TDC - Earnings call transcript Q3 2019

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Operator

Ladies and gentlemen thank you for standing by and welcome to the Q3 2019 Teradata Earnings Conference Call. [Operator Instructions]

I would now like to hand the conference over to your speaker today Nabil Elsheshai. Thank you, please go ahead sir.

Nabil Elsheshai

Good afternoon and welcome to Teradata's 2019 third quarter earnings call. Chairman by CEO Mark Executive call lead Teradata's followed today Culhane, Lund, and will Interim our Vic Teradata's CFO.

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

they the may Teradata's and our of statements XX-K, and could materially. XX-Q to that SEC. other actual uncertainties to are These these While risk risks current outlook, factors a are reflect number results differ with cause filings subject described in

such acquisition, excludes as On in and non-GAAP cost, we financial costs. expense, today's special stock-based asset development will certain other which call, compensation discussing our be information, earnings reorganization impairments, items items described software release, capitalized including related

also and will free other revenue as such cash constant We flow non-GAAP comparisons. discuss items, currency

other will earnings during as measures be included to of future A on revise reconciliation of obligation today which information our new or the release, results. website. conference no this GAAP results assumes investor.teradata.com. concerning or and conference in is this our information Teradata A available our to accessible result of results is later at information our replay call, call these provided update a whether non-GAAP

And turn over the to now, Vic. call will I

Vic Lund

everyone. afternoon, Good

want to Before announcement results, a our I to talk take Mark our minutes CEO you discusses few recent our about to regarding change.

we a this strategy on customer did an Oliver centric was appropriate As of stepped down a Oliver agreed that in developing Directors job aware, that leadership. and you as are vision of defining has time announced Oliver success. CEO. The our and Board fantastic change our for

that embracing our quarter this demonstrates are growth strategy it. our working ARR strong and is Our customers

great not that always skills make visionary the a those that are drive execution. However, great

skills is required where to a our this transformation, was are to It reason to strategy. the completion of at are point we drive a for this at decided change strong believes successful Board a required that Board Our our continue in executional time.

forward. propel commencing CEO search immediately is Board to a Teradata The

their but a dedicate her through best we who for seamless excellent the role. be CEO support have on they can will an important committee efforts this to candidate, person the I to transition. a or boarding have not We that ensure will search his new finding will I

strategy customer and team A the market all solid leading innovation, and success us successful. vision. right of ingredients to our right technology committed have We to be for the

team As along that our leadership Interim-CEO, execution rest are XXXX. will our eyes successful focused will I of to drive the with and a on ensure

to Now I'll turn time the Mark. over

Mark Culhane

good and Vic afternoon. Thanks,

action. high news expectations and that my customers recurring our with and takeaways at we're a in I the on to subscription of remarks which our quarter, value that our will centered with shareholders. will on end for for financial update our start strong drive turn had with by a business all the strategy revenue, I our center results. record success, covering ARR Teradata and three rate, demonstrating business Starting key moving for for customer driving success at and and guidance Teradata

move to we First, in continue cloud. forward the

recently we position cloud strategy cloud-based from And capabilities journey. help move a set to Teradata to answers companies market to to the data a they announced developed in have lead analytics. their on wherever major are We of analytics

consumption. capabilities, build and continuing learning adoption new momentum increased analysis Teradata including Vantage series of with that to time are we growing expanded and Second, machine

opening strengthen possibilities to our the for market. power us in go to the of third, And Vantage is cloud

trajectory. with Let's our start cloud

those cloud offer. move providing hybrid Along and to continue forward conference. lines, customers industry's by based several our cloud We recent important the product user made at multi we in announcements on choice our strongest the

Google. with We announced a new strategic partnership

customers both providers global Cloud. Only in choice same environments, hybrid Google Vantage the Azure and the Teradata top of soon giving leverage can cloud public the provides three customers flexibility. utmost AWS, Our across the and functionality power multi-cloud and full

also innovation data and industry. true perform of customers queries, via move pay current to any added Teradata This to complex We or on help low expand continues cost for amount only analytics true innovation giving support And commitment or our flexibility. system, consumption in providing operational to virtually Azure and their freedom completed based for prices and native a to on the the pay-as-you-go SX customers Amazon we what storage financial Vantage blog. announced is used

click calls, storage edition opens retains media captures expanding analytics, data our and Vantage opportunity. and social more. value sources new streams, Low from granular sensors, the up use Cost service from at level of to power object thereby market gain like This customer cases

seeing The answers premises. in cloud. on and powerful We provides the our same insights Teradata value from public are increasingly as great analytics, customers comes cloud utilize the the

