analysts’ estimates are based upon their own opinions and are often different from our estimates or expectations. If one or more of the analysts who cover us downgrade our Class A common stock or publish inaccurate or unfavorable research about our business, the market price of our Class A common stock would likely decline. If few securities analysts commence coverage of us, or if one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our securities could decrease, which might cause the market price and trading volume of our Class A common stock to decline.

We will be a controlled company within the meaning of the rules of the NYSE and, as a result, will qualify for and intend to rely on exemptions from certain corporate governance requirements.

Upon the completion of this offering, our Sponsors will beneficially own a majority of the combined voting power of all classes of our outstanding voting stock. As a result, we will be a controlled company within the meaning of the rules of the NYSE. Under the NYSE rules, a company of which more than 50% of the voting power is held by another person or group of persons acting together is a controlled company and may elect not to comply with certain NYSE corporate governance requirements, including the requirements that:

 

   

a majority of the board of directors consist of independent directors;

 

   

the nominating and governance committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

 

   

the compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

These requirements will not apply to us as long as we remain a controlled company. Following this offering, we intend to take advantage of some or all of these exemptions. Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE.

Our Sponsors and their affiliates control us and their interests may conflict with ours or yours in the future.

Immediately following this offering and the application of the net proceeds from this offering, the Sponsors and their affiliates will control approximately 88.5% of the combined voting power of our capital stock (or 87.2%, if the underwriters exercise in full their option to purchase additional shares of Class A common stock) as a result of their beneficial ownership of our Class A common stock and Class B common stock. Even when the Sponsors and their affiliates cease to beneficially own shares of our common stock representing a majority of the combined voting power, for so long as the Sponsors continue to beneficially own a significant percentage of our common stock, the Sponsors will still be able to significantly influence the composition of our board of directors and the approval of actions requiring stockholder approval through their combined voting power. Accordingly, for such period of time, the Sponsors and their affiliates will have significant influence with respect to our management, business plans and policies. In particular, the Sponsors and their affiliates will be able to cause or prevent a change of control of our company or a change in the composition of our board of directors and could preclude any unsolicited acquisition of our company. The concentration of voting

 

-72-


Table of Contents

power could deprive you of an opportunity to receive a premium for your shares of Class A common stock as part of a sale of our company and ultimately might affect the market price of our Class A common stock.

The Sponsors and their affiliates engage in a broad spectrum of activities. In the ordinary course of their business activities, the Sponsors and their affiliates may engage in activities where their interests conflict with our interests or those of our stockholders. Our amended and restated certificate of incorporation will provide that none of the Sponsors, any of their affiliates or any director who is not employed by us (including any non-employee director who serves as one of our officers in both his director and officer capacities) or his or her affiliates will have any duty to refrain from engaging, directly or indirectly, in the same business activities or similar business activities or lines of business in which we operate. The Sponsors and their affiliates also may pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us. In addition, the Sponsors and their affiliates may have an interest in us pursuing acquisitions, divestitures and other transactions that, in their judgment, could enhance their investment, even though such transactions might involve risks to you.

We do not intend to pay dividends for the foreseeable future.

We currently intend to retain any future earnings to finance the operation and expansion of our business. We do not expect the Company or our subsidiaries to declare or pay any dividends in the foreseeable future. As a result, stockholders must rely on sales of their Class A common stock after price appreciation as the only way to realize any future gains on their investment.

General Risk Factors

The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.

As a public company, we will be subject to the reporting and corporate governance requirements of the Exchange Act, the listing requirements of the NYSE and other applicable securities rules and regulations, including the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act. Compliance with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources. Among other things, the Exchange Act requires that we file annual, quarterly and current reports with respect to our business and results of operations and maintain effective disclosure controls and procedures and internal control over financial reporting. In order to enhance our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could harm our business, financial condition, results of operations and prospects. Although we have already hired additional personnel to help comply with these requirements, we may need to further expand our legal and finance departments in the future, which will increase our costs and expenses. In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expense and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards

 

-73-


Table of Contents

differ from the activities intended by regulatory or governing bodies, regulatory authorities may initiate legal proceedings against us and our business and prospects may be harmed. As a result of disclosure of information in the filings required of a public company and in this prospectus, our business and financial condition will become more visible, which may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business, financial condition, results of operations and prospects could be materially harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and materially harm our business, financial condition, results of operations and prospects.

We also expect that being a public company and these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified executive officers and members of our board of directors, particularly to serve on our audit committee and compensation committee.

In addition, as a result of our disclosure obligations as a public company, we will have reduced strategic flexibility and will be under pressure to focus on short-term results, which may materially and adversely affect our ability to achieve long-term profitability.

Business interruptions could adversely affect our business.

Our operations are vulnerable to interruption by fire, earthquake, power loss, telecommunications or network failure, and other significant natural disasters or events beyond our control. In addition, acts of terrorism and other geo-political unrest could cause disruptions in our business or the business of our partners, customers or the economy as a whole. We have prepared a detailed disaster recovery plan which includes the use of internal and external resources and will continue to expand the scope over time. Disasters or disruptions can negatively affect our operations given necessary interaction among our international facilities.

Our headquarters and a number of our employees are located in the San Francisco Bay Area, a region known for seismic activity. In the event such an earthquake or any other natural disaster or man-made failure occurs, it could disrupt the operations of our affected facilities and recovery of our resources. In addition, we do not carry sufficient business interruption insurance to compensate us for losses that may occur, and any losses or damages incurred by us could have a material adverse effect on our business.

Our corporate business processes rely on SaaS providers such as Microsoft O365, Salesforce, Oracle and Marketo to provide highly available business services. In addition, our cloud products depend on third-party service providers, including AWS, Microsoft Azure and Google Cloud, and certain single-source suppliers, including MITI, for our database connectors. Disruptions to any of our service providers or suppliers could also have a negative effect on our operations and harm our business.

We may be the subject of litigation which, if adversely determined, could harm our business and operating results.

Our business is subject to regulation by various federal, state, local and foreign governmental agencies, including agencies responsible for monitoring and enforcing employment and labor laws, workplace safety, laws relating to data privacy, data security and data protection, consumer protection laws, anti-bribery laws, import/export controls, federal securities laws and tax laws and regulations. Noncompliance with applicable regulations or requirements could subject us to investigations,

 

-74-


Table of Contents

sanctions, enforcement actions, disgorgement of profits, fines, damages and civil and criminal penalties or injunctions. We have been, currently are, and may in the future be, subject to legal claims arising in the normal course of business. Such legal claims have included governmental, intellectual property-related, commercial, and employment claims, and may in the future include those categories of claims, as well as, product liability, class action, whistleblower and other litigation and claims. An unfavorable outcome on any litigation matter could require that we pay substantial damages. In addition, we may decide to settle any litigation, which could cause us to incur significant costs.

The outcome of litigation and other claims or lawsuits is intrinsically uncertain. Management’s view of the litigation might also change in the future. Actual outcomes of litigation and other claims or lawsuits could differ from the assessments made by management in prior periods, which are the basis for our accounting for these litigations and claims under U.S. generally accepted accounting principles (GAAP). A settlement or an unfavorable outcome on any litigation matter could have a material adverse effect on our business, operating results, reputation, financial position or cash flows. In addition, responding to any action will likely result in a significant diversion of management’s attention and resources and an increase in professional fees. Enforcement actions and sanctions could harm our business, financial condition and results of operations.

 

-75-


Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this prospectus include, but are not limited to, statements about:

 

   

our ability to attract new customers;

 

   

our ability to retain existing customers;

 

   

our ability to upsell and cross-sell within our existing customer base;

 

   

possible harm caused by customers terminating or failing to renew their subscription contracts;

 

   

possible harm caused by customers terminating or failing to renew their maintenance contracts;

 

   

possible harm caused by significant disruption of service or loss or unauthorized access to users’ data;

 

   

our ability to prevent serious errors or defects in our products;

 

   

our expectations and management of future growth;

 

   

our ability to transition our customers to subscription-based offerings;

 

   

the demand for our platform or for data management solutions in general;

 

   

possible harm caused by the COVID-19 pandemic and its impacts on our business, our employees, and our customers;

 

   

our ability to compete successfully in competitive markets;

 

   

our ability to respond to rapid technological changes;

 

   

our future financial performance, including trends in revenue, costs of revenue, gross profit or gross margin, and operating expenses;

 

   

our ability to protect our brand;

 

   

the demand for cloud-based solutions;

 

   

our ability to attract and retain key personnel and highly qualified personnel;

 

   

our ability to effectively train and incentivize our sales force;

 

   

our ability to successfully execute our go-to-market strategy;

 

   

our ability to manage our international expansion;

 

   

our ability to build and maintain relationships with strategy partners;

 

   

our ability to maintain, protect, and enhance our intellectual property;

 

   

our ability to effectively integrate our products and solutions with others;

 

   

our ability to achieve or maintain profitability;

 

   

our ability to manage our outstanding indebtedness;

 

   

our ability to successfully identify, acquire, and integrate companies and assets;

 

-76-


Table of Contents
   

our ability to offer high-quality customer support;

 

   

the increased expenses associated with being a public company; and

 

   

our anticipated uses of net proceeds from this offering.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this prospectus.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this prospectus primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” and elsewhere in this prospectus. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this prospectus. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this prospectus relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this prospectus to reflect events or circumstances after the date of this prospectus or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

 

-77-


Table of Contents

INDUSTRY AND MARKET DATA

This prospectus contains estimates and information concerning our industry, including market size of the markets in which we participate, that are based on industry publications and reports. This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to these estimates. We have not independently verified the accuracy or completeness of the data contained in these industry publications and reports. The markets in which we operate are subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled “Risk Factors.” These and other factors could cause results to differ materially from those expressed in these publications and reports. The content of, or accessibility through, the below sources, except to the extent specifically set forth in this prospectus, does not constitute a portion of this prospectus and is not incorporated herein.

