TDC - Earnings call transcript Q3 2017

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Operator

My name is Jacqueline, and I will be your conference operator today. At this time, I would like to welcome everyone to the Teradata's Q3 2017 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. of you President conference. begin Vice Swearingen, Investor may Relations, your Gregg

Gregg Swearingen

our and our morning us Officer, Then Lund, Financial quarter call. begin joining thanks will third Teradata's discuss our Officer, for this our will Good the Teradata for full Chief earnings then for discuss and Everywhere Chief Oliver year. then Ratzesberger, third expectations our quarter CEO, Steve and call Product will morning, strategy. results Victor Scheppmann,

and other forecast that are Our statements. includes discussion information considered forward-looking today

information statements reorganization, described reflect earnings in today's costs, a transformation expense XX-Q to such non-GAAP be XX-K, as are items these we certain acquisition, compensation our call, and items cause sold Marketing will uncertainties our While factors business, are current Teradata's also On impairments, results subject and and number that discussing and special outlook, asset other which to vary which actual and excludes was risk other Applications in in they related materially. filings XXXX. These of with the including risks described financial SEC. release could the stock-based

And turn information later to over as will on reconciliation to Investor call potentially information whether We provided other results. cash to available our and update of such this comparisons. information the conference Teradata's on measures the no result non-GAAP website. revise is during constant these at concerning our this of earnings a results future of Vic. be now, A and currency page our replay the A as new will flow GAAP release non-GAAP or Teradata our will results revenue teradata.com. other free items discuss assumes also and call website in included obligation I or of call,

Victor L. Lund

Teradata welcome and quarter the morning to earnings call. third Good

traction is wide see last quarter, release to an to QX. And confidence one we strategy. lined technologies the the a are you call our reducing analytic are a After change deploy across why variety hear really up Everywhere answer in the stronger for very of results expected. were our than in question as easy, will customers was real stay this allows have our will better today, our highlighted, QX risk. we presentation. The As of Oliver changing will we with his They platform number attitude? Teradata that ever and ecosystem abreast develop our can while cover Teradata options. starting

strong only that scale. outstanding as to Teradata, that some we unique Not deliver we delivery we solutions Everywhere, our come all are we in with old are and our but engaging for Despite we analytic not. are only still at do customers. customers decidedly and Finally, our technology can view of the of our changes, consultants do those we new ways. have sure that Not us customers stay are rolling to in who our we value deliver make which around Teradata with offering out our real but analytics,

analytics Through increase integrate improve to Teradata, data to sensor example. with the strategic an probably a will Our customer GE manage help is announcement recent new flight airlines Aviation, operational importantly, efficiencies from experiences. and GE GE from we flight and customer with disruptions, most and partnership with data IoT operational

was partnership. scale, this factor at Our unique the largest in the capability to required perform airline, key by world's advanced analytics

significantly, while a and our pipeline, TCore, we consulting leading improvements, enthusiasm teams. which ARR there will our how by Our reoccurring metric his major discuss is will is He one operating driven Steve in will deploy in also up not is growth. revenue efforts. of include cover indicators, Consulting our also presentation, shift consulting which

against our from accounts. customers. stride. a continuing teams for consulting with our doing Teradata This but directing us only Further, drives not consulting a and top is We its relationship to product, organization away feel stopped XXX have transactional to sake our our moves are starting

progress. We are making great

in mentioned to able execute in to lot had to past, a strategy. as organization our the we However, change our I be new

the We are the are Teradata fearing an change In over me, strategy, that the that, a biggest many will us biggest have It deal to deliver reason part. upside harder. mixing it. to better beautiful now our margins, made the all new works, we and This They great That talent. know part can doing execution. increasing is and has by with a laser-focus be a point are for great and on it But the We where they that is execution getting of talent any to we working enthusiasm is strategy Oliver. people. winning still we They years. is thing are This embracing With are existing pipeline. to I'll left. our for we to our turn pushing more revenue, from moving of. Oliver? sense

Oliver Ratzesberger

everyone. morning, Good

and And We changed to have Innovations our work you our on update the I'm for truly at been pleased hard analytics. for innovations some game progress. with forward major steps that taking our customers.

start Let's meet continually that workloads user analytic businesses requirements. with Business analytics changing. to require face. dynamically-changing Companies greater challenges the is and agility

to more of and techniques There are siloed hard reduce analytical However, and than users limit solutions options because that flexibility and ever. deployment available business tools choice. this is

architecture into but choices for ability than finally, analytics, range to those of and being in easily a overhead. investing However, this decisions business. And leads rather departmentalized on over limit create the to that wide Companies choice often marginalized there's managing time. but the to change are technology are analytics focused the a locked significant analytics, can a specific lead investments of deploying proliferation

are So companies face is to of no The the small that today. issues with up analytics news Teradata set we at good challenge.