And of becoming support on the provide has This customer is on driven few using Group I'll French global running a A broadcaster advanced for learning leading leader the vantage a customer migrated company a interactions. to Teradata analytics. analytical Vantage AWS TV a examples. long to Teradata customer is furnishings home more digitization of Teradata. and and machine today their Canal+ Azure new successfully market with standing improve

analyzing gain leading world Japan Vantage on in customer how generation Telematics the data is into improve its and insights next to based are deep it partner as to products its and has services. quality car manufacturer being selected A AWS, cars with maintenance on Teradata innovate its looking By Teradata used.

the We Vantage, mentioned object at earlier the key for our our Vantage. platform progress look we history. I keep that in second bar cost added support with let's Now native on raising store. takeaway, successful Vantage most low continued

advanced of important products and marketers a Vantage have brings enables new two view Vantage to launched business Vantage to which their which users the power analytics analysts, degree of XXX we customers designed experience customer for users. addition, In

former R&D realize a reducing recent customer selected scientists sets term of generated to address the the of machines Now advanced and lab will capabilities customer analyze learning drugs. I'd help and long data to Teradata the new to integration deliver patient better data With it's Vantage and and Global to cost outcomes of share complex like help leader challenge market. from few and faster our Vantage wins. its strategy A time of developing machine it analytics

chain XXX With Teradata back public to IT are its degree streamlining Analytics chose running the AWS, omni a transformation A analytics as order view global channel processes needed to experience. of digital its U.S. provide supporting we Teradata customers Vantage journey. Vantage journey platform on for the retailer to advanced cloud superior customer's provide answers customers’ fulfillment. customer the large its in will a while provide supply and office personalize also

on Vantage consumption. payers based with world, healthcare largest the doubled in the of One in down the Americas, Teradata

better of is on business largest value line our suited is to investment. customers in value the focus ensuring realization one with the Now captured

to a as replaced view And a its outdoor retailer large an enterprise division. hospitality hospitality help of group, brands have customer its manufacturing the as and and U.S. retail customers spanning of well we competitor its all

customer our hospitality the of helping are integrating by We improve his retail, transactions. customers value lifetime and warranty

Earlier Vantage of new new customers, cloud this I the that And mentioned available in channels. capabilities open markets or can and through positioned to through partnerships premises. are the that new market functionality, on whether to are expansion to go we

in power announced strategic partnership to of a Germany. enterprises last with and the we medium Just Vantage bring Telekom to small week, Deutsche

take Deutsche sales in uniquely SMB advantage data to through Teradata large will Telekom develop that’s enormous leverage the and market something market to help segment targeting Vantage to our of this This customers will the just take not of partnership direct analytics analytics. addressed that potential best-in-class organization.

expected our faster our impact I than and an financial factors results, on update key want transformation to spend driving our on results few financial including reported outlook. moments Now recurring our on a transition related consulting our and revenue our model our few to updated the

business, accelerate company consideration Given of the and IT our spending execution faster plans transition uncertain subscription to a environment. our to based

to QX. and sales market for AAR drove exceeding of market team a sales years new solid go earlier reorganization bringing enterprise our incremental leadership experience. Americas we the to year, our APAC to quarter has of added dozens After settled First, this Heads and in our our with organization growth in incremental depth of expectations go

subscription business a at along transition proceeding an model are unprecedented based rate. We our to

In one our for first materially fact, moving to largest consumptions subscription of during customers while the quarter, the increased time.

for year, or versus our expect XX% expectation more. mixed result be bookings the of we approximately now original full XX% a to based subscription As

will expect a the term of metrics. little and the of this through substantially for year. to of revenue will to subscription transition has our implications metrics. model accelerated last as financial Therefore, provide near pace we our The be Consequently, year, be no next subscription that quarter transition end we mix bookings business our perpetual to based obviously a next quarter

per share beyond. sets resulting second It’s and quarter income, as for cash perpetual revenue has for well us flow to the earnings up operating but improvement expected we coming results for clearly in QX half QX and XXXX both in our incremental results, the than implications that lower as our and into

of other delivering driving taking hand, the types success consulting to improvement consulting of are and is our On is transformation we expectations. that very customer trailing longer software. a than part the It understand is increased gross certain expected margin Teradata organization important important of our consumption and of

