Earnings call transcript Q1 2023

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Operator

Good afternoon, my name is Francis, and I will be your conference operator today. At this time, I would like to welcome everyone to the Teradata First Quarter 2023 Earnings Call. [Operator Instructions]

I would now like to hand the conference over to your host today, Christopher Lee, Senior Vice President of Investor Relations and Corporate Development.

You may begin your conference.

Christopher Lee

to First welcome Earnings and afternoon, Teradata's Quarter XXXX Call. Good Officer, Executive Teradata's Claire lead Financial our President McMillan, our Officer, results Bramley, will and financial and Chief by Steve followed Chief will outlook. discuss today; our Teradata's who call

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

release materially. outlook, in quarter in While uncertainties with obligation today, undertake actual no that the cause forward-looking that current subject XXXX, update XX-Q in These factors a are described they and days. differ are the risk filed these earnings the and filings, is we and our statements most within statements Form of reflect number few SEC next for ended March to to today's could Form statements. results are as or recent SEC be duty our including of and our to These risks our the expected to forward-looking XX, made XX-K

we release. certain expense and be call, compensation items in described On discussing special stock-based measures earnings our non-GAAP which such as other today's will excludes items financial

We currency will call stated non-GAAP comparisons. A other also all as on otherwise, revenue discussed and later reconciliation our available to numbers investor.teradata.com. results Unless be non-GAAP are flow A and at on website items release, GAAP this the which free call is today's page included will such of cash our earnings our discuss a of constant Investor replay basis. measures on in is Relations website. accessible on conference today of non-GAAP

the turn call will to over I now Steve. And

Steve McMillan

building is another start Thanks today. momentum. everyone. welcome, great us robust on activity. Chris, XXXX, growth quarter cloud primarily of our a to achieved driven by market Teradata Thank you, We in off joining expansion and for

currency, also cloud our continued financial on Our quarter we cloud solid year-on-year as in growth. dollar a delivered leader. metrics position up we to and experienced strengthen key sequential We in constant the was XX% ARR and

growth in in year-over-year. our billion, accelerated growth both X also sequentially to experienced in $X.XXX years. QX growing than total We sequential ARR We more highest and our

In X% in also flow. which $XXX in we growth, profit addition more million free million $XXX and healthy grew currency, by revenue in contributed over to driving profits. to than total gross Recurring generating ARR constant delivered cash

proud team's I the am across full steam the transformation very moving indication board a of that the clear in execution is ahead. quarter, our

Our pipeline. market analytics differentiated our our and and is and driving reputation cloud in data recognized growing we are and position advancing

organizations automation enable in enterprises and Organizations trust analytics, including drive a AI agile decision-making. everywhere scale in to of performance. generative for investing data are stewardship at and fundamental To deep AI-driven of future machine enterprise massively ability requirements price to are move in and and advanced business, trusted into the data learning, this AI most they an Teradata's new world. capabilities, and the require scale will with proven management ML data high-performing as

use retail ML Vertex Google service VantageCloud shoppers. AI, cloud example, analytics its customer rounding our our product in provide real-time we cases. integration thereby recently AWS to personalization generative a Let retailer SageMaker we a ChatGPT, me and in language large the its example share recent by future helped that deliver training scale [thanks] a advanced model with AI, customer at model running model where upon recommendations provider announced with Building for in-store of capabilities extending out this to integrations,

and with learning. machine also the of integration Microsoft We Azure announced VantageCloud

and cycle. openness a ClearScape are the Together, generative Teradata ML analytics with ML. Azure data the AI/ML of science VantageCloud of corporate complex designed This to can execute they life and providing including investments We sophisticated analytics ability in including are unlock scalability tools, and and sets combining customers ensure their deploy with confidence. data simplify we production, to as the models, MLs and massive on platform helps preferred faster and Azure that AI/ML accelerate they and customers potential models

new monthly consumption financial also this is an and a these can major native to on They we that architecture. actually plans of adoption visualizations patterns addition This are driver on VantageCloud critical to financial see built type out pervade surprises, their benefits, and which our governance avoid our all value Customers to and next-gen see differentiator transparency against of their We're transparency for of our helps customer a basis. consumption of continuing major already our Lake In consumption enhancements. enterprise see competition. customers end-of-quarter uncertainty. weekly, hourly, can environments. across Having cloud and customers delivered bringing our new customers is VantageCloud of for product against now Lake, quarterly their times

and We experience to with open developer DBT cases approach important our enhance further strengthened more enable use developer for and integrated our the community.