The source of certain statistical data, estimates and forecasts contained in this prospectus are the following independent industry publications or reports:

 

   

Gartner, Gartner Peer Insights ‘Voice of the Customer’: Data Integration Tools, 8 February 2021.

 

   

Gartner, Magic Quadrant for Data Integration Tools, Ehtisham Zaidi, et al, 18 August 2020.

 

   

Gartner, Magic Quadrant for Data Quality Solutions, Melody Chien and Ankush Jain, 27 July 2020.

 

   

Gartner, Magic Quadrant for Enterprise Integration Platform as a Service, Eric Thoo, et al, 21 September 2020.

 

   

Gartner, Magic Quadrant for Master Data Management Solutions, Simon Walker, et al, 27 January 2021.

 

   

Gartner, Magic Quadrant for Metadata Management Solutions, Guido De Simoni, et al, 11 November 2020.

 

   

Gartner, The State of Privacy and Personal Data Protection, 2020-2022, Nader Henein, et al, 26 August 2020.

 

   

Gartner, The State of Metadata Management: Data Management Solutions Must Become Augmented Metadata Platforms,” Mark Beyer et al, 26 March 2021.

 

   

IDC, Worldwide Global DataSphere Forecast, 2021-2024: The World Keeps Creating More Data — Now, What Do We Do With It All?, Doc# US46410421, March 2021.

 

   

IDC, Semiannual Software Tracker, 2020H2, May 2021.

 

   

IDC Worldwide Data Integration and Intelligence Software Forecast, 2021–2025.

 

   

IDC Worldwide Business-to-Business Integration Middleware and Managed File Transfer Software Forecast, 2021–2025.

 

   

IDC Worldwide Master Data Management Competitive Software Forecast, 2019–2023.

 

   

IDC Worldwide Data Privacy Management Software Forecast, 2021–2025.

 

-78-


Table of Contents

USE OF PROCEEDS

We estimate that the net proceeds to us from the sale of shares of our Class A common stock in this offering will be approximately $825.9 million, based upon the assumed initial public offering price of $30.50 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters’ option to purchase additional shares of our Class A common stock from us is exercised in full, we estimate that the net proceeds to us would be approximately $951.2 million, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

We intend to use the proceeds from this offering, net of underwriting discounts and commissions and expenses payable by us, to repay the outstanding indebtedness under our First Lien Credit Agreement and our Second Lien Credit Agreement, as described in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” The First Lien Dollar Term Facility under the First Lien Credit Agreement matures on February 25, 2027. Borrowings under the First Lien Dollar Term Facility bear interest, at the Company’s option, either at (i) LIBOR plus 3.25% or (ii) the base rate plus 2.25%. The First Lien Euro Term Facility under the First Lien Credit Agreement matures on February 25, 2027. Borrowings under the First Lien Euro Term Facility bear interest, at the Company’s option, either at (i) LIBOR plus an applicable margin of either 3.25% or (ii) 3.50% based on the Company’s total net leverage ratio. The Second Lien Term Loan Facility under the Second Lien Credit Agreement matures on February 25, 2025. The borrowings under the Second Lien Credit Facility bear interest at a fixed rate of 7.125%.

We intend to use the remainder of the net proceeds, if any, from this offering for working capital and other general corporate purposes, as well as the acquisition of, or investment in, complementary products, technologies, solutions or businesses, although we have no present commitments or agreements to enter into any material acquisitions or investments. We cannot specify with certainty the particular uses of the net proceeds that we will receive from this offering. Accordingly, we will have broad discretion in using these proceeds. Pending the use of proceeds from this offering as described above, we may invest the net proceeds that we receive in this offering in short-term, investment grade, interest-bearing instruments, including government and investment-grade debt securities and money-market funds.

The principal purposes of this offering are to increase our capitalization and financial flexibility, create a public market for our Class A common stock and enable access to the public equity markets for us and our stockholders.

Each $1.00 increase or decrease in the assumed initial public offering price of $30.50 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase or decrease the net proceeds that we receive from this offering by approximately $27.4 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions payable by us. Similarly, each increase or decrease of 1.0 million in the number of shares of our Class A common stock offered by us would increase or decrease the net proceeds that we receive from this offering by approximately $28.8 million, assuming the assumed initial public offering price remains the same and after deducting the estimated underwriting discounts and commissions payable by us.

 

-79-


Table of Contents

DIVIDEND POLICY

We currently intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future. Additionally, our ability to pay dividends on our Class A common stock and Class B-1 common stock is limited by restrictions on our ability to pay dividends or make distributions under the terms of our Senior Secured Credit Facilities. Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions and other factors that our board of directors may deem relevant.

 

-80-


Table of Contents

RESTRUCTURING TRANSACTIONS

Prior to the completion of this offering, we have participated in certain transactions, which collectively had the net effect of reorganizing our corporate structure so that the top-tier entity in our corporate structure—the entity that is offering Class A common stock to the public in this offering—is a Delaware corporation rather than a Luxembourg société en commandite par actions.

In connection with the Restructuring Transactions, the Sponsors contributed their interests in Ithacalux to Informatica Inc. in exchange for an aggregate of 288,867,682 shares of our common stock. 200,768,636 shares of our common stock will be designated Class A common stock, and 44,049,523 shares of our common stock will be designated Class B-1 common stock, with an equal number (44,049,523 shares of our common stock) designated Class B-2 common stock. The number of shares of Class A common stock and Class B-1 and Class B-2 common stock issued in connection with the Restructuring Transactions was determined in accordance with the applicable provisions of the contribution agreement. We issued such number of shares of Class B-1 common stock and B-2 common stock as is necessary to facilitate CPP Investments’ compliance with certain regulations under the Canada Pension Plan Investment Board Act that restrict CPP Investments from directly or indirectly investing in securities of a corporation that carry more than 30% of the votes that may be cast for the election of directors of the corporation. For more information on the shares of Class B-2 common stock subject to such regulations, please read footnotes (2) and (4) to the table in the section titled “Principal Stockholders.”

We are controlled by our Sponsors following the Restructuring Transactions. After giving effect to the Restructuring Transactions and the completion of this offering, our Sponsors control 88.5% of the voting power of our company. For more information on the indirect ownership of our common stock by our Sponsors and the voting and economic rights associated with each class of our common stock, please read the sections titled “Principal Stockholders” and “Description of Capital Stock,” respectively.

Following the Restructuring Transactions, Informatica Inc. indirectly holds all the property and assets of Ithacalux and assumes all of the debts and obligations of Ithacalux. Informatica Inc. is governed by a certificate of incorporation filed with the Delaware Secretary of State and bylaws, the material provisions of which are described in the section captioned “Description of Capital Stock.”

Except as otherwise noted herein, the consolidated financial statements included elsewhere in this prospectus are those of Ithacalux and its consolidated subsidiaries. The Restructuring Transactions did not have a material effect on our financial position or the results of our operations.