those our support For our sure capabilities we to to sustain make customers. is priority

are partnerships consulting order by consumption deepening that a strong in is that currently system deliver our to handled position eliminating to efficiently organization simplifying in integrators unrelated areas includes strategic of strategic our automate with transformation and incremental these that key work products consulting three The our driving advantage, to are steps, services. consulting

in was progress oriented We XX% resulting that decline than non-strategic which consumption offerings consulting will greater consulting in on expected. made increase Vantage refocusing consulting in revenue QX, engagements, strong exiting in our a while

additional Teradata long-term results, Taken term our critical but up strong, putting together to near these growth. are profitable items predictable, are on financial pressure setting

we decline expect revenue prior from consulting million of by to year-over-year roughly versus year, XXXX. recurring roughly We for approximately XX%. XX% perpetual now our the revenues around XX of to means of now expectations our revenue transition decline faster a A that expect to XXX be business million

remain not going consulting are strategy. our in though execute to ultimately our to as XXXX we in our margin a expected we improvement increase corresponding confident ability we on significantly we However, see as margin consulting

year's consulting be similar to last full will for year. level the Therefore margins likely

As XX XX GAAP flow full $X.XX to our be year of we free the approximately to now And cash these full a result of million. expect $X. approximately be non items, for to million to EPS all year XXXX

now end XX for high to at used our restructuring the actions cash million With of million range. being prior the XX expected

the due the operational faster portion to a than higher significant expectations of the prior XXXX execution tax decline to while result than our a as A plan, subscriptions expected previously well as from is rate. against annual primarily expected remainder is transition slower

an points environment. overall spending data With in of understanding showing external these IT mind factors mixed more a

conservative more to a our for outlook taking are We approach QX.

currency of We are year of at full growth AAR X% point reported expecting which a headwind. least now includes

XXX recurring recurring of expect million, revenue which constant of X% currency. or year growth to in revenue to We results for the QX in to million XX% XX% for XXX X%

additional detail on For metrics. color this we website, providing greater on put the IR quarter, key financial financial

We beyond. positioned and confident incremental have made XXXX that and investments remain significant many improvement for the significant company XXXX is in in

we be XXXX. result, transition, believe EPS and metrics in free the model as our and a improvement should in we of As we XXXX flow cash trough the peak our passed substantial expect

We an our color more call, long-term provide Analyst and to for expectations additional year expect hold Day relating on to on to during targets. next update financial an will the in QX and we first our XXXX half business our provide details our earnings

Operator, answer are ready we now to questions.

Operator

Mohan comes from from question a line Your first Bank Wamsi of America. of Instructions] [Operator

Your line is open.

Wamsi Mohan

Mark on QX you what's you being the had driven talk And more thank revenues, execution about either in spoken on macro, can with quarter was elaborate it QX. flow it a for I changed comfortable recurring last about acceleration you. more have follow weakness from free up? and and to perspective, Can XXXX. and please QX a Yes, cash macro XXXX was thoughts you

Mark Culhane

Yes, Wamsi. thanks so

first had IT the a environment the in timing is spending our the all expectations a we're more given around outlook. uncertainties of taking overall from and approach other QX and So to uncertainty much QX we secondly, bit changed linearity conservative

Wamsi Mohan

Mark? flow cash free on And

Mark Culhane

Yes the us cash a than is EPS running free this revenue faster confidence to collect less that cash perspective. subscription. significantly flow collected gives we really impacted flow by perpetual and XXXX There that are into is move free future, cash QX from get and which expected to for we the going the bottom it’s honestly and the through QX don’t

Wamsi Mohan

it been adds strategy on has you're incremental to I Okay. too feels clearly give time transition CEO could if It judge And time if Vic some almost execution transition more a Board a the CEO the you why pleased the decide when were very with lot? disruption quick. did to not doing quick the at

Vic Lund

thanks. Yes, Wamsi

and Oliver He never that it's has been visionary, time a and obligation on to our just before, a we Board I him. entire place did a something had put we - point stayed when understand loved great drive CEO to concrete focused close do execution decision stayed Board reached him watched, reached an a was but So to execution. Board had in close, wonderful the of that the a more we across we where job, He more Oliver's to great collective needed the be visionary. just it organization. had decision

and had one in good of and make friend it's the that doesn't that's mine is but opening them a truth it would estimation, any mine, still executioner. the So great what what truth for the to friend it, it's benefit Board's makes expected comments time believe is you think I and a or the outcome. with I a he thing said And time we good result things did. that do often not the when visionary Board my - more realize I that in a about them you organization this something and just the of is was Oliver And that waiting sometimes different of know I great is.