saves win-win. that adding high-value set popular as data It to tool are We to modern integration them real and engineers with time part allowing while valuable analysts analytics, engineers focus to modern and advanced is this time stack. accelerate with of the on a pursuits data and outcomes

with current to grounded provide another added across and resilient during use geographies customers in with data continued In they customers, industries, and I economic them many cases. pleased momentum relying on the help in expanded like particularly our customer environment. or we remain I'm win-win, the are meet analytics times We the trusted quarter.

examples. a representative through walk Let's few

care one Teradata's valued and with included our closed the This deal largest measured at won of X-figure total health U.S.-based by was an history in value cloud in the partners one of service We a provider. expansion deals quarter. contract

These ClearScape continuing as Teradata engagement, importantly, cost such and, services serves the most level and by care on cloud areas members. increase Medicare/Medicaid multiyear customer in it of to consumers. Our drive health care as its of analytics providers care XXX Analytics million-plus signed of customer strategic AWS and the selecting be instrumental cost down a support to will agreement, to

selected includes more on than to the in AWS financial value data X,XXX and marketing, analytics drive billion program than to have modernization member and multiphase of It units, a and the financial ability most representing including the that success transactions One consulting largest our U.S., integrated of solution demand more in perform will providers on technology institutions predictive insights. services. VantageCloud annually, the supporting on aggregated the now scale end-state macro-level within X.X

in case East commercial customer needs. to to our in specific solutions analytics business new build is departmental success for tailor bank working small investment the logo in a serve to a customer fulfilling Middle specific An each needs the future. key world-class This us. use was set for to the is The ability to

on cloud note platform was the rate, of ahead of driver are activity expansion key just expansion in I'm that the was XXX%, our QX's net customers rate who from year. cloud that this our mentioned QX migrated already growth quarter. and of a year in pleased I to last expanding to

the Additionally, manifestation we This realizing expand of to cases. on customers them use ability best-in-class is they the and cloud. customers meeting to are point seeing wherever migration at a environments, journey hybrid provide their and our workloads of incremental value are adding cloud

Microsoft QX, A a of our transformation Azure. growth is strong forced win-win In relationships AWS and hyperscalers, tenet with They with with the our our key building business. capitalizing on are for relationships saw and multiplier we lasting partners.

the have In to and on-prem. the security Dell Technologies. cloud that the offer quarter, Dell private relationship Teradata of jointly and also we with committed our with flexibility give solutions cloud control deepened of the

have technologies, solutions regulatory Teradata converged hybrid companies as environments infrastructure. with ecosystem, co-engineered element are and such an on-prem for that our We integrating cloud best-of-breed compliance. ideal together Vantage wanting bringing analytic Dell's are the include These of

to customers the meeting adoption they and example of where excited they both the more This underway, market With is future. opportunity for one customer today need with seamless what companies. a already our path I'm are, of about offering

thoughts named of by proud XXXX Ethisphere consecutive day. world's highest the we the integrity and Teradata is of operating the commitment the doing with a year. that testament are right This In for way most companies one ESG our to was to designation every business XXth arena, exceptionally ethical fundamental

As pleased to strong underscore that incredibly want with are Claire, I we to call I turn our the start XXXX. to

for data the resilience multi-cloud, analytics and gives VantageCloud market our and growth are data across and With this on-prem. solutions. formats quarter connected in cloud, us platform, confidence Our hybrid multi-cloud positioned and need and all strongly deployments the we our

where meet help better, You've to more are they competitive more heard say and a efficient place. them me seamlessly get and customers we

reflect the results Our and connected need market approach. in an open

be the ability Our and resilient driving ARR to total demonstrating and economic uncertain cloud relevant in the are remain scale teams in growth at environment. ARR

growing Our technology outpaces Teradata. kudos garner are our analytic competition it and their building on futures and to continues customers the as

Our QX year the performance in confidence ahead. us significant gives

of cloud for our XXXX remain We outlook ARR. and than fiscal achieve XXXX, are to more on our track committed target billion in $X we to

to Claire. call And now I'll pass the

Claire Bramley

everyone. Thank you, afternoon, good Steve, and

is off in and have our sequential to total first The year-over-year constant the growth A fourth as is $XX in growth reported quarter currency. growth quarter and show, Teradata of to have first a X we the results was continues highlight good for clear the start time the momentum of of ARR As from seen years. X% million strong X% quarter to in XXXX.

