TDC - Earnings call transcript Q1 2019

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Operator

Good afternoon. My name is Mariama and I will be your conference operator today. At this time, I would like to welcome everyone to the Q1 Teradata Earnings Conference 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. you. Thank Instructions] [Operator like of the Investor now Gregg over Swearingen, VP Relations. to would call turn to I

You may begin your conference.

Gregg Swearingen

Officer President Good XXXX afternoon Culhane, financial Chief Teradata's Teradata's discuss will by results. first Teradata's our Executive and our quarter earnings CFO today; and call. Oliver Mark welcome followed will lead to then call who Ratzesberger,

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

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

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

Oliver Ratzesberger

that in these In executives the analytics have meetings complexities critically our challenges time today's landscape I've CEO, the been truly understand is megadata globe as and senior addressing customers and appointment significant interactions my Since important. of everyone. and with our they teams internal regions afternoon customers, of with all and numerous energizing. Good spent

can that data integrate organization's data of excellent point Teradata or conversation. they regardless uniquely As starting and power volume, so an of are bring their can intelligence today's provides the scale, they for pervasive recognizing that This leverage complexity.

As we XX% strategy by exceeded grew right the constant it currency by EPS. guidance ARR currency are In revenue QX, win. for XX% and is clear executing in grew we in to constant have recurring and

We the also remain very four our key rate you. few pleased and adopt financial will customers results continuing will model. I to in minutes. in cover detail rapid that for Mark more with other are subscription Today, these a takeaways highlight

in made have our strategy. executing we significant First, progress

we increasing demand because Second, strong and are Teradata position our of platform this competitive powerful continues Vantage solution. for our

new need their asset technology will share we than Vantage leading is from to Third, the have introduced some help outstanding serving rather answers getting to recognition they And infrastructure. finally, apply their analysts. receiving offerings industry the managing for our I of focus customers

is started, target of executing our differentiated strategy get note We to realigning our alignment we sales and provide significant the important focused we have our coverage model. customers. and As completed that made on to megadata of it progress teams our in go-to-market

large-scale users by will demanding data progress and and drive higher a higher-margin making We're As speed. of of consulting value also to This our our most increased megadata are aligning the massive companies these consumption requiring megadata resources world's software customers. engagements. reminder scale in the

data-driven transforms into have megadata In seen of in Vantage had the the strong they data them today's help the quarter to Vantage. Teradata succeed new and world. that customers who grow adoption and they need answers recognized have We we demand two

turn increasingly to to customers, existing help data their and saw challenges. to also Vantage toughest their to answers find utilize We the

services different of channels. Vantage expanding experiences, its manufacturer an Vantage driving new and accelerating France-KLM performing its chain hub analyzes equipment its path as sequence examples. business business. downtime. machine in is ecosystem supports that learning global reduce for analytic and Air customers few equipment analytics customer the streamline It supply processes A and Let interactions Teradata it medical using uses improving and graph me to highlight cross-channel is analytics through with functions manufacturing a group as analytics services entire the and

Vantage illustrate negative try having of our for traditional on to answers the to over-promised against The increasing. newer working, devices. its more the world's but companies the are is scale. deliver One has In deliver to is in Snowflake to few different winning and amount as chosen robust game also cloud fuel a increasing invested get even capabilities is to enterprise then of including and Vantage are platform or organization. improvements they quarter, network. does on expectations performance most Vantage customers the and in is to cost, XXX Vantage parts Vantage mobile data has lowering to capabilities. harnessing are power data our operations solution both the initiatives deliver silos and a to add drill and just strategic feedback and business drilling answers as-a-service data at decision support Companies technology We're as and power that and largest for our position. advanced real-time reducing unmatched results. of all well safety in Vantage Snowflake transportation new It reliable selected number and desktop an strengthening Barclays plenishing recognizing startups target. integrate we gas a service of S&P are oil enterprise not fleet meet helping of its acquire faster sensor beat a our safer, their changing delivers from examples data of business And These opportunities. Snowflake And it competitors. solution delivered on analytics in we rigs, of The producer hearing competitive modernization its and leveraging in to