 

-81-


Table of Contents

CAPITALIZATION

The following table sets forth cash and cash equivalents, as well as our capitalization, as of June 30, 2021 as follows:

 

   

on an actual basis; and

 

   

on a pro forma basis, giving effect to (i) the reorganization transactions described under “Restructuring Transactions,” including the filing and effectiveness of our amended and restated certificate of incorporation in Delaware that will become effective immediately prior to the completion of this offering and (ii) the planned change in our equity structure; (iii) the adjustments related to this offering, including the achievement of performance criteria in relation to our unvested performance-based option awards upon completion of this offering, the sale and issuance by us of 29,000,000 shares of our Class A common stock in this offering as described in “Use of Proceeds,” based upon the assumed initial public offering price of $30.50 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us; and (iv) the repayment in full of the total indebtedness outstanding under the First Lien Term Facility and Second Lien Term Facility and the payment of a 2.0% prepayment premium under our Second Lien Credit Facility, from the issuance of a new term loan facility (“New Term Loan Facility”), the proceeds from this offering and the use of available cash and cash equivalents, as described in “Use of Proceeds.” The borrowing on the New Term Loan Facility is expected to bear interest at LIBOR plus 2.75% with a maturity date of October 29, 2028. Each $1.00 increase or decrease in the assumed initial public offering price of $30.50 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, our pro forma cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization by approximately $27.4 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions. Any increase of decrease of 1.0 million shares in the number of shares offered by us would increase or decrease, as applicable, the amount of our pro forma cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization by approximately $28.8 million, assuming the assumed initial public offering price remains the same, and after deducting estimated underwriting discounts and commissions.

The pro forma information set forth in the table below is illustrative only and will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this table together with our consolidated financial statements and related notes, and the sections titled “Summary Consolidated Financial and Other Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” that are included elsewhere in this prospectus.

 

     As of June 30, 2021  
     Historical      Pro Forma  
    

(in thousands, except
share and

per share data)

 

Cash and cash equivalents

   $ 408,553      $ 290,845  

Other liabilities, long-term

     228,029        216,532  

Total debt, net

     2,773,895        1,870,210  

Stockholders’ equity:

     

Class A common stock ($0.01 par value; 100 shares authorized, issued, and outstanding, actual; 300,000,000 shares authorized, 229,613,193 shares issued and outstanding, pro forma)

     —          2,296  

 

-82-


Table of Contents
     As of June 30, 2021  
     Historical     Pro Forma  
    

(in thousands, except share
and

per share data)

 

Class B-1 common stock ($0.01 par value; 100 shares authorized, issued, and outstanding, actual; 100,000,000 shares authorized, 44,085,414 shares issued and outstanding, pro forma)

     —         441  

Class B-2 common stock ($0.00001 par value; no shares authorized, issued, and outstanding, actual; 100,000,000 shares authorized, 44,085,414 shares issued and outstanding, pro forma)

     —         —      

Ordinary share and each class of Class A shares; $0.01 par value; 26,857,688,559 shares authorized, 22,022,874,494 shares issued and outstanding, actual; no shares authorized, issued, and outstanding, pro forma)

     220,229       —    

Additional paid-in capital

     1,933,761       2,993,619  

Accumulated other comprehensive income

     33,194       33,194  

Accumulated deficit

     (1,063,509     (1,106,072
  

 

 

   

Total stockholders’ equity

     1,123,675       1,923,478  
  

 

 

   

 

 

 

Total capitalization

   $ 4,125,599     $ 4,010,220  
  

 

 

   

 

 

 

If the underwriters’ option to purchase additional shares of our Class A common stock from us is exercised in full, pro forma cash and cash equivalents, additional paid-in capital, total stockholders’ equity, total capitalization and shares outstanding (Class A and Class B-1) as of June 30, 2021 would be $416.2 million, $3,119.0 million, $2,048.9 million, $4,135.6 million and 278,048,607, respectively.

The pro forma column in the table above excludes the following:

 

   

24,948,147 shares of our Class A common stock issuable upon the exercise of options to purchase shares of our Class A common stock that will be outstanding as of June 30, 2021, with a weighted average exercise price of $15.70 per share;

 

   

2,211,143 shares of our Class A common stock issuable upon the exercise of options to purchase shares of our Class A common stock granted after June 30, 2021, with a weighted-average exercise price of $25.30 per share;

 

   

38,334,600 shares of our Class A common stock reserved for future issuance under our equity compensation plans, consisting of:

 

   

32,858,200 shares of our Class A common stock to be reserved for future issuance under our 2021 Plan, which will become effective prior to the completion of this offering; and

 

   

5,476,400 shares of our Class A common stock to be reserved for future issuance under our ESPP, which will become effective prior to the completion of this offering.

Our 2021 Plan and ESPP each provide for automatic annual increases in the number of shares reserved thereunder, and our 2021 Plan also provides for increases to the number of shares of our Class A common stock that may be granted thereunder based on shares under our 2015 Equity Plan that expire, are forfeited, or otherwise repurchased by us, as more fully described in the section titled “Executive Compensation—Employee Benefits and Stock Plans.”

 

-83-


Table of Contents

DILUTION

If you invest in our Class A common stock in this offering, your ownership interest will be diluted to the extent of the difference between the initial public offering price per share of our Class A common stock and the pro forma net tangible book value deficit per share of our Class A common stock immediately after this offering. Net tangible book value deficit dilution per share to new investors represents the difference between the amount per share paid by purchasers of shares of our Class A common stock in this offering and the pro forma net tangible book value deficit per share of Class A common stock immediately after completion of this offering.

Net tangible book value deficit per share is determined by dividing our total tangible assets less our total liabilities by the number of shares of our common stock outstanding. Our historical net tangible book value deficit as of June 30, 2021 was $2,436 million or $9.95 per share.

After giving effect to (i) the sale by us of 29,000,000 shares of our Class A common stock in this offering at the assumed initial public offering price of $30.50 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, (ii) the repayment of $916.4 million of the outstanding indebtedness under our credit facilities, and (iii) the Restructuring Transactions, our pro forma net tangible book value deficit as of June 30, 2021 would have been $1,610 million, or $5.88 per share. This represents an immediate reduction in historical net tangible book value deficit of $4.07 per share to our existing stockholders and an immediate dilution in historical net tangible book value deficit of $36.38 per share to investors purchasing shares of our Class A common stock in this offering at the assumed initial public offering price. The following table illustrates this dilution:

 

Assumed initial public offering price per share

     $ 30.50  

Historical net tangible book value deficit per share as of June 30, 2021

   $ 9.95    

Decrease in pro forma net tangible book value deficit per share attributable to new investors purchasing shares of our Class A common stock in this offering

     (4.07  
  

 

 

   

Pro forma net tangible book value deficit per share immediately after this offering

       5.88  
    

 

 

 

Dilution in pro forma net tangible book value deficit per share to new investors in this offering

     $ 36.38  
    

 

 

 

Each $1.00 increase or decrease in the assumed initial public offering price of $30.50 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, our pro forma net tangible book value deficit per share to new investors by $0.90, and would increase or decrease, as applicable, dilution per share to new investors purchasing shares of our Class A common stock in this offering by $0.10, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions. Similarly, each increase or decrease of 1.0 million shares in the number of shares of our Class A common stock offered by us would increase or decrease, as applicable, our pro forma net tangible book value deficit by approximately $0.13 per share and increase or decrease, as applicable, the dilution to new investors purchasing shares of our Class A common stock in this offering by $0.13 per share, assuming the assumed initial public offering price remains the same, and after deducting underwriting discounts and commissions.

If the underwriters’ option to purchase additional shares of our Class A common stock from us is exercised in full, the pro forma net tangible book value deficit per share of our Class A common stock, as adjusted to give effect to this offering, would be $5.34 per share, and the dilution in pro forma net

 

-84-


Table of Contents

tangible book value deficit per share to new investors purchasing shares of our Class A common stock in this offering would be $35.84 per share.

The following table presents, as of June 30, 2021, the differences between the existing stockholders and the new investors purchasing shares of our Class A common stock in this offering with respect to the number of shares purchased from us, the total consideration paid or to be paid to us, which includes net proceeds received from the issuance of our common stock, cash received from the exercise of stock options and the average price per share paid or to be paid to us at the assumed initial public offering price of $30.50 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us:

 

     Shares Purchased     Total Consideration     Average Price
per Share
 
     Number      Percent     Amount      Percent  

Existing stockholders

     244,698,607        89.4   $ 2,445,000,000        73.4   $ 9.99  

New investors

     29,000,000        10.6       884,500,000        26.6     $ 30.50  
  

 

 

    

 

 

   

 

 

    

 

 

   

Totals

     273,698,607        100.0   $ 3,329,500,000        100.0  

Each $1.00 increase or decrease in the assumed initial public offering price of $30.50 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, the total consideration paid by new investors and total consideration paid by all stockholders by approximately $27.4 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions. Similarly, each increase or decrease of 1.0 million in the number of shares of our Class A common stock offered by us would increase or decrease the total consideration paid by new investors and total consideration paid by all stockholders by approximately $28.8 million, assuming the assumed initial public offering price remains the same and after deducting the estimated underwriting discounts and commissions payable by us.