our cloud period last was Sequential as than XX% million, Another Xx public and more reported same the in highlight greater year-over-year which the year. than currency. growth $XX was was of growth XX% growth constant in

both us Free outlook of cash metrics. per our diluted for to puts track flow share of non-GAAP achieve on and $X.XX $XXX million earnings annual

just against over the company's cloud-first amidst Our years current ago. X give first confidence These quarter introduced profitable financial growth the me our the to results we execution environment. results strategy macroeconomic XXXX outlook reflects reiterate dedicated

Let starting details results, now me financial our more with on share some revenue.

revenue is reported. last dynamic driven from total revenue several last and by XX%, this X% the recurring revenue quarter, same X as Recurring execution revenue and strong $XXX was year. expansions migrations growth and large percentage contributed go-to-market up of and in currency growth quarter million, period our was to was range. including the the X-figure which Growth cloud X- year in First year-over-year. as percentage a This X% strong constant team points of

experienced or $X This This quarter a of the the we more the partway subscription a In point that increase recurring from revenue rate contracts contributed years. that of we renewal ceased previous of by net $XX resulting through than positive very XXXX. upfront was better the recognized first million of of a million, quarter, growth to Russian of was growth. than approximately offset loss year-over-year X revenue healthy operations on-prem in

down perpetual $XXX change year-over-year million, was currency and to flat our year-over-year reported. strategic total transformation, First consulting is primarily and in as due revenue constant X% quarter revenue. The impacting

upfront primary of recurring We a higher profitability benefit revenue. recurring of profit to of first revenue. of the the be healthy. The profit net was $XXX to quarter. gross positive in in the gross XX%. to margin million continues approximately our driver also points related performance mix X was Moving a Profitability over of reported gross There strong and percentage impact

an expenses Operating profit or were XX%. year-over-year fixed approximately SG&A and expenses and flat primarily increased compensation. down was million, Total $XXX higher operating margin operating variable to due despite of sequentially

positive We investments maintain well discipline return-generating are as focused continue cost future as growth. to on prioritize our that

range. was diluted Non-GAAP share is per with $X.XX, in earnings line our which outlook

other approximate Our an absorb results Egypt unplanned enabled geographies, $X.XX as various Pakistan. to impact devaluations strong such quarterly in us in from currency and expense

driven capital and We cash to Turning flow generated generation cycle. an allocation. income both by cash million free $XXX quarter and conversion efficient in solid the

to repurchase We of a to cash target strong our annual XX%. our of our flow free advantage ahead return first balance of of quarter shares, continue XX% resulting to sheet of in take shareholders,

the quarter quarter the of year though like outlook best view and XXXX outlook, of second our We year's the results our to reaffirm of linearity. outlook. annual ahead last year. some to first all The even our XXXX context of midpoint I'd regards With the elements remains were the rest provide our of on

slight currency material in see not absorbed We We other headwinds a impacting business. have outlook. sequential XXXX any do our our headwind currently

macroeconomic to very We will continue environment closely. monitor the

our the and of dollar for versus the in ARR sequential expecting second period in expect are we cloud the year, growth half not last same platform market line of given from do greater the the the We ARR quarter. growth dollar cloud an for first quarter VantageCloud second increasing seasonality. year acceleration Given and with quarter strength first historical our total linearity and to awareness ARR of the improved the

strongest the and We for continue will total both growth. ARR this dollar ARR to that anticipate year be our fourth quarter cloud quarter

margin to as scale total shift improvement in a we margin as The We gross noted revenue slight earnings in gross benefits. quarter's year-over-year last in results headwind mix solid call. expect a increasing achieve the XXXX, cloud to company cloud on

quarter. also the upfront first We less the a benefit anticipate the of to compared rest for recurring margin year as from gross of revenue

per earnings $X.XX, to and range track are for outlook the share completion annual the $X.XX We quarter. achieve on of to to first non-GAAP are our narrowing our with

approximately expense approximately include of million $XX tax assumptions Some non-GAAP shares is weighted million. other approximately to average no for rate and XXXX XXX.X the There updated outstanding change modeling of XX%. of

the for shares per XXXX non-GAAP of follows. non-GAAP to $X.XX outstanding share tax second the is be We in outlook We Our to to the as anticipate full is $X.XX. XX% estimate rate of as diluted average be quarter approximately year. the same weighted project range the the and earnings

for Before I open all to are year in share the we across questions, the pleased would to of with a metrics. key call I our team's execution, that the like great start resulting

focus cloud-first ahead maintain our are year growth on we We excited relentless about as strategy. the our profitable

today. your for Thank you very time much

to Now Q&A. let's move

Operator

Craig-Hallum. with [Operator Instructions] line first the Bennett Chad question comes The from of