competitive sales Here and examples wins. cloud Pictures value against information greenlining, achieve are a experience. maximizing competitive and our forecasting, Sony Sony few Entertainment won in a competitor We of customer helping success in

company's A Vantage retail European extensively retailer the cases. The Vantage offerings major One intelligence considered is deal. DIY business of data analytic an long-standing the power league and of not infrastructure. getting as the announced competitive their is despite to With matters, the enterprises Vantage tailor-made investments managing American from truly their leveraging recently the a personalized most capabilities on answers enhance IT partnership We largest with demonstrated of return what competitor. a analytic our get to focus and sports help capabilities operations megastore help as-a-service cloud experience. on-prem offerings, messaging for we significant of signed are their use Vantage's running for on its targeting Vantage drive drive and improved of fan adopting and value, cases whether the the adding and expand now chains hybrid customers won environment. simplify analytic Vantage their professional won lifetime to pervasive or in AWS, to experience helping them better understand further service, leveraging up

are getting from analytics. Vantage Gartner's in market technology ability our and were that our demonstrating excellent was delivering strategy Magic every analysts for again and external Teradata the use from highest for critical simplify We customer Teradata our users offerings meeting serious recognition for and is focus analytical is in industry needs analytics solutions as Gartner's recognized on data that report management And our on feedback on point. solutions case provides leader report a is in matter. Quadrant that based This capabilities named leading our technology for with on for Our and innovation continues. ranks analytics. Teradata to data that validation real-world management ecosystems

recognition management. Forrester Teradata This innovation. capabilities for analytics was acknowledged for in data market-leading Wave real-time customer Lastly, are we our demonstrates interaction driving market-changing management and that

seeing need they like to on leadership, industry. our bar our we've demand market innovations finally, So, customers Vantage set adoption as Teradata getting I infrastructure. Vantage would for are turn the outstanding progress team are made increase remind to in our position; takeaways, high I managing second, to persistent Mark, and Teradata and four strategy; and their you the for key And in help we my advance for our continue our focus drive offerings the of new call beat The entire third, as-a-service to executing our increasing momentum, the rather competitive than significant strong our the competition recognition. garner remains answers first,

committed to our to win. is than more I world. bringing status proud I easy difference power commitment quo and By pace of and to is how and am is could the of Teradata to team want the challenging an faster at people. outstanding moving and execute people be not conversation their way, a and moving reinforce, reshape value the our make shareholders. the focused, of energized around not proud our to This ever And data before and the are the accelerated Teradata customers We team our strategy, I leading such and

let's to Now, Mark. turn

Mark Culhane

everyone. afternoon, good and Oliver Thanks,

interested Platform Customers Teradata overall activity customer generated good see while strong and about engaged and building the how workflows learning spend. integrate helps QX. them to QX, IT analytic continue very in reducing Analytics our we their platform, on under their one We consolidate in momentum are Vantage,

currency of Our of strategy subscription based, as X% was over or constant annual our bookings or our first XX% XX% with reported. clearly our line is grew quarter was by higher. working highlighted being in performance which and XX% in ARR guidance

the quarter, or reported. currency ARR constant first million million in During $XX increased we as $XX by

than Americas revenue early which of transactions ARR quarter. total QX, first recurring to into would the QX for doubled a subscription more contributed We would sizable of end saw the QX. at billion the reported have For few $X.XXX and the ARR, have balance a in push also

have transactions. of process or in the We closed these closing

was year-over-year and first in XX%. software increased increase $X.X or XX% a Our the the revenue currency, revenue backlog decrease end hardware year-over-year an Recurring and at million, billion, Perpetual million reported. as quarter approximately $XXX of of XX% $XX was license of year-over-year. constant XX% was