reputation, solve a future data of new analytics It and examples of using and that is areas address moved previously improving customers the to Teradata and of Teradata problems time are By A disparate to to are two to dramatically innovation on portability to company Teradata is their customers, safety. products, users the ways business Teradata needs through silos outcomes. solving Everywhere, agriculture. achieve focus our are advantage the company Taking are to the value integrating database agricultural and revolutionize by recently Here data, how elasticity. as using for problems. free exceptional help to of in such business real fuel across global finding cloud hunger address belief

key Everywhere. are key needs future. driving move Everywhere, and but innovation advantage and The common with and can companies sources multiple of there Teradata biotech largest internal world's are high-impact a and pharmaceuticals any their and of Teradata today in the so of to precisely the shorten market. investments company different trial data of about advanced forward Teradata bring can incorporate analytics to help also data decisions, cases to knowing analytic element: of Everywhere sensor flexibility medical clinical and competitive using their It experiences. real-world industries, to to IoT patient materially integration meet the that is is innovations. future time they Teradata outcomes the de-risk developed confidence perform achieving This benefits from is we Through There are companies helps analyze allowing with four their use analysis real-time Teradata analytics. Teradata, protected. data are These will companies different and for external life-affecting data them why One develop

First, analyze anything.

expanding users our with and the across analytic We the capability, work data to database their performance. are of tools with capabilities to and best languages preferred sources enable elasticity

and business on change and We provide on software hardware the flexibility deploy deploys like as Azure, in and without scale Whether company a Teradata where to or will changes. hardware, offer Amazon clouds Second, run on needs same. or it the agility cloud, public is Teradata commodity code Teradata the Regardless of anywhere. evolve. the premises Teradata,

to Third, all sophistication and in introduced pricing choice. of bundles as-a-service price buy our IntelliCloud-as-a-service buy The any keeps and easier and points, it licenses our software performance deployment needs. We regardless to us of way. options. Teradata price offering lead, of at range make the leverage a We simplified pay-as-you-go software accommodate positioned subscription-based

helping close in as can't benchmark breakthrough database. with is executing move are across other With first. anytime. customers revolutionalized lock-in is given This innovation This companies of and license than analytics. queries, Teradata There query where In the the much real-world software $XXX,XXX driving in portability time? so guys Fourth, per Teradata we more leading cost software their vendors. Everywhere, software one cost for how versus can exhilarating on our great through no summary, It to is the making a strides from and ran the We deployment other industry find query strategy. measure real per enterprise an options. from work a of come data, million we've $XX amount work done needed The be move cloud of value was is than Teradata. can less

want to I'm more I This quarter. Teradata, be what it at time confident is and I to exciting hand and future. Steve, Steve? to in said about I even As reinforce our enthusiastic an last

Stephen Mark Scheppmann

Total QX expected good XX% third see execution from which was reported while QX the we total a and had in in X% than the increased as XXXX, of ARR, strategy. product driven recurring to everyone. revenue revenue of morning, XX%. excludes product increased revenue and of to Oliver, expect XXXX. from continued, we while even better EPS our from We from quarter ARR third quarter maintenance, increased Thanks, started momentum third the good the XX% we of increased and Reported the quarter stronger. by quarter Highlights our the quarter be third recurring reported QX include XXXX,

size TCore to including Teradata to increased Total revenue was like from grew I'd services point these sequentially the X%. all increase of as revenue X%, Consulting maintenance their up continue growth and customers QX. services Additionally, out systems. that X% of metrics

new a than should cases business of use customers business consumption focus and, Teradata, more services, increased which from within QX However, increased as XXXX. identify our drive consulting, XX% helps new consulting result,

my we including third products. the largely QX margin of revenue. discussed a to strategy comments, to a continue be was drive which by deal to the higher For basis. impacted QX margin quarter our consumption margins is have making, non-GAAP hardware quarter driver the discussing in our XXXX. versus decline before, Teradata's product margin XX.X%, XXXX. XX.X% we consulting are of I'll in driven gross the mix in a XX.X% increased overall XX.X% in from a of due mix, by remainder was results Services investments Product The strategic gross of business, business-led be on our of the in was gross in decrease Services

last gross margin of the we investments these course said quarter, year. impact the throughout As will services

been have margin year, began earlier Whereas QX margin throughout in we year. certain engagements in expect of cost in QX XX.X% do of these the QX services However, projects due QX. we in consulting recognized XX.X% to gross higher recognized gross from overall in revenue to being the results compared XXXX. in This the

expense and up to and are as development as development operating to R&D. platforms. primarily had of expected, are demand count, initiatives continue XXXX, was reduced XX% investment to IntelliFlex, is and period development and our Managed $XX of to increase as of research or other support against comparing cloud cost SG&A areas expense a public was The QX R&D largely year QX our meaningfully $XX to new XXXX. we million from Turning XX% due and creation prior compared million we expenses. IntelliBase million increased we strategy. head million related $XXX or to when up related to reinvesting in now we $XX cloud Correspondingly,

to prior cash than On continue QX, non-GAAP quarter effective third million flow XX, billion be mid-teens XXXX in we rate expect XX%. by the want income call. tax XX quarter in denominator lower pre-tax result generated we rate a worth an provided during slightly used tax QX basis, driven that And we rate driven to over Operating in in period period-over-period. a is increase had tax September and rate the period-over-period. was and the rate tax in full-year expected lower XX.X% basis, result, The a we days to lower working of $XX was $X for rate QX the our versus will out by a in previously the was do net did EPS rate annualized in ago. QX teens compared benefit was earnings our lower XXXX. the percentage the that QX that effective same in QX point our approximately impact capital will earnings the a the in offshore. in EPS was suggested XX.X% period largely $X.XX for substantially I operating QX held XXXX. of items at tax to anticipate a special XXXX not being as which over the Cash effective we tax higher now higher approximately the non-GAAP Our in than expect million We to On activities $X lower in high to than net due $X.XX QX change and be expectations. XXXX,