Board. good have We

a that Obviously it your decisions had not was discussions. about, watching in whim. it just you a after - I we'd mean, watched And judgment, while, We we done time. and for good, here, so we still but organization strategy better on make - drive stuff those what we decided like guiding start performance. it's and is is unacceptable. simply I things have and to customer happen reception mean, making strong, I to consulting thought did

Operator

comes of Katy the Huberty question next from Your Morgan from line Stanley.

line Your is open.

Katy Huberty

from model a ago questions a external good through didn't is years view seem think Hi then and And follow-on an search options. several went do a credit. market different? Why with Vic. is the clearly in to transition, near it be a any as - stable term, the will seem just follow-up, this through time end the doesn't to back, business a long-term, thanks tricky you welcome but company Wamsi’s, be business Couple going game you're more up you a creates of volatility you CEO pretty didn't come the lot giving

or in other of about not? about private or strategic the The alternatives? so the does think And board why idea doing this instead market thinking

Vic Lund

every So and part, I'll to remember I if can then don't, you try remind me.

So - just through go So we'll that where are. we

internal few of got and went a an getting we not and hitting ago, to thing we just in We We and tackling metrics first wanted up. we're everything that years process. through So basic actually ago like felt performance and blocking time we do. we there have and a had where we top to good did a to year got period decided of that we search. do came were lot for through external search I our

Oliver Oliver of company, our from would for CEO, work by for a visionary. it all be the and great great, would decided out was if we the would transition better was through of company worked if could best that great. new us, the it stability We be And knew company. it we that the well-liked be that

Unfortunately, it that worked out. the way isn't

the do time. So at search we that didn't external

there. that confident Board we highly can The is are find. We

they're a I today. starting good and together And committee our have we will think find We that process candidate.

characteristics and having they've major in for a I driving strong the feel need there today around a of One now really is a of business business, we think executional there, in a but assets. for the know all been difference better long between did have than you advantages we is we the we

has So what leader have to that the to new skills will of think and interest and I make we And interestingly kind enough it be that this that. drive outcome. we sure

As think we've in to plans we shareholder drive last the will your value. great question, here got place

obligations, but value. It's aware their will always in good of plans is got value. we've obviously drive Board fiduciary Our place the

lot sold of personally, you share. stock You mean, believe sell this of about you a and talks but there's lot do to stuff, never just - I not near term value I I've a own how I I live a know intend here. live, everybody share, a where do this

way through goals believer get top. do and the And quarter credit, start a We place. forward. a the it. been will and we will we think put understood in we programs which start next throughout year, hitting a PR It hasn’t going street performance metrics this, advantage can takes to in and have your after the we want of to we both And the if strategy showing, strong see executional the of then but that great not quarter that that you am strong you do I I

Katy Huberty

for Thank that. you

Mark Just flow about about a now off up. the free consulting and talked you perpetual How business? at you year. quick next precise run this cash EPS follow that think you the would and has revenue trajectory point

Mark Culhane

think more about we key metrics. XXXX get QX when on think balance we Yes, to we'll here on I XXXX our outlook the incremental the have that get all is talk but said I growth again, across from call, we

Operator

from Your from comes next of Lenschow question Raimo Barclays. line

Your open. line is

Raimo Lenschow

in. slightly faster the you me transformation. I me Thanks Mark, help like for puzzled get can maybe squeezing I'm

down off also good services stuff certain so recurring is that which is off. of you’re running and running stuff. And the perpetual and professional But guiding infused the kind ARR,

kind help me guide it. point. but levels, on you. kind them? this miss trying is of up, And pipeline looks it's if of it reading afford why more is you from than look with my color you just like kind slightly that's I'm maybe on I some put emptier all at change, high I'm of Thank CEO at to like So Can the the the picture QX for just

Mark Culhane

we uncertainties. to driving taking more what is, really are outlook the what's around guide. environment to that's due spending Yes, we've the said conservative a our I other think IT overall QX the And approach and uncertainty

Raimo Lenschow

Yes.

if if I you I in some see or is look so then look to little And the of, I of? you APAC, at - terms bit the performance, a in anything differently that that if of kind look can talk the EMEA, is at there the at geographic numbers Americas, in regions

Mark Culhane

regions. subscription the subscription Yet much profile 'XX all because why to perpetual from profits That's higher carry gross you it's moving playing across segment being at three and to we happening a see it's where thought. they're what's come we margin really fantastic the away No, driven all all revenues are have increasing gross how more rate. down out and that's a

Operator

from Your Wood comes next from the of Derrick Cowen. question line

Your line is open.