As eventually on I stop expect selling we to perpetual our Day Analyst at basis. last a discussed December,

margins expect on result. year-over-year obviously is our less we was are almost consulting therefore, perpetual expected. a than As basis a report than transition, moment. related, And million we interest gross perpetual customers revenue lower and decrease year-over-year. continue The in of XX% a affects $XXX margin, do perpetual perpetual QX, discuss as which revenue revenue software, as in to will purchasing continue we a in materially declines hardware from all we we revenue, And carries seeing I

to prioritize shifting we of consumption companies. are Vantage, to consulting that our software higher focus margin, that value, target business-related within analytics reminder, our market strategy of increased target based drives market higher megadata our on platform. consulting And a As

consulting on short-term QX our we meaningful I call, revenue consulting make some as a our shift this on margins. as impact as mentioned our consulting in business, we well expect As in reduction

term, higher longer much margins. consulting we However, expect

special other results, first such our continue unless please a Teradata's expense result reflect today highlight items comments non-GAAP release. as in note I my excludes identified our Before stock-based quarter compensation stated to and items on which operating otherwise basis, earnings

In QX with margin gross was margin, gross recurring terms XX.X% XX% of our in expectation. versus line revenue and in XXXX

as more subscription Our revenue current quarter has subscription revenue year, revenue perpetual hardware. since more total maintenance the based gross and prior profile carries both and carried subscription recurring that lowers software prior the margin which rights revenue, margin versus This compared to license software recurring upgrade period. higher mix includes than related a based revenue

XXXX. XX% compared We low Perpetual X% compared margin XX.X% the as year-over-year revenue continue compared decline QX, XXXX. to hardware expect XX% to QX as was mix gross to negative negative being related recurring was due X.X% to prior in Consulting revenue was in as perpetual revenue margin gross revenue year. gross The in margins to predominantly range.

As previously near-term mentioned, to we profitability consulting the our realign be as will impacted. our business strategy,

in we the changes in revenue. XX.X% of making recurring to year this the first Overall shifts quarter longer prior revenue materially improve non-recurring period are versus to XX.X% as margin the gross profitability compared intended the total term. mix revenue are to was However, business more

decrease analytics due was year-over-year platform revenue gross initiatives. X% in markets XXXX mix versus XX.X% Teradata's in Turning with expense $XX due to as Operating the SG&A quarter from The Research our driven largely align from $XX increased or the shift expenses. in lower in by and Vantage XXXX. cloud continued organizational operating margin of was million, we million quarter was in first quarter was for a was and XXXX million of the Selling resources $XXX XXXX. of operating in The expenses. driven sales have both development the higher the XX.X% year-over-year capabilities strategy. tax first X% with quarter. investments our XXXX go-to-market our was non-GAAP general from million X.X% and margin by timing versus around to to increase $XX QX, lower QX, tax rate rate improvement of items commercial and X.X% discrete to in in administrative recognized QX our decline of expense megadata realigned first headcount an

As The guidance $X.XX, driven result, was margins EPS $X.XX and the our EPS of quarter upside expenses. gross than first a range lower shift, in was mix was favorable in revenue which the higher by higher to $X.XX. overall

of Turning impacted by of transactions, maintenance activities QX subscription-based perpetual Historically, predominantly renewal in payments XXXX which the full reorganization due and meaningfully of the of which to XXXX. variable flow and upgrade operations, resulting license cash increases built performance. operating were QX shift compensation our expired versus restructuring related significant in historical as which XXXX. changes by collections was rights cash XXXX following timing and cash quarter flow. to $XX were billings, Net and totaled million year perpetual and from And higher compared compared operations revenue. XX/XX financial related cash on to QX maintenance Meaningfully upgrade and in deferred rights. vast from resulted the go-to-market payments, items: transactions provided majority to XXXX, QX billings $XX functions, first billings million in reported to the lower to license $XXX January, XXXX million and in to of and

decrease occurred in occur to movement the the more the million additions subscription was cost $XX capital billings a with the to XXXX. subscriptions, QX, for expenditures historically development Cash and used $XX million and year in from in in move Now versus software QX. billings QX to capitalized the happen throughout quarter

As was the free to cash million quarter million first reported XXXX. the a $XX of in for $XXX result, period flow compared same

reorganizing related cash and QX to our cash operations As mentioned go-to-market earlier, restructuring free $XX flow of included and functions. million

annual Given of to meaningful year-over-year quarterly not transactions, comparisons. the full cash transition flow as year subscription-based we are comparisons as believe