including flow a increase cash $XX full-year of of being as of expenditures by just I to flow After on approximately international Additionally, versus in workforce cash cash free funded targeting expected with $XX expenditures million $XXX XXXX approximately of severance $X $XXX the we as software, items on ongoing basis which million to our in to $XX QX, aggressive higher million payments primarily capitalized support described, managed cash million XXXX, drive optimization XX% currently capital The used million in generated $XX in expected our strategy, XXXX to to we of funded million in quarter, our initiated Based the flow the subscription capital transformation versus our transformation of increased cash culture, QX program of addition used the be XXXX. hand. $XX level part initiatives is million cloud even third million $XX and to in strategic range. in is free free performance-oriented we on due million the an to offerings. and are result an

our free volume, the for billing cash transactions highly of flow including many addition, for year the variables timing, frequency subscription mix, dependent is structure, In actual and upon new fourth forecasted quarter.

adoption quarter the flow to full-year the reported minimize and offerings, how the these the this ship difficult cloud recognized cash collected reported how XXX, the customers is transactions cash closer affect may impacted in by and Teradata's activity which of is manner get could and much purchasing new a free revenue caused XXXX revenue, be is order to old subscription-based to the is Furthermore, to is XXXX to recognition and we options. QX and for XXXX. have the change the new continue company's fourth As as XXX it structured estimate we are we minimize other the between which may If structure revenue metrics revenue opportunity, in to and of negative of new may in lost the by when ASC which changes, potential XXXX operating QX revenue transactions impact impact recognized in in impact standard. the of or ASC

continue strong However, sales deals stronger our our funnel in in deliver evidence success quarter as our to QX. results, we expect increasing of in completed as continues to fourth new financial strategy are

$X.XX equivalent of reported quarter down as $X.XX subscription-based full guidance could million X% current in revenue to million into expected expect gross translates XXXX from EPS. perpetual be is EPS. to approximately continue X%, revenue result our million, for view to to X% XXXX than year $X.XX a increased the sales our to $XXX of Given non-GAAP This is now we a structured of And $XXX increasing of down the that transactions of prior to to we million to full full our our the to for for activity, full which year. $XXX which of expectations be revenue expected of $XXX are and EPS This yield range non-GAAP year. $X.XX view XXXX. expect fourth reported We better revenue year be

track to with of from growth are cloud XXXX, to to increase continue being to Product product high-teens for the which upgrades, ARR digits. on XX%. revenue to we Annual high-single ARR consulting XX, grow that more ARR of XX%. $X.X revenue about excludes ARR approximately software XX%. grow and to or more reported by a grow to revenue approximately recurring a grow product and license total third rights approximately XX%, billion the maintenance. in For subscription the than than Total Recurring TCore. we expect year, Business full recurring December revenue

again SG&A future through mid-XXs, revenue, as for should as gross be continue approximately business be on cloud product pull should strategically percentage to digits the analytical up mid-XXs expect estimated a product basis, expense implying XXXX and in to XXs services we QX. to should invest solutions. core in our increase is margin continue QX. versus gross a in high-single we to addition, low we mid-XXs Services invest be In margin in the R&D and implying XX% in lower

from very but an be expected, we me optically clear. As results perspective, reported a has challenging year let been XXXX

result new stronger forward. our is We that are confident will going strategy much results and working in

have we subject to to in XXX This transition not view on assumptions of share I to any some before subscription-based targets. is XXXX finalized our ASC and options Although, changes plan, want regarding clearly things. among impacts XXXX other thoughts our is early early our purchasing our

assessment early are health And revenue, over how summary, been I and to we total share relentlessly XXXX I team, as value, I've XX%, other we to to positioned, some In deliver contract metrics, our take and should In XXXX difficult that in TCV; realization challenges quarter, metrics tried ASC many sales I see fourth my such to had which maintenance, increase you strategy to and to cash that addressing of is low working. more monitor support for operating our flow grow that and respect annual are product call. of as as XXXX revenue results. you clearly Product issues result, are and implications And that opportunity our reported over evaluate metrics well in can and you for in this to to life. value, my one revenue, reporting and and excludes should than declining targets. ACV, ARR, XXX, health. the we provide of of particularly non-GAAP most light we and with performance growth with reported of contract include to EPS to best want our a reevaluating ensure financial the family, beyond. the my XXXX. you free strong continue Total the as with improvement following the Our that XX%. the my the I friends, this again, know overcome body my XXXX funnel, to have of the of now, I've Teradata on my make mind cannot come will health improved decisions a expect we with Many with add beat confident should