Chad Bennett

staggering, mean we've guys. light the year. to hyperscalers especially pretty from job Great heard in and the is the cloud cloud what ARR of start I

that pardon So midstream of cloud prepared on on just the Steve the And of quarter hopped remarks. in question, the and mentioned I public pull you reiterating apologize the saw of kind I remarks, you that accelerated I or it boosted any number? prepared guess the kind was and in forward in but of there me, year, Claire, or ARR migrations first if outperformance kind

Steve McMillan

think significant This bit, have pull team. didn't little by that but great we a Chad, I no, forward any QX. execution was from we the just covered

really the that I executing the think strategy QX. proves in of team and company, it getting behind the well whole strategy out

Teradata from call, predominant the real of expansions. growth customers. the platform that seeing on incredibly We're of proud was the for terms said inside in VantageCloud we our traction As

unusual nothing yes, So perspective. from a transaction

Chad Bennett

you kind all or right? hinting the and which I less, trying you're is decelerating? in seeing I'll in, "We're i.e., your off. basis, people how workloads, once-converted improving new a every like maybe and levels would ROI spend kind Got saying, just be considering a maintaining towards utilizing kind seeing if the pitch optimize expansion spend," think it's actually -- that's it. great. extraordinary. And hop But different workloads have net And the consumption business are guess, it's your subscription whether characterization is know everybody is Just models, or case, of the like there of churn I terms hyperscaler on-prem you customer our to of in on what of I net on of model any your business, less, backdrop then Coming else

Steve McMillan

Thanks, Chad.

clearly yes, customers' the with our the financial cloud. and Teradata have and governance So for the a platform the gives they that enable workloads we differentiator and deploy in expanding the Teradata faith that platform is on us

patented with the a optimization customers cloud. don't predictable capabilities clearly, have Our query And solutions. essentially consumption-based and in XXX% very that management workload get that mean cost entirely model we with

about more to to the the we Teradata In terms see the types in to VantageCloud methodology, our becoming see data your open question of figures, biggest continuing We and growth really and was to expansion, big data expansion that about deal, platform, total that Teradata causing AWS happen. And we're that's deal the expansions also, is using been and for platform. a The probably connected ARR. workload done. available talked that those X-figure is Marketplace the in TCV X deal and

a lot deals had portfolio. X-figure across also the of and We X-

and use but controlled good data well very that resonating spread is good a the Chad. expansion which a doing in data a deal for with expansion question, Thanks of workloads of sizes, our different spread really cases, So customers. different happening, way,

Operator

with Ma The from Howard next Guggenheim. question comes

Howard Ma

Can to may in incumbents be in this multiyear and your more how you delays and now that migrate had to a planned to ask about the the of the respect peers? industry, talk to environment with cloud to performing inclined one about related in customers Vantage? benefiting about is Steve, more we're on I you seeing stick across migrate competitor relative Teradata, cloud-only projects Teradata that expand Are also optimization cloud board. hearing major as how Teradata want a and question with to

Steve McMillan

especially want macroeconomic VantageCloud turbulent respond Howard, what able take commitment real in even I nimble, turbulent, And to be They technologies. a Organizations seeing, Yes, want quickly. times. to want to it's think platform, innovative. or the do maybe we're of to in be is advantage to cloud-based clearly, we Teradata

VantageCloud want our that's cloud they customers. Teradata as Teradata as the exactly to delivers. fastest, want cloud to the least environment and get a of risk the is lease controlled. possible to amount so risk. when easily they to And And they And for quickest, very get quickly cloud, with the to have then that's what path the financial

I that. think they seeing are

the I and integrate, the integrations out across The capabilities Azure, that they Teradata that something VantageCloud cloud. new that using and VantageCloud with grow really something start completely that in fact and the platform and to customers of we is to fact very, competition, is and the Google to with something AI/ML the new that commit compared certainly, is they these And mentioned I'm deliver capability ways to some very having recommit Teradata And activity can seeking can confidence can value our are capability, AWS, that the deliver. capabilities customers with. a expansion happy giving our differentiated QX our and in

Howard Ma

for a income is in is for It full the income at other It looks very the Is as our that Claire, like was guidance a of other What low least actually EPS have guidance sense. remarks. in follow-up Claire. was operating you And flow your lot little great. line? reason prepared the that model. income I the I all end operating cash makes light, the for That's to line. outperformed, of mentioned variance that bit and relative flow see near But a in modest year? cash the operating

Claire Bramley

remarks. some expense a Pakistan. and with see Egypt in did and do mention did so couple devaluation income Yes, geographies, prepared in specifically Howard. I QX related other my briefly to currency We headwinds in it Thanks, the and to of

did and those So that to currencies other so hit take devalue and expense. income our QX is in in -- this therefore, we QX, have and

saw that's what there. we So

to the impact cash overall With regards on operations. the from

have we we of flow view. is we guide So and that midpoint reiterated cash the best have the free given still believe our guide, our

our We a our expenditures movements from between have and ops. capital few cash

in adjustment great and we've So given that generation flow why that we've but still we cash gave year outlook to cash a previously made slight confidence free the reaffirmation that the that's today. outlook, full of the have

Operator

with comes The next question from Tyler Radke Citi.