Except as otherwise indicated, the above discussion and tables assume no exercise of the underwriters’ option to purchase additional shares of our Class A common stock from us. If the underwriters’ option to purchase additional shares of our Class A common stock were exercised in full, our existing stockholders would own 88.5% and our new investors would own 11.5% of the total number of shares of our Class A common stock outstanding upon completion of this offering (assuming conversion of all of the Class B common stock outstanding upon completion of this offering).

The number of shares of our Class A common stock and Class B-1 common stock that will be outstanding after this offering is based on 200,613,193 shares of our Class A common stock and 44,085,414 shares of our Class B-1 common stock, outstanding as of June 30, 2021, and excludes:

 

   

24,948,147 shares of our Class A common stock issuable upon the exercise of options to purchase shares of our Class A common stock that were outstanding as of June 30, 2021 with a weighted average exercise price of $15.70 per share;

 

   

2,211,143 shares of our Class A common stock issuable upon the exercise of options to purchase shares of our Class A common stock granted after June 30, 2021, with a weighted-average exercise price of $25.30 per share;

 

   

38,334,600 shares of our Class A common stock reserved for future issuance under our equity compensation plans, consisting of:

 

   

32,858,200 shares of our Class A common stock to be reserved for future issuance under our 2021 Plan, which will become effective prior to the completion of this offering; and

 

-85-


Table of Contents
   

5,476,400 shares of our Class A common stock to be reserved for future issuance under our ESPP, which will become effective prior to the completion of this offering.

Our 2021 Plan and ESPP each provide for automatic annual increases in the number of shares reserved thereunder, and our 2021 Plan also provides for increases to the number of shares of our Class A common stock that may be granted thereunder based on shares under our 2015 Equity Plan that expire, are forfeited, or otherwise repurchased by us, as more fully described in the section titled “Executive Compensation—Employee Benefits and Stock Plans.”

To the extent that any outstanding options to purchase our Class A common stock are exercised or new awards are granted under our equity compensation plans, there will be further dilution to investors participating in this offering.

 

-86-


Table of Contents

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

The unaudited pro forma consolidated statements of operations for the six months ended June 30, 2021 and the year ended December 31, 2020 and the unaudited pro forma consolidated balance sheet as of June 30, 2021 present our consolidated results of operations and financial position after giving effect to the following transactions:

 

   

the “Restructuring Transaction Adjustments” resulting from the reorganization transactions described under “Restructuring Transactions” including (i) the filing and effectiveness of our amended and restated certificate of incorporation in Delaware that will become effective immediately prior to the completion of this offering and (ii) the planned change in our equity structure; and

 

   

the “Initial Public Offering Transaction Adjustments” including (i) the achievement of performance criteria in relation to our unvested performance-based option awards upon completion of the initial public offering, (ii) the sale and issuance by us of shares of our Class A common stock in this offering as described in “Use of Proceeds,” based upon the assumed initial public offering price of $30.50 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us; and (iii) the repayment in full of the total indebtedness outstanding under the First Lien Term Facility and Second Lien Term Facility and the payment of a 2.0% prepayment premium under our Second Lien Credit Facility, from the issuance of a new term loan facility (“New Term Loan Facility”), the proceeds from this offering and the use of available cash and cash equivalents, as described in “Use of Proceeds.”

The Restructuring Transaction Adjustments and the Initial Public Offering Transaction Adjustments (collectively referred to as “the Transaction Adjustments”) are reflected in the unaudited pro forma consolidated statements of operations for the six months ended June 30, 2021 and for the year ended December 31, 2020, as if they had occurred on January 1, 2020. The unaudited pro forma consolidated balance sheet as of June 30, 2021, gives effect to the Transaction Adjustments as if they had occurred on June 30, 2021.

The unaudited pro forma consolidated financial information was prepared in accordance with Article 11 of Regulation S-X, as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses,” and present the pro forma financial condition and results of operations of the Company based upon the historical financial information after giving effect to the Transaction Adjustments set forth in the notes to the unaudited pro forma consolidated financial information. The Transaction Adjustments necessary to fairly present the unaudited pro forma consolidated financial information have been based on available information and assumptions we believe are reasonable and are presented for illustrative purposes only. The unaudited pro forma consolidated financial information does not purport to represent our consolidated results of operations or consolidated financial position that would actually have occurred had the transactions referred to above been consummated on the dates assumed or to project our consolidated results of operations or consolidated financial position for any future date or period.

The unaudited pro forma consolidated financial information should be read together with “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes thereto included elsewhere in this prospectus.

 

-87-


Table of Contents

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

As of June 30, 2021

(In thousands, except par value per share data)

 

    Ithacalux
Topco S.C.A.
Historical
    Restructuring
Transaction

Adjustments
        Pro
Forma
Before
Offering
    Initial
Public
Offering

Transaction
Adjustments
        Informatica
Inc.
Pro Forma
 

Assets

             
Current assets:              

Cash and cash equivalents

  $ 408,553       $ 408,553     $ (117,708   C   $ 290,845  

Short-term investments

    25,267         25,267           25,267  

Accounts receivable, net

    257,644           257,644           257,644  

Contract assets, net

    105,476         105,476           105,476  

Prepaid expenses and other current assets

    91,759         91,759           91,759  
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total current assets

    888,699               888,699       (117,708       770,991  

Restricted cash

    4,219         4,219           4,219  

Property and equipment, net

    182,567         182,567         182,567  

Operating lease right-of-use-assets

    80,498         80,498           80,498  

Goodwill

    2,402,367         2,402,367           2,402,367  

Customer relationships intangible, net

    1,035,790         1,035,790           1,035,790  

Other intangible assets, net

    121,319         121,319           121,319  

Deferred tax assets

    9,369         9,369           9,369  

Other assets

    126,018         126,018         126,018  
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total assets

  $ 4,850,846     $     $ 4,850,846     $ (117,708     $ 4,733,138  
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Liabilities and Stockholders’ Equity

             
Current liabilities:              

Accounts payable

  $ 23,687       $ 23,687       $ 23,687

Accrued liabilities

    71,519         71,519         71,519  

Accrued compensation and related expenses

    94,370         94,370           94,370  

Current operating lease liabilities

    20,165         20,165           20,165  

Current portion of long-term debt

    23,588         23,588           23,588  

Income taxes payable

    9,640         9,640       (2,329   D     7,311  

Contract liabilities

    505,866           505,866           505,866  
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total current liabilities

    748,835               748,835       (2,329       746,506  

Long-term operating lease liabilities

    67,911         67,911           67,911  

Long-term contract liabilities

    18,843           18,843           18,843  

Long-term debt, net

    2,750,307         2,750,307       (903,685   E     1,846,622  

Deferred tax liabilities

    79,945       1,653     A     81,598       (11,497  

F

    70,101  

Long-term income taxes payable

    43,729     (1,653   A     42,076           42,076  

Other liabilities

    17,601         17,601           17,601  
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total liabilities

    3,727,171               3,727,171       (917,511       2,809,660  
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Stockholders’ equity:

             

Ordinary shares; $0.01 par value per share

    220,229     (220,229   B                

Class A common stock; $0.01 par value per share;

          2,006     B     2,006       290     G     2,296  

Class B-1 common stock; $0.01 par value per share

          441     B     441           441  

Class B-2 common stock; $0.00001 par value per share

                         

Additional paid-in-capital

    1,933,761     217,782     B     2,151,543       842,076     H     2,993,619  

Accumulated other comprehensive income

    33,194         33,194           33,194  

Accumulated deficit

    (1,063,509         (1,063,509     (42,563   I     (1,106,072
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total stockholders’ equity

    1,123,675               1,123,675       799,803         1,923,478  
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total liabilities and stockholders’ equity

  $ 4,850,846     $     $ 4,850,846     $ (117,708     $ 4,733,138  
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

See accompanying notes to the unaudited pro forma consolidated financial information.