For thank my and it forced you my illness all debilitating to want support, you me of nature The this priorities on focus more all, my imagine. realign health. of than I to means can has my attention

ready have is support leave and by to the my outstanding middle led the will rewarding to lose. reasons it of for me, full-time the decided under professional the it getting stronger all teams. This become to you. now the making Vic Vic, at this be in because over the to and I They career. career, doctors I our help has align on our I about better missed vision, last With health. term Thank our The these be am I'll of the quality one new team, and is decision I'm and here passion exceed of to years Enough attention is Vic. plan. grateful hard. my professional My Teradata rewarding my being why of expectations win. to winning, team talent, customers Throughout win. my It disability in this customers with professionally so most my XX go short team team family, back will my found their I my the every turn you going medical working day. to as hate I

Victor L. Lund

company he a – like to Steve put everything done has we the lot but I'd of I that you want have for the the of seen announcements things for first for only not me. to In say. closing, sure out. thing couple A Personally, I'm thank

he's over of made. the on we position, person sure and voice new As was challenges have delivered all Steve that a fighter, the I've reason, life promises the wishing the you'll of to this And Steve his health that and make to taken Steve sure we the very and reality, take join I'm that I me best. will that going is and us better a know who forward. on voice that pushed in win battle

several November him starting Mark on strategic, for However, a he'll me. I to part the great counsel results pleased knows that around. on are advice to experience been I'll have be Mark sure an also to of are Culhane, undergoing continue many today, advice with many how I've and give and that and He's his our that Mark will them Steve point having we great to be his XX. organization. new will scale of weigh great and years. has a talk known of have to benefit who initiatives; transformation in us. still benefit drives introduce on to and the transformational I'm or CFO right as about I'm

Officer. strong talent better we as will executional a better Like him background roles. customer that. With Eric, notice By You results have Eric see think in the Global brings focus, Tom. operator over Teradata Mark, to Revenue that, coupled coming in mixing with go-to-market. will as execution to for result our and strong I we'll turn announcement a the drive we at the us is that have, have team Chief questions. great will allow I it in the Eric the name will our we Eric also in similar with accelerating of

Operator

yourself question. one Please limit to

comes Wamsi of America from question first Mohan Bank Lynch. Merrill from Your

open. is line Your

Wamsi Mohan

how time under And have any that to choosing deployment are to the changed customers this adoption in new based the Yes. on model? noted Thank new deploy more Teradata? driven clarity you. by sales your increasing customer might purchasing how about and taking Good funnel the is it's talk morning. deals, funnel Vic, you close Can that of options. now highlights you

Victor L. Lund

Thanks.

So, things the a couple of question. about

a seeing capital sales by is surprisingly lengthening They have in two our One as and that taking have gone they of are all the to time to that subscription things. budgets driven it that. go been some fact is at. the to a work We customers we pricing principally approved have that, bit want through process time

So that has taken been a had than a little anticipated, that's it's longer there. process but getting we

think taking And back a will shrink require forward. case. up, of then, their think is time it'll they little So through in And over fact, with seeing an And process. by have building where analytics down customers budgeting are. pipeline deal so our longer, process people in with business as today. but outcomes our and that's built continue their nature, I moving doing going our the consulting that business accelerating that, of rate I see closes we're we're we'll – The getting that we a

adoption didn't we're We deals, huge we QX QX, in going. where of then broad-based have it's are have broad-based. We so and

size the the and going is well. number the so of transactions And up as

of (XX:XX) the So to this out. seeing there. build bit we're I good organization time little It's do traction take a to with going our and consulting think led

(XX:XX), – this to enough line opportunities, that. We people have get of one do we're lot we've and on going just and challenges is key doing ready got our a of to and to in

I very one great so are they doing. the reasons very, quality, the interest I our in time really we're mean, customers, customers feel like going. will of I lot and that's about a good there. of spend interested them, we're customers. We feel number, doing. really and seeing mean, what on what we're the what with where the pipeline; our get about in I I But we're And really, the

Stephen Mark Scheppmann

that Wamsi, and And offerings the I add, the bucket and at of improved of the in perspective. looked percentage as growth. significantly has of sales the the pipeline my closing quality I I see from growth bucket, should pipeline the X/XX,

and opportunity me So see sales that moving that grow that to those opportunities areas like as these to through and that close. tells offering are the I'd that funnel, are

wanted So that perspective also. I just to you add

Wamsi Mohan

and No, working helpful. wanted say to that's been I good it's you, pleasure a Steve, luck. with

targeting clear half. that You called be workforce the optimization by out. It second seems flow were cash free that $XX the million, sense And of the when you free you really functions that weaker in this, Thank last see this kick partly much in flow-through could XQ? is Of call, how on give that in? can was cash you should the initiative regions flow already some us of we what in from and way, or are you. savings negative completed

Stephen Mark Scheppmann

Yeah. future, to market, – the and our it and objectives office, was and we objectives? looking objectives, strategic going Oliver's the really where throughout the was resources achieve our And at to and in board the back that. go-to team, align XXX on our is across was Wamsi. best the and are my color It how in we're and culture, it those XXXX identified and higher this do workforce board, process Wamsi, across – people And manner want QX, to for style started up-front aggressive optimization, to the forward when we workforce me strategy teams, drive onboard Thanks, opportunity and in to said It's be the want the which our execute focus what it The to looking now. that. we get benefit finalized And align QX, them really at optimization. said more best whole give was reduction; we giving those to a more right not performance we to we aggressive. and about more time a the be it's workforce or in a resources

half then in in half This QX, XXXX. is a workforce looked – comment it reduction. of is we this $XX Again, workforce a optimization. and my another previous made, that about in at, to little I is So that that million QX, not bit the a

a – reduction not implied cost reduction effort. it's So cost

the to to culture going We talent, and drive to continue the people, level. hire optimize higher-performing and hire are our a