Tyler Radke

So to impressive, to Steve, ARR the for you customers communicated migrate their could or the started has has curious, just on kind some cloud road as very the come back perception reverse the about that Teradata, what and the wondering clearly, that been maybe boomerang Teradata off what Just have in extent the maybe here to if performance extent driver years But customers down joined plans of company. since to that, those frankly, you of performance. implications you you have plans? been I'm a think that comment see

Steve McMillan

confidence they Teradata didn't in can in strategy see context the Yes, migrate very on of into comment customers differentiated. One cloud dimensions. company is is capability, a a on translated a and gives that effective we into Tyler, which hyperscaler certainly from way. modern a their X in a who that environment that strength our I'd have past the And context, I and think transform the cloud uniquely technology the technology our

that and with is advances the our technology made the differentiation we significant. that we've So competition have

fixed of model. run second terms of contracts. the we us capacity that over that's gives our Teradata the like is recurring of most think revenues in customers It have leading solid utilization our in systems. the model, the a a are fact very base contracted remember, capacity that XX% business And offer at that we I strength to thing fixed

workloads. logical geography, the cloud And think get across customers absolutely they way can then our the require have at choice. relationships think, is mission-critical customers multiple mission-critical just with I Teradata means the I that third where absolutely the have the scale seeing And we area, what is are that that industry, differentiation some and is are across to that that performance the those they we workloads

all to continuously customers I'm team very Teradata's the see inside proud point. get us recommitting we So Teradata. committing contribution that And of of and to to

Tyler Radke

your QX at of couple clarify on pace And Great. as like expecting understand Are with guidance the why comments you same guess a this given QX? not performance it not that grow timing any seem be so ARR the really And to seems methodology. respect on seeing just Claire, to to sequentially not business in increase questions. updated you're QX, outlook better and just doesn't your clean I to was the a in seasonality acceleration. here One, outperformance? wanted headwinds this such year strong QX, full and related, then and in given really a just

Claire Bramley

Thanks, Yes. Tyler.

jus the linearity on question. So

particularly the obviously we linearity improved with last this So the start, happy the QX with year happy year. I'm very are and to compared we've seen that

time I reiterate as important the I milestone it prepared a mentioned that's in big remarks, but in also to we first for think years. my the sequentially us it's total are X a for growing that company. point ARR

QX. So said, start great as you to

As the you you know, quarter. don't guide for we look as acceleration, QX the at

to last my each we that as really I a normally growth there was year is, in focused starting quarter. sequential dollar we're you comments that see a use leading year's if number. full acceleration So would by quarter previously, on But point, linearity

linearity the year. better each better to year in we and So because this last obviously and growth a quarter, have group QX seen getting higher performance higher compared

an sequential that see we dollar acceleration see growth dollar not Just an QX. acceleration. We're just expecting in highlighting we the in absolutely probably expecting are growth, to but won't

to regards So that third QX. answers with your hopefully, question

growth forgetting back of again, quarter outlook. in there. And a be think see that comes to this not both macro be and guide, is uncertainty year, within there's prudent, linearity our year lot improved ARR. it out full as full for ARR have realistic great still and our important we to still QX the biggest total going cloud to the But we as we it's confidence an year then And and

believe just methodology, conservative the full So midpoint our terms of the still in that for our best keeping of view approach the we that outlook year. is outlook

Operator

The with next Nehal Markets. from question comes Capital Northland Chokshi

Nehal Chokshi

congrats total a first basis far, the strongest well quarter. for as and My on on, incremental fiscal cloud by ARR

You answered to questions all the related that.

a question here, what So talked little on more you about future you those a bit growth? see looking towards investing you talk continuing longer-term invest areas to I are which that are want see to to Can to future pivot about and growth.