Nick Altman

Nick the you of Thanks to CEO are questions. qualities and expect CEO? do on take, is for This taking some in the Derek. looking our what new guys you're Altman for long How search the for

Vic Lund

firm search we the use so like they a then, Well, that. identified they that anything there committee and have we name starting going to have and they're to don't are signed in has so individual you yet,

We Because knows right? who interviewing will can just we're on six together, is to this, as it my as and eight they soon months. start candidates pull starting, guess but

collect a then to that I get and think all head get are. people they ready got more to through stuff lot your they of where got to get and be their kind going to and you're you bonuses -

of process eight today. And transition, see and short That's would good where we'll think that's then our we shape thought course I in be months, likely apparently I six to But at. should would think.

experience the would good to Further, have approval, can we And see team where before, and really think that who we're very at a strong through are, could place leverage strong benefit been we're we a qualities thing someone that would our for we has transitioned operational who the now. I in has growth. looking love

All hires excellent of the are people.

use this really them. team characteristic have executive place strong a team and properly We through to and leader is in has have the work ability seasoned other to the a

and can. their up to you bottoms will will operating top opposed be ability do allow your loose as capabilities think to And so of Let the down, turned their they performance. the the do best it people percolate increase team also I to

Nick Altman

in how about as might And guide your a when give you results then the can revisit just you the transition, you the CEO QX us or that? framework given guys sense thinking XXXX are previously and issued to

Mark Culhane

that. Day the Analyst give Yes, half we'll hold insight where year an first of next in more on we'll

Operator

Your Citi. of from the question from comes line Radke Tyler next

open. is line Your

Tyler Radke

you from just of question that kind question. multiple the for I working think customers the a how employees a And taking product Thanks employees just all guess as with this that isn't having sense morale just transition their over Maybe also of to are inspired was going taking position. few viewed and, my both could potentially positivity at lot of I things were Vic, CEO But challenging through one that, of and kind that. how, are what be on leadership next confident the visionary, among heard for of by dampen a of your you transition, I of customers had months?

Vic Lund

of know me. with for than people but they excited the to so people, would. and the adjustment know is power I've I is them meetings positive. I cost and styles they I've grow Well, think or sure that. excited - way that they're the most before. it other, been differently about two days And different spent in not for know had here because management one of have field personally, people. I about I very an I reception me

I that people big are I I'm with know we of customers, big so lot know and the customers. know a in, those some our did deals DT, them, I there of

He is that he So good is lot great our visionary mine, product a the of standard. of company. a a brings benefit is still of friend still and vision true have But we friend it Oliver that in the today. his a

the I of there businesses buy vision, outcomes. and think day, won't but end the they Customers so love And animosity. be at any

going what deliver future value job talked is our in focus to next to the so And for inspiration that's we've our we're not make sure about year. and to on the things all customers, the

Tyler Radke

move pricing follow the was and Great. the packaging one guess, discussed has topics change up, conference know anything product user as respect we're been or outlook here? just perspective to out I pricing, And you having from any just some that’s any a call with towards on seeing pay if pricing or of on recent if of there impact new the to potentially the or go curious I but to a then Vantage at there's

Mark Culhane

our of No, we in remarks, that pricing our did a attention customer lots model interest has from no, leading. Tyler, announce, we and gotten said prepared conference consumption at customers because market it's

only in You for industry. - completed so pay queries, the is which unique

So, be we there. additive to forward. move There'll nothing specific actually how

Operator

are time. [Operator turn at questions Lund you. this Instructions] There no further to Victor back call over Mr. the I

Vic Lund

that record joining much. Thank of strong for of you our this put But Thank drive know I to our the our I a you all go that commitment we hitting a you continued leave lot growth digest transition make out with you. you here. to forward, execution, of to the per call. to targets bottom around want very to shows in turn and both share revenue as demonstrate front earnings we and of

learn got understand something I we've So here. to

thank do will you the again, being that. for We on so And much call.

Operator

gentlemen, you participating. for today's and call. Thank concludes Ladies conference this

now disconnect. may You

Teradata (TDC) 7 Nov 192019 Q3 Earnings call transcript