And thank XX over you years. with been it's you. So, great Wamsi, working personally, those

Wamsi Mohan

Steve. Thanks,

Operator

Lenschow from comes question Barclays. from next Your Raimo

open. Your line is

Raimo Lenschow

in have versus like hardware customers enjoyed always look you get managing questions. we the came working model more I you bit the looked licenses old terms will business that for going how more licenses as just to through, came in Thank you. look a like was going miss that question in Thanks QX the numbers, product to the little first I to bit look looks all Can – help you. was little forward? Steve, like company, I expected. process? bit – business you taking it go you talk at visibility your you gross through with me a from if it all, with get Hey. deciding modeling your little if at margin, in you, of a and there a you If my bit talk A bit better terms model? Do I you like of little Can the on. little new go replacement you you a the us about visibility of can think much than do

Victor L. Lund

our risk, what through talked and are as we Oliver customer's just say process. They're and got. go perspective, a little interested we the they are about I'll wanting from we've that, about see seeing risk I from Yeah. customer's yes, perspective. a talked to in

want, going the I – opened discussions was Everywhere customer missed whatever, is was they everything really up So, cloud When have job, anywhere we our technologies had across it ability around to before, we away. never base. to are the Hadoop, we I wondered, we with deploy had drive has missed – Teradata resonating took multiple

discussion lot going portable I the had on license, way our at when has what that have that's to to with a the business I'm meeting board. one what could our really engaged. have our help drive And cross with where think Totally and my end gets stuff. a I And I learned to us technologies would we the what, I've help we at. what us, in to multiple our company on about a customers. mean, mean, means go, as over willingness and across went where I I I all hardware engage Teradata do And confusion deliver a they the long-term meeting in mean, from think, sort to perspective, fact, ability customers in anymore, and about hours. of them to in them a largest them I with we fully And our out it are we are with. the around outcomes. consulting them think outcome are think something about the , came to help And big In a prepared, was importantly, they day, think guess, discussion with Monday, focused of they customers not this that's of allowed in of they in I teams couple happening never but not before. trying market out. from there's that starting

strategy. a seeing lot of So, our in we're It with traction our plays customers. well

I driven And customer so, think and seeing really are receptivity base. in of of we in our the in is driven around in it's I the the pipeline is the by the but feel change it pipeline. the the our execution, I strongly increase and our partially pipeline bulk – strategy biggest mean, growth that doing

Stephen Mark Scheppmann

the – Raimo, recurring subscription it And that – just revenue comment, was your revenue and in I rental, that recurring as to our in want that component total particularly add, relates product strongest to increasing product lineup. revenue,

ARR recurring to then, And with of strength converted. coming continued Again, growing that in strength. continue over model that revenue that The the product continued quarter. in out of QX. again, exception expect one saw that XX% we QX, the that in So customer

Raimo Lenschow

Perfect.

All Steve. best, Okay. Thank you. the

Stephen Mark Scheppmann

Hey. Thanks, Raimo.

Operator

Your Wells from Philip next from Winslow Fargo. comes question

line Your open. is

Philip Winslow

for now. QX seeing then I the pleasure Thanks. it's you're a guys good the that about and industry thinking you Thanks, And color there talked you're working just environment been some high-teens next with see price you out wonder about touch of some Yeah. could in sorry Obviously, your – you I the I if too. of Steve, numbers and on commentary my Hi. kind question. can pricing mean, the of us the year's and taking how you. growth. you really to early real give leave. right on you're TCore on just hope one guys guys just

Victor L. Lund

Yeah.

So, that perspective. of a from couple things

around before. the to didn't driven the for seeing have erosion all, our at I drive pricing et revenue. price – we TCore, we in first our aren't that interested have any concessions of end in is a I'm think, cetera. market not discipline in Part business operational in of particularly quarter we giving new

done haven't We that this year.

We are value We not need have going do don't to our so we discipline. that that. to to that. do bring customers, We

us with We we are not where so chasing, are. helped that

are before. easier – it that because thing haven't discipline, some to much doesn't the that. quarter-to-quarter. going think we it easier make difference your price have made had makes have that pricing continue other hold But to just to I that's we we subscription operationally, is We're also

pricing year. our has remained during And the so, constant

that. aren't seeing We degradation of any

Philip Winslow

it. guys. Got Thanks,

Stephen Mark Scheppmann

Thanks, Phil.