$XX mainly of increase balance cash end XXXX. sheet, related as the and million. increase of end of increase million maintenance QX timing an million, the $XXX to of to model And business subscription-based XXXX, to of The year-over-year $XX legacy to model. at transaction revenue was million XXXX, perpetual model was a due the the $XXX the an XX, was sequential subscription of a Turning billings and of was the to contracts. shift shift end March Deferred QX of increase our the due to from from the

million the quarter, authorization. of end Teradata shares first the During XXXX, we stock QX we for bought have At $XX approximately $XXX million. of X.X of approximately million repurchase remaining share

mix which X% year-over-year to the second currency guidance, is to bookings, and expect of headwind fluctuations to of Turning factors, variables with dependent point headwind X% other a our currency the revenue point approximately timing X% quarter. many and on full regarding now for on including X% we comparisons,

XX% or mix bookings to full subscription-based be expect continue We high year transactions. to

XXXX, to and ARR annual approximately expect XX% to recurring increase in to revenue to XX% continue approximately We full to XX%. grow XX% year

million $XXX recurring million expect revenue. $XXX we to QX, of For

in be perpetual For consulting range XXXX $XXX prior prior gross megadata we continually higher margin margin at cloud-related at recurring to leverage decline We and high the $XXX decline of to revenue end gain value, and our our the guidance range. we Longer our as margin XX% the of in to increasingly engagements target expect decline XX% XX% And gross recurring the to consulting our full market. we the million higher investments. consulting prior expect Vantage efficiencies improve, revenue, term, decline focus our as to resources we revenue in revenue on from low and our guidance year, realign end we to of high expect million year. expect

to margins gross of expect improve strategy. In and margins gross XXXX XX% points now our continue margin and about to expect to prior consulting XXXX expect in operating we to full approximately be a for organization to four the to three we expect XX% to to for couple overall gross the continue the year. we from align total, single-digits we margins high year over levels We points improve as consulting perpetual XXXX

to line be is expect which We year tax XXXX's rate. continue year in rate XX%, approximately tax non-GAAP our to full with full

non-GAAP in based $X.XX the expected XXX year. non-GAAP of This second be on $X.XX to And result, million based shares. outstanding As EPS to be outstanding. average for quarter, shares approximately to tax the is full average $X.XX rate $X.XX EPS expect on range, and XX% non-GAAP XXX a weighted a shares continue for to is year full to million we weighted the

Turning cash expected to our operations free reorganization approximately functions. annual of for our go-to-market our flow million $XXX to $XXX cash includes flow. to regarding realignment XXXX which Reported expectations million, payments be and free is

As we've million. realignment cash to those associated efforts, reorganization time and to estimate $XX million to the payments cash be with expect evaluate $XX and now more approximately had our we

payments, million. would cash these $XXX be million cash XXXX Excluding our flow approximately $XXX free to

projection many to of subscription to well expenditures the frequency mix, as to subscription not subject as amount new is capital such bookings Our transactions the required transactions. of free cash support but variables limited subscription of flow including, new billing

close, I that with our are increased the interest and we emphasize excitement customer Vantage I As to Analytics Platform. want encouraged in

and through Greg. who ready El And take for will am Teradata for taking transitioning very questions. to the personal Teradata to over that years to to leaving I with Sheshai are are us Swearingen pleased and is a thank pipeline I QX year. deal start to And gives good Gregg Teradata. Greg confidence our for be to also to robust want of guidance which full will the welcome off And of Nabil dedicated for in our end reasons we his achieve service be many family operator year. be will We

Operator

question Instructions] Reback Brad comes with Your first Stifel. from [Operator

open. is line Your

Brad Reback

vendors quarter, How do think much wins new had versus very you've force? of think the competitive the Thanks tech sales that that and cloud do against with out put for there the this the of about Snowflake. you the compensation you Great. especially new some plans stack Oliver, much. if Thanks. to

Oliver Ratzesberger

to I think two competitive just the wins. parts --

First cloud seeing from past who vendors. And done technologies is compared they Greenplum they seen of all, we've a the before lot like in thing stack a to as finding Vantage tried with Netezza. clearly out have said And is superior these what as of some have I customers shortcomings. the just with of are and second technology are we

enable is need – really in together cannot Snowflake. business our of with the coming that out just they get solutions that Vantage, deliver allowing results they us to So to like customers

Brad Reback

Great. Thank very much. you

Operator

with next Wood from Your Company. question Derrick comes Cowen and

Your line is open.