Steve McMillan

Yes, continuously dollars get Nehal, the that we're in right Clearly, assess Thanks, on those key. for question. we to is our the our investment envelope taking of putting absolutely to business we're traction. areas them the ensure and analytics focus

of One for those believe of don't that our as that analysts capabilities you provide our are the platform capabilities built forward. the And customers analytics analytics reported all move we recent of customers into many can use today. that capabilities differentiated the

integration So stacks with key manifest cloud that's the us, that going on to for area it's be service continuing to AI/ML in providers. going a and investment of

and that we scientists get say at data to on We everyday valuable platform, most stored have in a the can unique we to when up it we that where the basis the so approach data the open a means want -- that Teradata, world. that that look as platform VantageCloud Teradata that's they in the utilize data probably tools to an use the tooling

artificial in of motion, machine our to that And success continue invest awareness. so in which our from drives like investment is customer to ensuring motions we a product terms our intelligence going learning. that capabilities teams. in and focused expansion continue get invest to sales going We're And market we more to will with along where is be

to over for what quarter I this seen market Teradata awareness the platform that continues is And past we've think grow.

had that really Forrester that perspective. note up backed think I from our a from we

to are committed we company. so And profitable absolutely growth being a

But full absorbed of As perspective. increased remarks, currency terms Claire the our guidance in we and mentioned our in we are of operational how year proud from executing. guidance headwinds company's very some her that

Nehal Chokshi

possibly innovation also, from the road existing both any to is my that And Is like, to perspective, analytics that an seems product As collaborative a sharing then of one cloud-based you to going follow-up would in areas OLAP. enable understanding of that, something unify partners. structure data that's be then their can your a that map? customer and OLTP a from to

Steve McMillan

of So has Data Nehal, couple Teradata points and a there. for done is that sharing years years. something

provided data sharing on to most the valuable native CSPs ecosystem. perspective services give that that is sharing by Our data is going customers by are the data capabilities the sharing

And and very so sharing And we capabilities we it of data our governance from control services integrate all That manage today. we with in services, can that sharing the built data hyperscalers. of customers the that the enable platform really the our data the enhances and are data save essentially proud and our Teradata call and their fact are to ecosystem.

across use #X. refer of of all in comes Just as different the Gartner report workloads, the Teradata from X and in different of terms cases cases, where types Gartner all you I'd up of looked number perspective, they use the a future a systems cloud management to -- database with

best analytical So data the use we are lake, the best enterprise data the cases platform. deployed on the warehouse, best

and is solidly capability our believe Teradata the from platform our to workloads converge cloud. platform and and competition the those allows all really we so of that differentiated on And

Operator

The next TD question from with Cowen. comes Derrick Wood

Derrick Wood

to business Great. Congrats in get QX? of a been the have lot certainly customers a you sensed guys on topical have when in pipeline, vertical. to you cloud? behavior comes trying at customers pulse How appetite This any the change you migrate in And looking a of solid has the financial see vertical. behavior that services, demand you're did to the of quarter. Steve, banking especially terms in out in just from on your of revenue activity a when it lot

Steve McMillan

-- couple a just The to Derrick. Thanks, points know. of Yes.

of in or of have exposure a terms organizations. We failures largest, robust that global we the impact with financial happened the the services right? direct services the bank the demand deal haven't bank from the to successful, future. most build see transform, had them on financial organizations any a in those Just the most basis, world. to to And Build organization financial of want we future, from services want still

deliver that and those one in times, was -- cases a and that American experience every that, have, to the South off to have customers banking a appetite single of have outcomes I they perspective migrate to place nimble, agile. be capability use than tremendous use to have yesterday, the customer in They to to the I working times be anything help of growth And us talking transform drive and they transform the customers through our day. get kind right have to backing cases times, cloud turbulent experience they better experiences to context a organization. any And the I their organization the to think data give don't have that is they that cloud them in think continue turbulent and and we to our solutions to Teradata the else. for use unique the the has, fact

Derrick Wood

And margins. nice Claire, Okay. job on gross

that in us for And a you I sequentially this what out don't know sense for had or sense kind you us You improvement public cloud quarter? guys are of give of gross as margins, room scale of part a the where revenue pretty gross good break drove margins. much the Can how give but in business? you recurring there today jump you is can a they

Claire Bramley

absolutely. Yes,

now recurring can revenue, recurring percentage total a look see, So at higher gross much our performance And at margin. really up strong margin. revenue at from a as as you it's runs XX%, you as revenue and of we've had

from standpoint overall for great margin. So mix total that's an gross

We QX we look revenue recurring at specifically we recognition. as upfront to regards As higher strong at performance, you also the XX%. are as were said, in a had margins, helped with normally you

a is an there that couple overall performance. points So us from helped of there

And in helped normal from margin revenue strong and seasonality. a So recurring that's that and line renewals, that's are we seeing standpoint to also with us keep strong. helped