Operator

from comes question Sachs. next Hulsing from Jesse Goldman Your

Your open line is

Jesse Hulsing

guys. echo of the six else's pleasure and you working last thoughts, Thank over luck. five a or Steve, Yeah. you, years it's best everyone And real I'll been with

Stephen Mark Scheppmann

Jesse. Thanks,

Jesse Hulsing

put But growth. strong with talked as seems Yeah. is new introduced of a Can does find quarter. product first you can big the rights and around of last new that give kind sense I is of know Everywhere base legacy think, growth like It of I is some kind about metric how appreciated. revenue? guys upgrade include that us which just you quarter, ARR being this stuff a that it is, this Teradata subscription this quarter or it, this the a you I you

Stephen Mark Scheppmann

you Yes. Jesse. got I

product be – the said we recurring Yes, total ARR – about billion in about back. that our peel represents will remarks, ARR third me a of Let $X.X prepared total that. and

at so, subscription, then the And – in upgrade piece the it's so that its legacy's it of in it's our software product you you It's if rights pieces is the ARR except is total of the rights. and upgrade, of the it's our look priority. cloud. what Now, rental, And software predominant the are everything kind cloud, it, maintenance then ARR It's and okay? – subscription, described. the

is upgrade of software cloud. product the we rights. from that rights that upgrade in growth that The that that subscription, and and piece. is rental in maintenance included percentage exclude the But then Now, just software the is primarily ARR, legacy the

Jesse Hulsing

of – I ARR guess, far a the you. Got as as give product is in excluding big us upgrade sense how can absolute dollar And you value? rights

Stephen Mark Scheppmann

there the cloud is and mean, that as is customers Vic go rights quarter-on time. the component of smaller as the software getting and in and described, with at this a upgrade the smaller adoption I the year-over-year. No. But point percentage is growth substantially subscription rental, we the areas model. that in -quarter, in largest as The total of the

Jesse Hulsing

ratio to? are that I've Got guys you're cloud you. question the on I you've that for if but you're is on focused that always marketing on customers? wondering query performance customers – as Google some seems price been on resonating and focused at mean and your it really in have that the like price speak it the And should how's people latching I then that a others. look like been has call, Oliver, pushing and Is Amazon conferences with at be Oliver. versus I'm – focused that, still on. you And seen I a curious, I'm really if seems per that How and something

Oliver Ratzesberger

cost something you customers when the the in can talk customers, with looking come their hardware question. environments, that fixed biggest scale. And really something see and on normalizes a we per that at Yes, Thank standard, costs they to resonates something, move many is inherently the being especially us – our differences and with they throughput then is that there. that they the base This the the purchase cloud, is yes. scale and when have do absolutely. But need run And it's that storage for comparative And capabilities analytical just we to that price the cloud so very they that this they a our see whatever it's our to largest customers, technologies. new software prototype are at out into say building by different our to lot on much one hardware software is different focused to prices build published the to point there, do. cloud our which all because when now. cloud, they have put of Jesse, is scale. versus customer and you ultimately the problem they right at how is real of workload the measurement production at is these well thing very we like And way, at

So, difference makes yes, answer it is big a we believe.

Jesse Hulsing

it. Appreciate Thank Okay. guys. you,

Operator

from from Suri question William Blair. next comes Bhavan Your

line Your is open.

Bhavan Singh Suri

seven, on Steve, level, but really eight And personal everyone what It's you. will been miss good said, Thank a you. a years. I'll echo I

Stephen Mark Scheppmann

Bhavan. Thanks,

Bhavan Singh Suri

too, a speedy friend. know the Mark my well for hope I but all recovery,

Stephen Mark Scheppmann

Thanks.

Bhavan Singh Suri

in quickly dive really I'll Yeah. here.

Just one for Oliver.

this demand few right? you way at are are pent-up sort First, demand spreading and large-scale How guess assets. net you customers the guys of that about and we've the growth, that at or when EDW the years are is sort I to is of off of incrementally look buying, feel with, think seeing for brand-new what should mix, customers? much deployments? deployments, I thinking these we mean, got from start look I a about there a you how So, expanding for of existing

Oliver Ratzesberger

Bhavan, analytical the deploy, The to the thanks. derisk this our them are And we board. and some world, go they it's deploy the to of is at but where in in Teradata to with the use cloud something deployments that accounts, seeing scale. also these fact ability the them, decisions can these and decision that make it they deploy analytical cloud Yes, both. in are across new and them capabilities. the on-premise in allows for It's that really pent-up starting to is cases of mix public

are demand and new the growth growth is that So, that both driving pent-up adoption that in whether whether or it we're seeing in it's market. it unlocking is capabilities

Bhavan Singh Suri

then obviously understand guys version, sort I uptake and margin Got of if it. investment it, and quick are customers one Got want just of are but what then the well, performance saying gross at of associated hardware of software-only progressing? very how obviously, the the that. proponent version version? the about, software-only follow-up. get, of, that, the but I've is the been in software-only for haven't look sort I And And to it. how heard you much sort and understand, big the thinking of of, software-only a, a the with optimization We optimization, you

Oliver Ratzesberger

that various right? cloud we use that offer software definitely in it software-only, these in environments. Teradata Teradata it it it's offer think and hardware, runs our cases. across the we offer choices being see We it a certain deployed on development, one same all customers. the you offer, that So, is in about is choice cloud. the We the And is it, for public if forms we test It it in of of

to being continue options scale, commodity this to capability Or by and the companies is us give large things it's is Teradata things deploy what on, or vested Teradata customers to that on we also customer the side or for software. to In at whether foreseeable AWS general, exact is IntelliFlex however, at leverage centers. whether our in a deployment the the scale, see where data for be the it the hardware. cloud, always same the where like software-only into on the mix interests XXX, because So or focus in do top have future there existing will we cloud enabled, that

see And deployment when we customers of see of the look de-risk something what the allows to performance with get the a that it at our that mix. they cost as software. and ultimately So, it's hardware, them

of is this a that. so why healthy we think mix I see And

Bhavan Singh Suri

Thank it. you, for Thanks Got guys. the color.