 

-88-


Table of Contents

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

For the Six Months Ended June 30, 2021

(In thousands, except per share data)

 

    Ithacalux
Topco S.C.A.
Historical
    Restructuring
Transaction
Adjustments
        Pro
Forma
Before
Offering
    Initial
Public
Offering

Transaction
Adjustments
        Informatica
Inc.
Pro Forma
 

Revenues:

             

Subscriptions

  $ 324,265                       $ 324,265         $ 324,265  

Perpetual license

    16,239         16,239           16,239
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Software revenue

    340,504             340,504               340,504

Maintenance and professional services

    335,034         335,034           335,034
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total revenues

    675,538             675,538               675,538
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Cost of revenues:

             

Subscriptions

    37,067         37,067           37,067

Perpetual license

    2,187         2,187           2,187
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Software cost

    39,254             39,254               39,254

Maintenance and professional services

    80,282         80,282       793     K     81,075  

Amortization of acquired technology

    37,095         37,095           37,095  
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total cost of revenues

    156,631             156,631       793         157,424  
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Gross profit

    518,907             518,907       (793       518,114  
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Operating expenses:

             

Research and development

    123,831         123,831       1,030     K     124,861  

Sales and marketing

    220,938         220,938       1,575     K     222,513  

General and administrative

    55,178           55,178       3,976     K     59,154  

Amortization of intangible assets

    86,386         86,386           86,386  

Acquisition, litigation settlement, and other charges

    128         128           128  

Restructuring charges

                         
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total operating expenses

    486,461             486,461       6,581         493,042  
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Income (loss) from operations

    32,446             32,446       (7,374       25,072  

Interest income

    534         534           534  

Interest expense

    (72,183         (72,183     25,319     L     (46,864

Loss on debt refinancing

                         

Other income (expense), net

    14,779         14,779           14,779  
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Income (loss) before income taxes

    (24,424             (24,424     17,945         (6,479

Income tax expense (benefit)

    11,900           J     11,900       4,400     M     16,300  
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Net loss

  $ (36,324   $     $ (36,324   $ 13,545       $ (22,779
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Pro forma net loss per share – basic and diluted

            N     (0.08
             

 

 

 

Weighted-average shares used in computing pro forma net loss per share, basic and diluted

            N     271,424  
             

 

 

 

See accompanying notes to the unaudited pro forma consolidated financial information.

 

-89-


Table of Contents

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

For the Year Ended December 31, 2020

(In thousands, except per share data)

 

    Ithacalux
Topco S.C.A.
Historical
    Restructuring
Transaction
Adjustments
        Pro
Forma
Before
Offering
    Initial
Public
Offering

Transaction
Adjustments
        Informatica
Inc.
Pro Forma
 

Revenues:

             

Subscriptions

  $ 593,834                        $ 593,834         $ 593,834

Perpetual license

    63,126         63,126         63,126  
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Software revenue

    656,960             656,960               656,960  

Maintenance and professional services

    666,136         666,136         666,136  
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total revenues

    1,323,096             1,323,096               1,323,096  
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Cost of revenues:

             

Subscriptions

    54,454         54,454           54,454  

Perpetual license

    3,876         3,876           3,876  
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Software cost

    58,330             58,330               58,330  

Maintenance and professional services

    161,197         161,197       3,559     P     164,756  

Amortization of acquired technology

    98,458         98,458           98,458  
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total cost of revenues

    317,985             317,985       3,559         321,544  
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Gross profit

    1,005,111             1,005,111       (3,559       1,001,552  
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Operating expenses:

             

Research and development

    230,151         230,151       4,943     P     235,094  

Sales and marketing

    451,839         451,839       6,979     P     458,818  

General and administrative

    93,548         93,548       15,780     P     109,328  

Amortization of intangible assets

    189,309         189,309           189,309  

Acquisition, litigation settlement, and other charges

    3,001         3,001           3,001  

Restructuring charges

    16,476         16,476           16,476  
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Total operating expenses

    984,324             984,324       27,702         1,012,026  
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Income (loss) from operations

    20,787             20,787       (31,261       (10,474

Interest income

    2,254         2,254           2,254  

Interest expense

    (149,445         (149,445     58,618     Q     (90,827

Loss on debt refinancing

    (37,400         (37,400     (30,375   R     (67,775

Other income (expense), net

    (26,404         (26,404         (26,404
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Income (loss) before income taxes

    (190,208             (190,208     (3,018       (193,226

Income tax expense (benefit)

    (22,321         O     (22,321     (740   S     (23,061
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Net loss

  $ (167,887   $     $ (167,887   $ (2,278     $ (170,165
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

 

Pro forma net loss per share – basic and diluted

            T     (0.63
             

 

 

 

Weighted-average shares used in computing pro forma net loss per share, basic and diluted

            T     271,097  
             

 

 

 

See accompanying notes to the unaudited pro forma consolidated financial information.

 

-90-


Table of Contents

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

Note 1. Description of the Transaction Adjustments and Basis of Presentation

The unaudited pro forma consolidated financial information are based on the historical financial statements of Ithacalux after giving effect to (i) the Restructuring Transaction Adjustments and (ii) the Initial Public Offering Transaction Adjustments, as describe in these notes.

The unaudited pro forma consolidated financial information was prepared in accordance with Article 11 of Regulation S-X, as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses,” and present the pro forma financial position and results of operations of the Company based upon the historical financial information after giving effect to the Transaction Adjustments and related adjustments set forth in these notes to the unaudited pro forma consolidated financial information.

The unaudited pro forma consolidated financial information presentation assumes no exercise by the underwriters of their option to purchase additional shares of Class A common stock.

The unaudited pro forma consolidated statements of operations for the six months ended June 30, 2021 and for the year ended December 31, 2020, give pro forma effect to the Transaction Adjustments as if they had occurred on January 1, 2020. The unaudited pro forma consolidated balance sheet as of June 30, 2021, gives effect to the Transaction Adjustments as if they had occurred on June 30, 2021.

(i) Restructuring Transactions

Prior to the completion of this offering, the Company has participated or will participate in certain transactions, which will collectively have the net effect of reorganizing its corporate structure so that the top-tier entity in the corporate structuring—the entity that is offering Class A common stock to the public in this offering—is a Delaware corporation rather than a Luxembourg société en commandite par actions.

Following the Restructuring Transactions, Informatica Inc. indirectly holds all the property and assets of Ithacalux and assumes all of the debts and obligations. Informatica Inc. is governed by a certificate of incorporation filed with the Delaware Secretary of State and bylaws, the material provisions of which are described in the section captioned “Description of Capital Stock.” See the section titled “Restructuring Transactions” for more detail.

In connection with the Restructuring Transactions on September 30, 2021, the Sponsors contributed their interests in Ithacalux to Informatica Inc. in exchange for an aggregate of 288,867,682 shares of the Company’s common stock. 200,768,636 shares of our common stock will be designated Class A common stock, and 44,049,523 shares of our common stock will be designated Class B-1 common stock, with an equal number of shares of our common stock designated Class B-2 common stock. The number of shares of Class A common stock and Class B-1 and Class B-2 common stock issued in connection with the Restructuring Transactions has been determined in accordance with the applicable provisions of the contribution agreement.

(ii) Offering Proceeds

The sale and issuance by the Company of shares of its Class A common stock in this offering as described in “Use of Proceeds,” based upon the assumed initial public offering price of $30.50 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

-91-


Table of Contents

(iii) The Debt Repayment

The Company intends to repay in full the total indebtedness outstanding under the First Lien Term Facility and Second Lien Term Facility, from the issuance of the New Term Loan Facility, the proceeds from this offering and with the available cash and cash equivalents, as described in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

The First Lien Dollar Term Facility under the First Lien Credit Agreement matures on February 25, 2027. Borrowings under the First Lien Dollar Term Facility bear interest, at the Company’s option, either at (i) LIBOR plus 3.25% or (ii) the base rate plus 2.25%. The First Lien Euro Term Facility under the First Lien Credit Agreement matures on February 25, 2027. Borrowings under the First Lien Euro Term Facility bear interest, at the Company’s option, either at (i) LIBOR plus an applicable margin of either 3.25% or (ii) 3.50% based on the Company’s total net leverage ratio. The Second Lien Term Loan Facility under the Second Lien Credit Agreement matures on February 25, 2025. The borrowings under the Second Lien Credit Facility bear interest at a fixed rate of 7.125%.

The borrowing on the New Term Loan Facility is expected to be $1.9 billion and bear interest at LIBOR plus 2.75% with a maturity date of October 29, 2028.

In connection with the prepayment of Second Lien Term Facility, the Company is required to pay a 2% prepayment premium on the repayment amount, or approximately $9.5 million.

(iv) Unvested Performance Based Options

The Company has issued performance-based incentive stock options to its employees, executives, and directors through September 21, 2021. The vesting of certain of these performance-based options is subject to both the completion of this offering and market liquidity vesting criteria in connection with achieving a certain per share price in any one or more exit events. The vesting of the remaining performance-based options is subject to the satisfaction of both a liquidity event-related performance condition, including the completion of this offering, and a service-based vesting condition. Assuming this offering was completed, the Company would recognize stock-based compensation cost in proportion to the requisite service period already completed of $16.5 million. The remaining $38.5 million of unrecognized expense would be recognized over the remaining weighted average service period of 2.6 years.