So overall, the there, happy Derrick. your to point with performance

gross and making. that continue good With numbers, we're overall, cloud don't still scale. with say, being we progress margins impact our definitely we making to with improving to regards still to they margins to expand. continuing They we're cloud the year pleased plan you gross seen QX reaffirm track on full cloud year-over-year regards continue with but to And to the I'm are expand. We and disclose our margins. strong overall as able margin expansion dilutive with we've are to a our but anticipate the a those on we cloud on performance gross growth, that as margins progress And margin, our in total are

Operator

of next line with Mohan Wamsi America. Our comes Bank from question the of

Ruplu Bhattacharya

filling have for Claire. Ruplu I for And today. X It's Wamsi questions in

follow-up Claire, just a to prior one, first the question. The as

we kind if just side revenue about talk margins the give benefit recurring on thoughts we us you the benefit first Should or either from recurring upfront and if in you revenue So not, And So in the some the any can as XQ, the lower. year? can your the you expect Can quarter. we moderate on of any the remaining to of puts sustain XQ? to expect should that got drive XQ, through go moderate rest the payments of takes quarters? margins

Claire Bramley

Yes.

thank Ruplu the So you, questions. for

in as 'XX, we overall, move for that of upfront impact seen And margins be again, saw than So line we fiscal throughout impact we the the in And seasonality in than we with 'XX. to the less of year we is are year. in was less 'XX rest saw in have than normal to be expecting do lower the QX. 'XX, the and we what anticipate

customers. and on-prem material renew kind of definitely becoming So is this expand impact less with to that as continue and through we we of refresh existing get a cycle,

margin to saying thing what shift. cloud gross our is mix margins the cloud with about we are through the our main the we as and So year regards move

from moment, move the see. is So proportion great as increase, At I to it's a will still will our the throughout cloud business come dilutive the we mentioned, year, which of that as impact.

so plan another will us gross we a we up gave to see our plan. into just get long-range guidance that's grow. that to And margin. overall at or our built So continues last our But our business is this to that our gross of our our year something long-range average decrease so earnings cloud into margins with in overall total the to as the take and margin regards cloud will outlook,

into of the margins able that great overall growth midpoint headwind from reiterate outlook. factored the we as to as gross coming to we were the range. non-GAAP you So all And in year slight we our through that's the seeing. yes, And our a cloud EPS are saw, move

So too. to on track deliver that,

Ruplu Bhattacharya

a I Can follow-up you ask allocation. capital Okay. on

XX% returning targeting still -- cash flow. least of you're of So at free at least XX%

on you versus think couple kind flow? we So taking when the out we how linearity pace debt? how -- the your of of interest take you of your give cash. M&A about can we thoughts versus Or is targeting maybe think free trade just we you us on What And uses should debt, should debt, thoughts Any points are of there, off to of then expect? how more expense? buybacks out versus about should other should that? buybacks buybacks about cash And any think reduce

Claire Bramley

Yes. Sure.

changed capital So allocation overall our we strategy. haven't

about number focused on all items. to of returning shareholders, it's it's So value different a and

the mentioned areas to So able obviously about in Steve to business. we drive be we future to want are into reinvest that those back And some profitable investing of growth.

key is repurchases. share Another area

'XX. to committed have of fiscal that at in an we the from target which we overdelivered in flow 'XX free had, XXXX, obviously on that increase target was We fiscal XX% least deliver from but cash

of So at we of least to be repurchases. returned shareholders on are execute will terms share flow that. QX, to XX% cash track in deliver In free and

capital track It's committing as We're We're very a on current but been to part still our out the focusing we of looking seen, there, still are they that something allocation. to our nothing, returns-based. big have of in We're be that's much to strategy. that market not much at are XX%. on. M&A areas continues But deliver the very what's part that. all that has you

that at and share million saw terms in recommitting XX%. of repurchases in QX were You we the $XX to

I a think question flow on linearity. you asked cash free

linearity is for of the which of rest was the the given, of year's last QX. the the just the $XXX of of year million cash is So I a at million kind think free $XXX probably would say flow $XXX the you best generation to approach And that million. and looking to with very of rest range midpoint still we year, pleased about have guide in as use our I

Operator

The comes next question with Barclays. Lenschow Raimo from

Sheldon McMeans

Are then any along preferences And slower It for from regions? migrate improved is Raimo. and the QX. domestic to the or demand types you looks willingness versus to APJ any for with and more positively? Can slightly contract activity like EMEA underlying internationally, growth there are see international? that cloud you conversations trends differences on across from trend Sheldon these to This starting speak to revenue