Derrick Wood

Thanks. want I slipped. rates the made you're the I it on And I you and has think and to Great. like clarify you two comments in talking ARR insinuating mean growth sounds mentioned Mark, deals large I one double. that you're closed would've one it been the that about process. still – suspect is

more some Just around can flush out – detail slipped those you deals?

Mark Culhane

Sure. Yes, Derrick.

had the currency March $XX and were we the a of to more I of These or been anticipated ARR yes, double than either we like or have closing. QX in already closed in maybe would've process reported as sizable in $XX out So originally deals either transactions million closed those process closing. Had that. constant million said that, like the occurred few push reported the

Derrick Wood

of Okay. And the a – number you structural beginning of made the changes year. at I mean, guys

around of new You've external head got sales. an a transition

into the now you that you're bit customers. dividends dedicated more to And it's just you more little what how quarters? kind on so gone it expect of as over ARR several – Can megadata on to go-to-market the next changed You've you touch focus be the far?

Oliver Ratzesberger

is Oliver. this Yeah. Derrick,

all, progress very restructuring. in First first doing good quarter the this made of we some

for right? next help good are really We the business said, us Revenue looking New are Officer you progress software they done, are now a Chief and there. making we As level to that take are subscription behind also to

that amount have sales increase revenue sets optimized So beginning within in to we driving. we will and subscription, year of and feel recurring ARR we the hard to drive the up done. of work software And structure it be said, that the do worldwide we is us

Mark Culhane

really ARR sit. to Yeah. very we're the good comfortable we XX% And we growing XX% that's for about year. where why with We Derrick, feel said

Derrick Wood

it. Got

Thanks. Okay.

Operator

Your America. with from question comes next of Bank Wamsi Mohan

Your line is open.

Wamsi Mohan

Mark you. prior this on Thank Yeah. to around just clarify push question outs. deal

EMEA? the that to clarify that QX, lot also closing in a region are deals there a mean, regions. second revenue in the And versus follow-up just you I leading to for As tied is that is to it the I stronger looks recurring in growth why not guide quarter? business have that Oliver. declined like business environment more other a in in those And

Mark Culhane

Yeah.

to question process these – they've your the in deals closing. So or of closed first

quarters QX. a going So revenue recognition full we're of amortization not get to in

further but had in we we've impacting now a that three points it's FX two were on up Secondly, before. headwinds year from to full are that to two one QX where

not impact. to driving These were That's EMEA. is So in year-over-year that. perpetual. of that's EMEA's because significant down had some related what's decline a revenue

Wamsi Mohan

what Oliver, installation? you Snowflake targeting? against Okay. you. head workloads have Thanks the the were won And for mentioned the in that. about then talk a scale on? winning of And Thank customers you can of bit Where little you some instances sort these guys

Oliver Ratzesberger

Yeah.

Snowflake We that low to instances when of customers up required. seeing that Data in at mart like tried have Snowflake primarily seen have multiple what they we with applications they end workload have to that ended that – of take is scale. are the

our addition outweighing there also general, with get supplement workloads other technologies order had them us the the And customers. get and are hearing in complexity of In telling first to the with smaller to we much it. scale that, end and they of see databases, to low very benefits that they run. they the at Snowflake that pretty are would primarily it are we the other thought In even problems all to

that big a momentum. in part that's so shift And of

Wamsi Mohan

you. Thank

Operator

with Your Stanley. Huberty Katy from comes next Morgan question

open. line is Your

Katy Huberty

Thank you.

perpetual I the is a upside revenue? but should you're seeing Then coincident of have a recurring a level what falling fact than from Just you faster off ARR high not we follow-up. in expected, make that and

Mark Culhane

this is Katy, Mark. Yes.

on about good ARR. we feel So really full year still guide

at thought is end that markets that of wouldn't Clearly on we're our $XXX perpetual higher in that But it we million maybe track. seeing it and plan to decline. our be But where we're to $XXX expect million being yes, as going move fast. comp is the is. excluded So we international

Katy Huberty

just -- follow-up as that question. When a to

Europe you moving process planning or saw a the customers off model of said as all will where revenue in drop year? you build that in we into recurring Just to perpetual. those in subscription through big Are that go this of your

Mark Culhane

Yes.