Note 2. Adjustments to Unaudited Pro Forma Consolidated Balance Sheet

The pro forma adjustments included in the Unaudited Pro Forma Consolidated Balance Sheet as of June 30, 2021 are as follows:

(A) Represents a $1.6 million reclassification between deferred and long-term income taxes payable due to additional foreign tax credits utilized as a result of the Restructuring Transactions, as described above, that are not creditable under the Base Erosion and Anti-Abuse Tax.

(B) Reflects the changes in ownership structure as a result of the Restructuring Transactions.

(C) Represents the total cash used in connection with the debt refinancing, net pay down of debt of $916.4 million, $17.6 million of new debt issuance costs and debt discount related to the New Term Loan Facility and payment of the 2.0% prepayment premium, or $9.5 million, associated with the repayment of the Second Lien Term Facility, partially offset by assumed net cash proceeds of $825.9 million from this offering, as if such repayment occurred on June 30, 2021.

 

-92-


Table of Contents

(D) Represents the income tax impact of $2.3 million on income taxes payable due to the payment of the 2.0% prepayment premium of $9.5 million associated with the repayment of the Second Lien Term Facility by applying a U.S. federal and state blended tax rate of 24.52%.

(E) Represents the net pay down of debt of $916.4 million in connection with the debt refinancing, payment of debt issuance costs of $15.3 million, a debt discount of $2.3 million on the New Term Loan Facility and the write-off of the unamortized debt issuance costs of $20.1 million and debt discount of $10.3 million related to the First Lien and Second Lien Term facilities, as if the repayment of those facilities occurred on June 30, 2021.

(F) Represents the income tax impact of $11.5 million on deferred tax liabilities due to the debt pay down, as described in (E) and the incremental stock-based compensation expense related to the achievement of performance criteria for unvested performance-based option awards upon completion of the initial public offering, by applying a U.S. federal and state blended tax rate of 24.52%.

(G) Represents the par value of Class A common stock, 29 million shares or $0.3 million, assumed to be issued in this offering to new stockholders.

(H) Represent the total assumed net cash proceeds of $825.9 million from this offering. Additionally, upon completion of this offering, the Company expects to record $16.5 million of stock-based compensation expense related to its unvested performance-based option awards.

(I) Reflects the impact on accumulated deficit for adjustments defined in (C) payment of the 2.0% prepayment premium of $9.5 million associated with the repayment of the Second Lien Term Facility with the assumed proceeds from this offering, (E) the write-off of the unamortized debt issuance costs of $20.1 million and debt discount of $10.3 million related to the First Lien and Second Lien Term facilities, (H) the recording of $16.5 million of stock-based compensation expense related to unvested performance-based option awards, (D) $2.3 million of income taxes payable adjustment, and (F) $11.5 million of deferred tax liabilities adjustment.

Note 3. Adjustments to Unaudited Pro Forma Consolidated Statement of Operations

The pro forma adjustments included in the Unaudited Pro Forma Consolidated Statements of Operations for the six months ended June 30, 2021 are as follows:

(J) The Restructuring Transactions do not have a material impact to the income tax expense or (benefit) for the six months ended June 30, 2021.

(K) The vesting of certain performance-based options is subject to both the completion of this offering and market liquidity vesting criteria in connection with achieving a certain per share price in any one or more exit events. The vesting of remaining performance-based options is subject to the satisfaction of both a liquidity event-related performance condition, including the completion of this offering, and a service-based vesting condition. Pro forma incremental stock-based compensation expense of $7.4 million related to these performance-based option awards is recorded for the six-months ended June 30, 2021 as if the performance vesting condition had been achieved on January 1, 2020. The related expense is allocated to Cost of revenue of $0.8 million, Research and development of $1.0 million, Sales and marketing of $1.6 million, and General and administrative of $4.0 million.

(L) Represents an adjustment to remove historical interest expense of $39.4 million and amortization of debt issuance costs and discount of $2.0 million for the six months ended June 30, 2021, as if the debt repayment occurred on January 1, 2020 for the First Lien Term Facility.

 

-93-


Table of Contents

Represents an adjustment to remove historical interest expense of $17.0 million and amortization of debt issuance costs and discount of $0.7 million for the six months ended June 30, 2021, as if the debt repayment occurred on January 1, 2020, for the Second Lien Term Facility.

Represents an interest expense of $32.8 million and amortization of debt issuance costs and discount of $1.0 million, recomputed under the terms of the New Term Loan Facility, for the six months ended June 30, 2021, as if the New Term Loan Facility existed on January 1, 2020.

(M) Represents the income tax impact of $4.4 million on the income (loss) before income tax by applying a U.S. federal and state blended tax rate of 24.52% for the six months ended June 30, 2021.

(N) The basic and diluted pro forma net loss per share of common stock represents net loss attributable to Informatica Inc. divided by the combination of the Class A and Class B-1 shares to be owned by existing stockholders and the Class A shares of common stock assumed to be issued in this offering to new stockholders, to be used for the repayment of debt, equal to $816.4 million. See “Use of Proceeds.” The table below presents the computation of pro forma net loss per share, basic and dilutive, for Informatica Inc. (in thousands, except per share amounts):

Pro forma Net Loss Per Share

 

     Six Months Ended
June 30, 2021
 
    

(in thousands,
except

per share
amounts)

 

Numerator:

  

Net loss, pro forma

   $ (22,779
  

 

 

 

Denominator:

  

Weighted-average shares used in computing net loss per share, basic and diluted, before the completion of the Restructuring Transactions

     22,019,216  
  

 

 

 

Assumed conversion of Ithacalux shares to Informatica Inc. Class A and Class B-1 common shares

     244,658  

Incremental Class A common shares attributable to proceeds from this offering used for repayment of debt

     26,766  
  

 

 

 

Total weighted-average shares used in computing pro forma net loss per share

     271,424  
  

 

 

 

Pro forma net loss per share, basic and diluted

   $ (0.08
  

 

 

 

The pro forma adjustments included in the Unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2020 are as follows:

(O) The Restructuring Transactions do not have a material impact to the income tax expense or (benefit) for the year ended December 31, 2020.

(P) Upon completion of the offering, the Company expects to record stock-based compensation expense of $16.5 million related to the performance-based options which were granted through September 21, 2021. The vesting of certain performance-based options is subject to both the completion of this offering and market liquidity vesting criteria in connection with achieving a certain per share price in any one or more exit events. The vesting of remaining performance-based options is subject to the satisfaction of both a liquidity event-related performance condition, including the completion of this offering, and a service-based vesting condition. Pro forma incremental stock-based compensation expense of $14.7 million related to these performance-based option awards is recorded for the year ended December 31, 2020 as if the performance vesting condition had been achieved on January 1, 2020. The related expense is allocated to Cost of revenue of $3.6 million, Research and development of $4.9 million, Sales and marketing of $7.0 million, and General and administrative of $15.8 million.

 

-94-


Table of Contents

(Q) Represents an adjustment to remove historical interest expense of $86.6 million and amortization of debt issuance costs and discount of $4.4 million for the year ended December 31, 2020, as if the debt repayment occurred on January 1, 2020, for the First Lien Term Facility.

Represents an adjustment to remove historical interest expense of $33.8 million and amortization of debt issuance costs and discount of $1.4 million for the year ended December 31, 2020, as if the debt repayment occurred on January 1, 2020, for the Second Lien Term Facility.

Represents an interest expense of $65.6 million and amortization of debt issuance costs and discount of $2.0 million, recomputed under the terms of the New Term Loan Facility, for the year ended December 31, 2020, as if the New Term Loan Facility existed on January 1, 2020.

(R) Represents a loss on debt extinguishment related to the one-time write-off of unamortized debt issuance costs of $20.1 million and debt discount of $10.3 million related to First Lien Term Facility and Second Lien Term Facility as if such the repayment occurred on January 1, 2020.

Additionally, represents a loss on debt extinguishment related to the payment of the 2.0% non-recurring prepayment premium or $9.5 million associated with the repayment of the Second Lien Term Facility with the expected proceeds from this offering, as if such repayment occurred on January 1, 2020. There is no prepayment premium for the First Lien Term Facility. The Company expects these one-time charges will not recur beyond 12 months from the date of the transaction.

(S) Represents the income tax impact of $0.7 million on the income (loss) before income taxes by applying a U.S. federal and state blended tax rate of 24.52% for the year ended December 31, 2020.