Steve McMillan

EMEA the to across one geographies, strengths we've question, sector Sheldon. industry from diversification really the Thanks mentioned diversified saw the for strength great that Clearly, of also and We -- I an migrations different the migrated and in some us portfolio. a we've that is through in as well. Yes. got diversification but some position? gives the driving enterprises perspective, gone of APJ mission-critical want that workloads of by really some some world to across XX some as being the Claire, and/or you last businesses But large cloud critical months, revenue make that. do the terms terms points

Claire Bramley

Yes, absolutely.

still obviously, year-over-year business, the impact seeing So EMEA on we're of for revenue the numbers. the reported currency

not to from slight exit QX remind have -- actually there's Russia 'XX. fully decline And currency. in they're the of, removed of was So what we our constant a

total in was all is which EMEA. there our in revenue QX of $XX So obviously million still 'XX results,

account. need does be that taken So to into

I think underlying with traction said, good and that. good and market, is in business, the Steve momentum The business seeing the underlying growing. we're we pleased as are

see With regards impact we overall again, Asia, currency. the to of

as the strategy impact overall -- consulting of pressure and perpetual in reducing the of China terms business see and kind some of and on also seeing a there well. our We little

made out direct of decision in move China. business So the we the have to

to it company's impact an through. overall material. So results, from But there's a materiality isn't come we slight there as the impact and

Sheldon McMeans

speak if quick model very may. partnerships opportunity ML the Dell, with of incremental you then And I the integration it. in Any is could particularly DBT CSPs term? of the you potential more we've you're talked seen initiatives the today be Can about that from Got follow-up, about capabilities, popular? which expanded excited to the near a and more that these

Steve McMillan

AWS teamwork on enormous deals AWS. of got certainly the proud with give hyperscalers really our integrations that We're the with Yes. the It in hyperscalers. successively us with marketplace. Doing partnership our and confidence we've

partnership doing with and organizations United led people off. with and X-figure what with believe If in Microsoft working Azure it's total that did, as really of largest care about a generating to and a health is of And the deal We, in U.S., excited data think the as we're care that enterprise business pay hyperscalers, cost of capabilities in health that terms see Our States. really proud lower about really I is awesome. deal great we partnerships partnership in organization company, fantastic -- the that we're the the transform care. can helping those that

SageMaker then context the the We that's gen great feature like integration, the is example I opening in and enterprise deliver on successfully, to large -- where that data if gave is and real data engineering trusted tools, using of done that think perspective, training retailer the science DBT scoring example grow mission-critical is and deployed a done a going then of to going AI can from see Just AWS utilizing ChatGPT future that, that to done be I about the grow. the VantageCloud to that's we're platform is language real think models, to in so marketplace outcomes. a of that model VantageCloud continue business where

the And that they future. cloud with work mentioned. that's how optimized enabling to Vantage come Dell then customers environment our really was capabilities to to to private the converged and hybrid the And cloud software run up we're want We've where final Teradata excited into now Dell with a partnership about can we got the therefore, infrastructure. of point our on super

Operator

We with Morgan from Stanley. have a question Woodring now Erik

Maya Neuman

This is on Maya for Erik.

for expansion And Just overall think net for customers customers how your one how primarily do the next trended in from trending their appreciate providing expansion how But migrated quarters? already Steve. we rate have about should the net that the over that I question you cloud, me the about quarter. March? that in you think and for to few

Steve McMillan

Yes.

VantageCloud expanding us customers mentioned into in that were with with last have we I in QX, on that with the quarter even remarks started in us really prepared think happy we QX. our

really migration, included isn't -- the that since especially So as point out that [XXX%], in we we get expansion rate we're at net around expansion pleased number. of which modeled with the our the we're XXX%,

and business year-on-year data more that the more quarter, fact by the being the Teradata more and that workload and -- expansions, overall XX% growth driven moving that into just getting ARR the you tells benefit the Teradata growth platform, at and platform so look people predominantly cloud And faith there's that of are in if for our us platform. out

Thank it strong rest question. of a Maya. as year, really the the indicator So for for see you the we

Operator

I time, remarks. Steve will final over his for to McMillan turn back this call the At

Steve McMillan

our Thank We're us quarter. operator. start really next to to and Thank Thanks, are everyone, the look going to much. for got We today. all us joining pleased confidence and great keep technology that you, strong people moving very year, our forward talking you with our ahead. we've with innovations you

Operator

call. conference today's concludes This

disconnect. now may You

Teradata (TDC) 4 May 232023 Q1 Earnings call transcript