Katy Huberty

And around follow-up terms you're free today. you as cash then quarter a were the in It you ago sounds flow? the what free outlook three down just on of months to like just Mark, do the going flow the knew flow. but I back restructuring and those taking on reorg, of free changed past costs, cash cash over mean,

Mark Culhane

Okay.

first $XXX of executing going through million. the in change. of and probably is because charges for in taking we it cash a million feel $XXX don't reorg as to not call of in early we $XX much were were because to reorg the free all, it to time the QX that $XX And be, we're been be excluding is. at a $XXX I The that not which million, We better payments. million could still million that we February said $XX closer what as what There's million range $XX said now that million, So call now just down $XXX million. a I'm charges flow. the have didn't great think we have

we're then where QX million those we million I which $XXX excluding to And $XXX million, would thought we you include it's to $XXX is said on what is so $XXX said if we call. the be those million

Katy Huberty

you. Thank Okay.

Operator

Your next question comes Raimo Lenschow Barclays. from with

Your line is open.

Raimo Lenschow

Oliver. for question Hey,

overall can of Where with where on-premise Vantage, about you in in cycle? that they the actually terms and of like life terms already versus taking you. we to as deployments cloud that in a are As are Thank you deployments see talk guys concept going cloud?

Oliver Ratzesberger

Raimo to implement for by the significantly the And Vantage customers there's thank service see supplementing cloud thank that and offer. forms several Barclays you investing various also on-premises are of that first existing cloud hybrid given we as Clearly, cloud. way all here examples Vantage into adoption Vantage as instances, We throughout the Vantage you. recently. with in are cloud it of in new I've deploying a customers the you today

a it's So mix.

Vantage mix forward. hybrid multi have We see cloud. in we and going And both available in that

and megadata Our in cloud is itself Vantage but that this is new differentiates right against now coming lot is a of companies it on-premises in providers. are really other world predominantly in where cloud the business the

Raimo Lenschow

Thank done. you. Well Perfect.

Operator

time have We from caller one Wells more the and for Fargo. with Phil question comes Winslow

Your open. line is

Phil Winslow

would any Hi, product. I taking just used old this you the it of things see are be big box mean, that what guys legacy floor for maybe thinking helpful. cetera I've talk be people seeing it'd on-premise. couple customers quarters how quarter I'm do if refreshing sort still guys. are software Thanks and curious that terms that maybe or the of have they way sweeps to Sort could are pipelines? been of upgrades. floor your obviously we buying in my the there et just towards about in online last whether But question. of color sweeps cloud. I about your of for of know sort still sort kind shifting color big those and of you more give or on that's

Oliver Ratzesberger

Yes.

we new I offerings and Vantage is in execute of our about the adoption do that this. workloads. as confidence. way, that new we of for is terms part what Yes, And prior compatible customers the see think existing the that majority the technology Teradata by seeing existing and Vantage. backward fully floor in of driving majority the that is vast on. funnel makes that the we easy adoption seeing as in customers But what's fact it's are to that see with into And of of are sweeping we is really ARR growth growth in sometimes capabilities

Phil Winslow

Thanks Great. guys.

Operator

back call Oliver over the comments. to turn now Ratzesberger final will for I

Oliver Ratzesberger

We Thanks exceedingly remain Okay. our strategy everyone. confident direction. in and our

we Our answers provide to winning the are adopting most. rapidly Vantage and data validating of in are in need And business they their customers the they Teradata their service competition market. to leverage against are need

amongst Our in updating delivering Thank enthusiastically remain and to you. the and look committed shareholders. next people and quarter. to on you Bye. the value business are forward to customers focused best We

Operator

call. conference today's concludes This

You may now disconnect.

Teradata (TDC) 2 May 192019 Q1 Earnings call transcript