Operator

comes Wood from Cowen Your Derrick Company. next & from question

line open. is Your

J. Derrick Wood

been It's and to And Steve, you. you, miss good Thanks. we'll great work with luck.

Stephen Mark Scheppmann

Hey. Derrick. Thanks,

J. Derrick Wood

about this have we this developments nice yet what you kind subscription can to of expect is conversion subscriptions, in are pricing. and and the expected or would you guys the pop have know see about contracts why increasing a go should And dynamic happening, more some but through interesting interest talking kind quarter, to the back contract talked you down momentum of up-front about up-front kind where you license So, dynamic in just you're Should of step think then XXXX? license business this continue? I QX, last and to

Victor L. Lund

with we over over. customer In choice. that start and fact, said guess, We've I

very that difficult to we It's continue and that our of so, gauging going it's – to strategy. organization, why drives you set or to pricing. you how And right? to us operating – in I weird, see been more are customers own is an a year play the continued go is inside give people The customer but is for to they've that issue politics driven the the to interesting what in be around answer been to much sort moving and a their more and And way; it got politics seeing it. is are that how come interest know capital thing and their a budget those We're have hardest got inside subscription of – through deploying that would choice do they have be. either you've Teradata sounds have got those what to has you've their this to make choices own margins, as company as

to wanting people that. move seeing subscription; very we're interested think I in

process I so. the some It's easier they think those for this in where year, so two trend to go cases. to did subscription, had quarter But of through subscription. year, budget have approval. get had wanted that in them done start but they the they to it working this We their do think get they deal because could and I is perpetual left just a they to overall

more I and more grow that, like people that continue will think I time. it to and expect over that

faster than U.S. the about bit little a international. talked we quarter last remember, You'll is moving

in in now But as transaction percentage a the the we're seeing there Americas. starting pipeline as of still to subscription is are interest well. increased it We smaller see than in an international

long-winded we lot are not seeing is answer, what But of – it. just can see. a a kind there's that's buy happening they what's but know how we I of and that's So around

that mind, we've do can that that. probably, going driving customers is something to that's do think necessarily the flexibility willingness probably that we've but interest. will focus thing and I that on increased shown it do our our help right number-one they them to my build now, analytics they're shown and help in Not the

equally funnel. we building as mind their think the I with been are at flexible has so of interests And showing that important the in

J. Derrick Wood

you that that for if favorable And were more Sure. contracts look on XXX, good mean, on were rev color. would what No, basis, that's you a establish Steve, I like? ASC to rec

Stephen Mark Scheppmann

you them, Derrick, to the know, of key duration the contract mean, choice; the we're right the to right to, and comes to down cancellation Vic or which, the cancellation said, I it time. spreading the That's time know, XXX periods. and over renegotiate what's as as down clauses benefits give okay? when of going key QX as it Yeah. that comes short-term periods renewal the you clauses customer. when looking time of driver to QX, for all we're the starts. you And down comes know, ASC in do It's those at the the Again, revenue, to

between revenue concept and and opportunities XXX look us ASC order in mitigate minimize that that we the ASC ability ASC XXX So to XXX of may give XXX, potential ASC to revenue lost effective lost that at between X/X/XXXX.

customers a we as because, are their individual kind as to of giving are in those. customers. of said, points. we recurring look And the free cash benefits the it model, associated benefits, back, so understand Vic choice echo respect go, is and revenue customer And we're getting to Vic of sure that understand long-term, points we're the affect flow outside going again, we with right We lot the But trigger managed on continue recurring even to the or people we flow those these understand U.S. described. of at to The with okay. the learning that Again, want make business I the again, doesn't Vic's – cash CapEx the model. to OpEx, this

that's model evolve the and focus I they're learning. those at, expect model, so hey, they in and said, recurring They're and continue – I'll looking benefits benefits And that understanding operating below this gets on if my non-cash line I to But Vic CapEx. that XXXX. are do on as education of that OpEx, that

J. Derrick Wood

you. Okay. Thank

Operator

Stifel. Your comes from next question Brad Reback from

line is open. Your

Brad Robert Reback

And of best much. very Steve, Thanks luck. Great.

Stephen Mark Scheppmann

Hey, Brad. Thanks.

Brad Robert Reback

Oh yeah. Absolutely.

with that Just XXX? The favorable potential So upside, that would is got or in if contracting terms, impact, terms to provide Steve. ASC – that XXX type you more question, if XQ respect already any, ASC returning priced what of that? does to million to million $XXX from baked the have $XXX into guide,

Stephen Mark Scheppmann

revenue No, now, teams. more negative Brad. impact deals revenue, it's with because But then recognized got million. going lost if have just QX, it looking $XXX the be revenue in in the nominal the things impact increased on in lost now a I those a item. the been into the mean, cumulative lost the revenue the we at and Right minimal impact will we're would quarter

small ASC comes really it gotten effective December the and to "lost in rateable increase So, earnings just that in contracts that that would and piece revenue" have retained to the would've adjustment down we XXX. a would been We X/X/XXXX. theory under

numbers next looking year at to to we're at those you if approach look of what we XXX doing retrospective put So, the comparable XXX. and under under start for X/X/XXXX at then we're is ASC But have basis these I is we the ASC XXXX. the contracts, provide on that doing opportunity dates reinforce recognize where will want a also

XXX the you'll between QX differences ASC in So, of and XXX ASC see primarily XXXX.