(T) The basic and diluted pro forma net loss per share of common stock represents net loss attributable to Informatica Inc. divided by the combination of the Class A and Class B-1 shares to be owned by existing stockholders and the Class A shares of common stock assumed to be issued in this offering to new stockholders, to be used for the repayment of debt, equal to $0.8 billion. See “Use of Proceeds.” The table below presents the computation of pro forma net loss per share, basic and diluted, for Informatica Inc. (in thousands, except per share amounts):

Pro forma Net Loss Per Share

 

     Year Ended
December 31, 2020
 
    

(in thousands,
except

per share
amounts)

 

Numerator:

  

Net loss, pro forma

   $ (170,165
  

 

 

 

Denominator:

  

Weighted-average shares used in computing net loss per share, basic and diluted, before the completion of the Restructuring Transactions

     21,989,821  
  

 

 

 

Assumed conversion of Ithacalux shares to Informatica Inc. Class A and Class B-1 common shares

     244,331  

Incremental Class A common shares attributable to proceeds from initial public offering used for repayment of debt

     26,766  
  

 

 

 

Total weighted-average shares used in computing pro forma net loss per share

     271,097  
  

 

 

 

Pro forma net loss per share, basic and diluted

   $ (0.63
  

 

 

 

 

-95-


Table of Contents

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes and our unaudited pro forma consolidated statement of operations included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the sections titled “Risk Factors” and “Information Regarding Forward-Looking Statements” included elsewhere in this prospectus.

Overview

We have pioneered a new category of software, the Intelligent Data Management Cloud, or IDMC. IDMC is our AI-powered platform that connects, manages, and unifies data across any multi-cloud, hybrid system, empowering enterprises to modernize and advance their data strategies

In 2015, Informatica was taken private in a transaction led by our Sponsors (2015 Privatization Transaction). At that time, most of our software revenue was derived from the sale of perpetual licenses to our software products, the largest of which was PowerCenter, our traditional data integration or Extract-Transform-Load (ETL) product, and related maintenance and professional services. As part of our new strategy following the 2015 Privatization Transaction, we pursued two initiatives to grow our business and build an integrated data management platform that unites multiple product families with a common cloud-based operating framework. We initiated a strategy to develop new products for our cloud platform, and we re-engineered our existing products to enable them to leverage the shared services and connectors of our platform. We also set out to transition from a primarily perpetual license and maintenance revenue model to a primarily subscription-based revenue model. Key to the development of new cloud products and supporting a higher level of interoperability across our total product portfolio was the introduction of our platform, IDMC, built on our new cloud architecture. Our platform is a multi-tenant cloud solution that consists of a series of shared platform services combined with our wide range of interoperable data management products. Substantially all of the products that we sell are now supported by the common services and key functionality within our platform, enabling us to offer an integrated platform that we believe includes the broadest range of best of breed data management products.

Our key milestones since 2015 include:

 

2015-2017   Expanded our subscription-based license pricing model across our product portfolio to focus on subscription recurring revenue and transition away from selling perpetual licenses
2016   Introduced Enterprise Data Catalog product
2017   Introduced Claire AI as an embedded service for AI and Machine Learning as part of our platform offering; introduced Data Governance product
2018   Introduced new cloud product, Informatica Intelligent Cloud Services (IICS) for cloud data integration; this is the first cloud product covering the complete data lifecycle, leveraging the full suite of platform services and laying the foundation for our IDMC platform
2019   Exceeded $1 billion in Annual Recurring Revenue (ARR) for the first time; introduced Data Privacy product

 

-96-


Table of Contents
2020   ARR from subscriptions exceeded ARR from perpetual software maintenance for the first time—$607 million compared to $555 million, for a total of $1.16 billion ARR. Year-over-year subscription revenue growth was 26%
2021   Launched the full IDMC platform at Informatica World 2021, highlighting the work done in prior years that culminated in what we believe is the industry’s first multi-cloud multi-hybrid data management platform. As of June 30, 2021, cloud ARR reached $264 million, representing year-over-year growth of 39%.

We generate revenues from the sale of software products and related maintenance and professional services. The vast majority of our software revenue consists of fees generated through the sale of our subscription-based products and related support agreements for our subscription products. We have pivoted our business to focus on subscription revenue and have consequently grown our subscription revenue from $118.4 million in 2016, the year after we were taken private, to $302.5 million in 2018, to $471.7 million in 2019, and to $593.8 million in 2020. Over this period, our subscription revenue has grown from 31% of our total software revenue in 2016, to 56% in 2018, to 77% in 2019 and to 90% in 2020. Our subscription revenues grew from $259.5 million during the six months ended June 30, 2020 to $324.3 million during the six months ended June 30, 2021. Over this period, our subscription revenue has grown from 92% of total software revenue during the six months ended June 30, 2020 to 95% of total software revenue during the six months ended June 30, 2021.

Our subscription products can be purchased individually as distinct product families or together as a tightly integrated platform to support complex data management needs and certain customer journeys. Our subscription products are sold through contracts primarily with a one-, two- or three-year term, with an average contract term slightly over two years as of June 30, 2021. Substantially all of our subscription customers pay us annual fees in advance at the start of each contract year. We recognize revenue from our cloud-based subscription products on a ratable basis over the contract term. We generally recognize the majority of the revenue from our subscription-based on-premise licenses at the start of the contract term. The remaining portion of on-premise subscription fees attributable to related support services are generally recognized on a ratable basis over the contract term.

We generate additional software revenue from the sale of perpetual licenses. Consistent with our business transformation strategy and focus on subscription revenue, our perpetual license revenue has decreased from 69% of total software revenue in 2016 to 44% in 2018, to 23% in 2019, to 10% in 2020 and to 5% during the six months ended June 30, 2021, with further declines expected thereafter.

Our maintenance and professional services revenues consist of recurring maintenance fees related to perpetual licenses and one-time professional services fees, respectively. Our recurring maintenance fees grant our customers access to software updates and support for our perpetual license products. We recognized $573.9 million, $572.1 million and $560.9 million of maintenance revenue in fiscal 2018, 2019 and 2020, respectively. We recognized $279.8 million and $283.3 million during the six months ended June 30, 2020 and 2021, respectively.

We generate professional services revenues through one-time fees associated with implementation, education, and consulting services related to our software products.

We market and sell our subscription products primarily through our global direct sales team, which is enhanced by our relationships and collaboration with our partners that include global system integrators such as Deloitte and Accenture, hyperscale cloud platform providers such as AWS, Microsoft Azure and Google Cloud Platform, and channel partners. Our sales organization consists of sales development, inside sales, and field sales personnel and is generally organized by region, the size of prospective customers and certain industry verticals. Cloud hyperscalers help us amplify our commercial reach when we jointly engage in cloud modernization efforts or when customers purchase

 

-97-


Table of Contents

our products via the hyperscaler product marketplaces. In addition, our global system integrator partners provide implementation services for our products for customers as part of their support of broader, overall cloud modernization initiatives.

Historically, we have focused our selling efforts on executives such as chief information officers (CIOs) and chief data officers (CDOs) who are often making decisions to purchase our products for their most important business initiatives. CIOs adopt our platform as part of their cloud migration journey, application modernization efforts, and business 360 initiatives. CDOs purchase our products as part of their overall data governance, access, and security strategies in order to democratize data access for everyone across the company. We recently expanded our go-to-market efforts to focus more on line of business customers.

We employ a “land and expand” model to increase sales to our existing customer base. Once customers have purchased one of our products—for example, Data Integration—they often identify additional use cases for our software and expand their use of our products accordingly. For example, as a customer seeks to expand the distribution of data-centric reports powered by our data integration solutions to a broader set of internal or external users, enhanced levels of data quality and control may be required, prompting the purchase of our Data Quality and Data Governance families of products. We also market our cloud products to our large installed base of perpetual license customers, enabling them to advance their cloud modernization efforts to migrate existing processes and net new workloads from costly-to-maintain internal IT infrastructure to lower-cost elastic cloud architecture. In 2020, we also introduced a new consumption-based pricing model to provide customers greater flexibility regarding trial, use and consumption of a broad array of our cloud-based services. The effectiveness of our land and expand strategy is evidenced by our Subscription Net Retention Rate (NRR), which was 106%, 113%, and 114% as of the three months ended December 31, 2018, 2019 and 2020, respectively. For the three months ended June 30, 2020 and 2021, our Subscription NRR was 113% and 116%, respectively.

As of June 30, 2021, we had approximately 5,700 customers2 in a wide variety of industries located in over 100 countries and territories. Approximately 66%, 68%, 67% and 67% of our total revenues for fiscal 2018, 2019, 2020 and for the six months ended June 30, 2021, respectively, were from our North America region, which we define as the United States and Canada.

Purchasing patterns for our products have followed quarterly and seasonal trends that we expect to continue. We typically sell a substantial portion of our software product licenses and services in the last month of each quarter, and demand for our software products and professional services are generally highest in the fourth quarter and lowest in the first quarter of each year.

