TERADATA CORP /DE/ Q1 FY2025 earnings call

• Teradata had a solid first quarter with public cloud ARR of $606 million, a 16% year-on-year constant currency increase, total ARR of $1.44 billion in line with expectations, $7 million in free cash flow, and non-GAAP EPS of $0.66, up 16% year-on-year. • Focus on execution with go-to-market team executing well against pipeline, cloud now 42% of total ARR, and hybrid capabilities relevant in macro volatility. • Announced Teradata Enterprise Vector Store, a crucial infrastructure component for building trusted AI systems. • Highlighted customer use cases like a global Telco using ClearScape analytics for fraud prevention, a large customer in Asia Pac evolving responsible gambling models, and a major European airline leveraging vector store for customer feedback analysis. • Introduced new executive appointments: John Ederer as new CFO starting next week and Sumeet Arora as Chief Product Officer.

In the first quarter of 2025, Teradata delivered public cloud ARR of $606 million, a 16% year-on-year increase in constant currency. Total ARR was $1.44 billion on a constant currency basis. Recurring revenue for the first quarter was $358 million, down 8% year-over-year as reported and 6% in constant currency. Total revenue was $418 million, down 10% year-over-year as reported and 8% in constant currency. Cloud accounts for 42% of the total ARR.

• Reiterated total ARR, Cloud ARR, free cash flow, recurring revenue, and non-GAAP EPS guidance. • Expanded total revenue outlook range to negative 4% to negative 7% year-over-year on a constant currency basis. • Anticipates total ARR growth to be below outlook range in the first half and accelerate in the second half, returning to total ARR growth in Q4. • For Q2 2025, anticipates recurring revenue in the range of negative 5% to negative 7% year-over-year on a constant currency basis, total revenue in the range of negative 7% to negative 9% year-over-year on a constant currency basis, and non-GAAP diluted EPS in the range of $0.37 to $0.41. • Expect to return at least 50% of free cash flow to shareholders in the form of share repurchases.

• Macro-economic uncertainty impacting discretionary spending in the services business. • Potential impact from dynamic tariff situation, though expected to be immaterial to the business in 2025. • Volatility in the macroeconomic environment affecting overall business performance and guidance execution.

Q: Erik Woodring asked about cost efficiency programs and the 2Q EPS guide.

A: Steve McMillan responded that the company is focused on profitable growth and optimizing investment envelope, while Charles Smotherman mentioned factors like lower volume, lower corporate spend, higher cloud mix, and lower CFC contributing to the 2Q EPS guide.

Q: Yitchuin Wong inquired about lessons learned from the executive management team and the impact of hybrid on the cloud.

A: Steve McMillan discussed entering Teradata 3.0 phase, focusing on business outcomes from advanced analytics, AI, and ML, and mentioned continued growth in cloud business with midpoint growth of 16% for the year.

Q: Howard Ma asked about parallels to cloud optimization periods and visibility into expansions.

A: Steve McMillan stated that the Teradata platform's stickiness and demand for its technology continue, and consulting/services business is expected to reaccelerate in the back half of the year.

Q: Chirag Ved questioned confidence in maintaining ARR guides despite cautious peer commentary.

A: Steve McMillan said the company has line of sight into execution with continued patterns of growth and improved retention rates.

Q: Mike Richards asked about Fed exposure and trends in the Doge vertical.

A: Charles Smotherman responded that the majority of government business is international with minimal federal spend exposure.

Q: Jared Jungjohann asked about benefits of go-to-market changes and impact of AI products on revenue.

A: Steve McMillan noted a pivot towards analytics, AI, and use case business with POCs showing interest, and AI-related revenue impact is early but exciting.

Q: Wamsi Mohan inquired about verticals and boomerang customers.

A: Steve McMillan mentioned the sticky nature of Teradata, hybrid capability differentiation, and customers interested in consolidating on-prem and optimizing cloud spend.

Q: Sheldon McMeans asked about role of data warehouses in AI ecosystem.

A: Steve McMillan discussed partnership with ServiceNow and signal as a service concept for real-time insights.

Q: Pat Walravens asked about John Ederer's qualifications and initial tasks.

A: Steve McMillan highlighted John Ederer's experience in software transitions and operational capabilities, looking forward to his contribution to driving profitable growth and executing strategies.