Brad Robert Reback

couple just it. think Not the before of you the a call one last quarter mention to those large you transactions close that then expected Got was of end And Vic, talked year. the guys specifically. on follow-up. if I any about real sure quick there of

great. Thanks. on that Just would be update any

Victor L. Lund

Yeah.

we yes, QX, large we those transactions that QX. do on we but of any still, have several in for track didn't So, are

negotiation. so there still deals any and lost active haven't in We

on So, they're pipeline still our in track. and

Brad Robert Reback

you Thank Great. very much.

Victor L. Lund

Yes.

Operator

Bachman of Montreal. from comes Your next question Bank from Keith

Your line is open.

Keith Frances Bachman

the Hi. the wish to you best Many have... challenges that thanks. I ahead. And in Steve, I want lay

Stephen Mark Scheppmann

thanks. Thanks, Yeah.

Keith Frances Bachman

Yeah. Yeah.

Stephen Mark Scheppmann

Thanks, Keith.

Keith Frances Bachman

way have from ask specifics us capacity little your any greater us there think give that, of on give Is much Best going get the customers about And that should a hoping could workloads? I new to or versus related and/or say, to versus or there. number you specifics growth one, at again, dimensions either one existing I'm more I a installed workloads, new was new with buys, any on you luck Is on of revenues but to if them questions there how I customers two dimensions is base? customers. that time. more are associated will, impacting workloads, existing

Stephen Mark Scheppmann

in is driving Keith, and really consulting-led, our a percentage consulting, and Yeah. seeing ties What our we're this we're more into is TCore XXX. growth. coming of the business-led growth large what top seeing – TCore

Keith Frances Bachman

Right.

Stephen Mark Scheppmann

where the opportunities cases are use growth. are for These driving

still the Keith with on in process earlier, to earlier of just – of we Vic this It's refreshes, are that the consultants our early of refreshes. We're doors. our it's inference brought hardware addition, see as just on that very top very, those coming from focused. – are as early, understand continue But our into scale drivers. those Vic In acceptance purely a the very to technology mentioned, TCore being week broader good stronger mentioned more stronger the the opening than a conversation growth acceptance key even conversations, these getting business-led largest hardware XXX, not

Victor L. Lund

it's watched it has because before TCore have I other whether customer. add, larger it just it In actually growth. growth it is a might not absolute be in be a install words, to an I gets existing new And we I mean, grow or growth. Yeah. – replacement there,

first installed off the ones. our lot expanding we Teradata footprint is, not expand of business some the now customers starting going of over – looking today. is growing be right. had us. use have to our with We're had, you Actually as I existing actually on – of seeing how I of first both now are the have and in think, that new somewhere going as those well where at are footprint their to a everybody about quarter. customers But call base So, They're discussion in we And all. above of I'm else. is that Teradata, we And customer is I all I the moving with we when at

in fact, the expansion so, growth wherever Teradata from it TCore of comes. And is,

So it's true growth.

Keith Frances Bachman

detecting that break data issues, the a it's if small gravity because interest In a actually few Anaheim I'm hardware still cloud, performance model fast, aggregation renewed in the It's me a me group ago, is pretty number, not. one let relates. user if couple event including try of new of times but growing small We're and I've you But meaningful wanted I correct which interest a not we're the Teradata, seeing why or that flexible on second there's Teradata, your definitely but LA Okay. of perhaps you reasons you're business question heard to in the a wrong. number. weeks is Well, the at lot down. can that will.

So, and between similar I between subscription. think, difference think And very license yet, it comes down to the is I subscription. the license TCO,

make opposed decisions flexibility, grain really is it or business more can than budget is fine as about it to was So, i.e., it capital operating decisions units that? –

Victor L. Lund

No. are It you – that derisking way, not about seeing performance impact is decision. by we the made the comment that absolutely the the that, about And in cloud, right.

Keith Frances Bachman

Okay.

Victor L. Lund

cloud. the migrated we have customers performance compare the benchmarks, a cloud We show the significant also in they other seeing and great when that into platforms are and to – we

matter that I And any or can on-premises I time, decide to point ability that's the start from what's driving to customers cloud, customer we have base. say, if in choice that. no the have adoption and given have at the the for and to So, in switch

Keith Frances Bachman

thanks. enough. Fair luck, gentlemen. right. Best All Okay. Many of

Victor L. Lund

you Thank thank you so much and for...

Stephen Mark Scheppmann

you. Thank

Victor L. Lund

...for joining us today.

I our you fourth next we your Thank quarter for a think we're to support for you on look that's the Actually, joining. time participation got. bit. Thank all We all strong a interest. forward reporting past call. little and and

Operator

time, call. this this concludes today's conference At

may now disconnect. You

Teradata (TDC) 2 Nov 172017 Q3 Earnings call transcript