Factors Affecting Our Performance

We believe that the growth of our business and our future success are dependent upon many factors, including those described below. While each of these factors presents significant opportunities for us, these factors also pose important challenges that we must successfully address in order to sustain the growth of our business and improve our results of operations.

Continued Adoption of our Subscription Products.    Our success will largely depend on customers’ continued uptake of our subscription offerings. Our success will also largely depend on the

 

2 

We compute the number of customers by assessing when we have a subscription contract or perpetual license maintenance contract sold to a unique entity. If we sell to several different divisions, segments or subsidiaries inside a company, we count each division, segment or subsidiary as a separate customer. If a customer has both a maintenance contract and a subscription contract, we count this as a single customer.

 

-98-


Table of Contents

value businesses place on data management as part of their overall digital transformation initiatives and the timing and willingness of businesses to move their data and workloads to the cloud. As companies from all industries continue to shift to subscription and cloud-based services, we believe demand for our platform and subscription-based products will increase. We generated $310 million, $446 million and $607 million of Subscription ARR in fiscal 2018, 2019 and 2020, respectively, representing growth of 44% in 2019 and 36% in 2020. In fiscal 2020, Subscription ARR represented 52% of total ARR, and Cloud ARR (which is the total ARR derived from hosted products) represented 37% and 20% of Subscription ARR and total ARR, respectively. For the period ended June 30, 2020 and 2021, we generated $510 million and $686 million of Subscription ARR, respectively, representing growth of 34%, with Subscription ARR representing 55% of total ARR and Cloud ARR representing 38% and 21% of Subscription ARR and total ARR, respectively, for the period ended June 30, 2021. For the period ended June 30, 2021, our $686 million of Subscription ARR was comprised of $264 million in Cloud ARR, $105 million in PowerCenter-related product ARR and $317 million in ARR from non-PowerCenter self-managed products. Cloud ARR grew at a rate of 39% for the period ended June 30, 2021 compared to June 30, 2020. Since 2015, many of our new subscription products were architected to be deployed in the cloud, and we intend to make the remainder of our subscription products available in the cloud to meet the demands of our customers. In addition, we assist our customers with migrations of their Informatica on-premise data integration and MDM installations to our corresponding cloud solutions. For the period starting in our fourth fiscal quarter of 2020 and ended June 30, 2021, we have entered into agreements to migrate a total of approximately $6.0 million of maintenance ARR, which has converted into approximately $11.0 million in Cloud ARR. Our future growth will depend in part on our ability to develop new market-leading cloud products to expand the offerings in our platform.

New Customer Acquisition.    Our future growth depends on our ability to acquire new customers. Our ability to acquire new customers is demonstrated by the fact that 55% of our subscription customers as of June 30, 2021 did not have a prior maintenance contract with us. In addition, our ability to attract new customers will depend in part on our ability to continue to compete effectively against a variety of different vendors who offer existing data management products, as well as our ability to convert companies into paying customers who are using hand-coded, custom-built solutions. Additionally, we will continue to rely on our sales and marketing team to effectively and efficiently identify and engage with prospective customers, increase brand awareness, and drive adoption of our products. We have recently added a dedicated inside sales team to our go-to-market strategy that is focused on growing adoption of our products by targeting key business personnel adjacent to technical roles, as well as small- and mid-market organizations, which represents a new addressable customer base for us. We will continue to make investments in sales and marketing to grow our total customer base, with a focus on targeting these new buyers.

Expansion Within our Customer Base.    Our business depends, in part, on our ability to expand within our large existing customer base by adding new products, addressing cloud modernization initiatives, and growing with our customers’ overall data footprint. We have successfully expanded our existing customers’ adoption of our platform through upselling and cross-selling, as evidenced by our Subscription NRR, which was 106%, 113%, and 114% as of the three months ended December 31, 2018, 2019, and 2020, respectively. For the three months ended June 30, 2020 and 2021, our Subscription NRR was 113% and 116%, respectively. We doubled the average subscription ARR per subscription customer from December 31, 2018 to June 30, 2021, from $98 thousand to $198 thousand. We continuously focus on increasing the value our customers derive from our platform and often become a strategic vendor to them in the process. For example, as of December 31, 2018, 2019 and 2020 and June 30, 2021, we had 27, 66, 104 and 116 customers individually with over $1 million in Subscription ARR each, respectively.

 

-99-


Table of Contents

Retention of Existing Customers.    Our business also depends, in part, on our ability to retain our existing customer base. We typically enjoy a high customer renewal rate, which we attribute to the fact that our products are embedded in mission-critical applications, as well as the fact that we have an expansive product portfolio and world-class customer success organization. For example, in 2020, we achieved a subscription renewal rate3 of 92%, and a maintenance renewal rate4 of 95%. For the period ended June 30, 2021, our subscription renewal rate was 93% and our maintenance renewal rate was 94%. We intend to continue investing in our products and customer success organization to maintain these compelling retention rates.

Investment in Go-to-Market Efforts.    Our business and results of operations will also be significantly affected by our success in strengthening our relationships with strategic partners, including cloud hyperscalers, including AWS, Google Cloud Platform, Microsoft Azure, cloud partners such as Snowflake and Databricks, global system integrators, including Deloitte, Accenture and Cognizant, and value-added resellers and distributors. We believe further developing these key strategic relationships will help us scale and enhance co-selling of our products and services with these partners. We plan to continue to strengthen and expand our network of strategic partners to increase sales to both new and existing customers and offer new and existing products on partner marketplaces. We believe that investing in sales enablement and co-selling efforts with our strategic partners will broaden our distribution footprint globally and extend and improve our engagement with a broad set of prospective customers.

Key Business Metrics and Non-GAAP Financial Measure

We review a number of operating and financial metrics, including the following unaudited key business metrics and non-GAAP financial measure to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions:

 

     Year Ended December 31,     Six Months Ended June 30,  
         2018             2019             2020             2020             2021      
     (in millions, except percentages)  

Annual Recurring Revenue

   $ 906     $ 1,021     $ 1,160     $ 1,070     $ 1,240  

Subscription Annual Recurring Revenue

   $ 310     $ 446     $ 607     $ 510     $ 686  

Subscription Net Retention Rate

     106     113     114     113     116

Cloud Annual Recurring Revenue

   $ 140     $ 167     $ 227     $ 189     $ 264  

Adjusted EBITDA (Non-GAAP)

   $ 337     $ 335     $ 400     $ 168     $ 175  

 

3 

We compute the subscription renewal rate by assessing the value of annual subscription contracts that expire at the end of each period (denominator) and comparing this to the amount that we renew for that set of expiring contracts (numerator). We typically allow for a grace period of up to six months past the original contract expiration quarter during which we engage in the renewal process before we report the contract as lost /inactive. This grace-period renewal amount has been an immaterial portion over the last three years. If there is an actual cancellation for a subscription contract, we count that amount as removed from the numerator in that period.

4 

We compute the maintenance renewal rate by assessing the value of annual maintenance contracts for perpetual licenses that expire at the end of each period (denominator) and comparing this to the amount that we renew for that set of expiring contracts (numerator). We typically allow for a grace period of up to six months past the original contract expiration quarter during which we engage in the renewal process before we report the contract as lost /inactive. This grace-period renewal amount has been an immaterial portion over the last three years. If there is an actual cancellation for a maintenance contract, we count that amount as removed from the numerator in that period. If a customer cancels a maintenance contract and migrates the underlying product to one of our cloud products, this loss of maintenance would be counted as a cancellation and reduce our maintenance renewal rate.

 

-100-


Table of Contents

Key Business Metrics

Annual Recurring Revenue

Annual Recurring Revenue (ARR) represents the expected annual billing amounts from all active maintenance and subscription agreements. ARR is calculated based on the contract Monthly Recurring Revenue (MRR) multiplied by 12. MRR is calculated based on the accounting adjusted total contract value divided by the number of months of the agreement based on the start and end dates of each contracted line item. The aggregate ARR calculated at the end of each reported period represents the value of all contracts that are active as of the end of the period, including those contracts that have expired but are still under negotiation for renewal. We typically allow for a grace period of up to 6 months past the original contract expiration quarter during which we engage in the renewal process before we report the contract as lost /inactive. This grace-period ARR amount has been less than 2% of the reported ARR in each period presented. If there is an actual cancellation of an ARR contract, we remove that ARR value at that time.

We believe ARR is an important metric for understanding our business since it tracks the annualized cash value collected over a 12-month period for all our recurring contracts, irrespective of whether it is a maintenance contract on a perpetual license, a ratable cloud contract, or an on-premise term-based subscription license.

Subscription Annual Recurring Revenue

Subscription ARR represents the portion of ARR only attributable to our subscription contracts.

We beli