Teradata (TDC) 6 Aug 202020 Q2 Earnings call transcript

Good afternoon. My name is Stacy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Teradata Q2 2020 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 Development Relations. Corporate and Elsheshai, Investor Nabil

You your conference. may begin

lead welcome Good and second will discuss followed our to who quarter Teradata’s and Mark Chief call Culhane, by earnings Officer, financial President XXXX will Teradata’s Teradata’s afternoon, CFO, today; McMillan, call. Executive results. our Steve

SEC actual a and or which in that our information no our items will Form next they and XX-K We stock-based quarter undertake XX-Q current are today to to call, and number On risks SEC non-GAAP days. forward-looking uncertainties in considered results obligation financial the to and the of discussion in measures, release. cause exclude These with filed items earnings special June expected ended Our to the are for other few duty statements. materially. our XXXX, discussing includes described could certain outlook in earnings we today’s compensation are other such forecasts XX, forward-looking update the the described recent be that release, risk expense These statements. reflect differ and as subject statements be most with Teradata’s such factors filed today’s

conference call call I available page Relations now, over A be our of website will items, non-GAAP accessible on Investor Steve. GAAP and reconciliation of of other earnings this today investor.teradata.com. to is which measures our discuss release, as revenue non-GAAP the the is also comparisons. website. will on at later turn free cash flow will to And such our currency We constant A included replay in

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underway on on experiences. expansion We believe from program this significant drive focus to customers are deeper The with capabilities and customer time. cases remains QX. pivoting very building and marketing as our use we modern Simultaneously, enter programs work response sales positive our will seeing it over opportunities are digital

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all fronts, base. and on to we advancing many grow So customer our support are

over Teradata broad intelligence, and its work I’d recent vision continuing of multi-year, help energy won cloud-only a A have for to first This prevention, strategic to migrating network on expanded forward partnership cloud new with the analytics We major digital in proposition the extended Vantage expanding with value is Vantage the small store to is information, of on to the improve a vendors. Teradata’s telco we more. company experience, drive IoT to growing trade chain A multimillion-dollar and wins look Vodafone cloud like customer its number including new wins. We supermarket utilizing through European with and and the AWS, to in quarter, Vantage walk and finance. a sample commitment, to loss cases, migrated with AWS. future. our of Vodafone U.S. step HR, into use here,

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selected world’s program, on run Vantage its a to the companies of Azure largest drive and flows hospitality every through rewards technology. of applications out cloud-only loyalty utilizes $XX $X revenue gaming Vantage. of One Teradata on firm and The versus

business, timely to is will As collaborating the on with a consistent continues and to transform global Cognizant, and analyze stakeholders data decisions set. simplify across entire with Teradata integrator, better enterprise Teradata the its data company more this it project. the working way to modernize with be make

key Teradata ecosystem. history running on of Despite beginning systems data deal. initiatives a and basis migrating offer case Vantage global Our work seamlessly it collaborating business provide multi-phase on couldn’t its integrator expand business cloud long a requirements. drive a ultimately Teradata is systems replicating to mandate. solution a to to working AWS marks for replace wholesaler other volume this leading meet of its consider competition disaster new of the together on-prem customers’ a throughout reporting compelling has The customer customer. on-prem the data the will is its Vantage consumption and as large to cloud-only Azure. it that major involves a Microsoft cloud-first system value A part on Vantage won U.S. is cannot to that that redundant deployment price This Canadian migrating with with and with from of of minimal applications Teradata’s usage on retailer from to seriously real-time disruption. is two databases Teradata customer model AWS. This near allows transition a in that with scale the cloud-only processed key knew the crews to and daily, performance providers,

accelerate lasting in based work our high-quality relationships our and will cloud business and wins, We to drive value foster to differentiated continue on technology services. efforts

and I the time Teradata, tremendous. opportunity see take are Mark, our position why see call opportunity about I and Before to to how to you joined I pass what little talk would business. like to as I market I a Teradata’s our

our I’ve at strategy improving working leverage new the context for the not we digital company’s the to and in create I why the incredibly future Teradata cloud been so statements. bring stated, But Teradata rest share the time companies primary data, returns. focus and apply problems world their quarters. the are only on two great and now in assured, to of financial is for companies the of to coming mission-critical mine the knowledgeable technology for transformation provides plans out solve strategic company, operating a tirelessly have is of help value will This data months, future companies to are As previously the A driving to we market. analytics enable expertise best analytics and and which get in people on truly we is the unmatched data. the foundation build Teradata compete and

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companies product, hybrid a Teradata and a great In transform technology focus world. on as not huge addition, platform analytics leading and we the for be I believe opportunity and multi-cloud there’s to platform

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into we urgency productive future. of the paranoia sense a with operate will We and as move Teradata

be inclusion As we grow, and one diversity. values our ethos will continue that to

conversation stood a Our of company-wide and where ensuring commitment And world together entire facing team recently in have knowledge to to to driving some as pledged are take openness employees our and dialogues priority. all open align we to with begun holding workplace inclusion, leadership a actions set responsibility, that key the the a change. of deep cultivates diversity and Teradata today are challenges to equality, social

we foundation. and to While a we are where do it get be, sometime more have strong work we from starting to to take should will

multi-cloud world. hybrid for a We have and technology built the

outstanding base. We customer people have strong and a very

see vibrant help the We from that in greatest absolutely the is the get culture. And I right confident data joining customers the made decision a and energizing. passion to strong I’m assets Teradata. I value have

ongoing and to pandemic, and the when uncertain one many organizations, the With everything environment. our no are return Despite predictable we to market listening remains for a uncertainties, second-half customers. more the will normal knows

to delivering are we our agility providing our to call to speed look progress. ensuring pass that, on committed I we supporting are providing responding updates I’ll and We people and customers, Mark. as With with for forward our value and the expectations.

I would you Teradata. Steve. to to publicly welcome Thank like you,

three has in together solid the come very way flow strong temporary cash took our by extended we regions. solid with generated more As our Steve enabled these We growth, terms, our expenses free and recurring this actions with free growth, proud some but customers, to I’m helped robust ARR transactions the And and mentioned of the organization EPS to uncertain us very given importantly, our quarter quarter, said, healthy the we revenue executed. in manage all relationships payment it including healthy in environment. of move had results on deepen a or and customers. took actions call, helped support last QX forward we capacity We of actions growth

release. Before want our otherwise make few highlight our my elements and continue comments today items QX results, that it I to other a stated, on special which in earnings operating of I stock-based key such clear Teradata’s results basis, unless to non-GAAP reflect expense excludes items a compensation identified as

commentary can the Additionally, constant resulted in recurring revenue, trends $XX at in well in in this quarter, million reported guidance currency. growing key range. document X% We was investor.teradata.com. generated $XX constant discussion incremental be IR and segment million $XXX our above the in found and on million ARR in currency website X% This earnings on

seen we last that to said as see, see manage we will our declined of very the we to currency. to outlook, quarter, XX% levels outbreaks quarter. more the This COVID-XX, But in given As to various given remain in We discretionary revenue in is continue and as wanted remote conservative headwinds headwinds customers can mandates. strong second-half, consulting uncertainty. constant ongoing the overall area XX%, Consulting an had has uncertainty from a work you some continue continued believe spending. due

points margin gross was improved to and versus significant gross a year. the that sequentially, margin mix realization margins. gross Consulting better to mix near-term margins XX XX expand offering created and over to but as basis gross significant time, expect cloud recurring expansion revenue of were points movement recurring margins lower-margin Over price XX.X%, we XX.X%, as XXX helped expect headwind. cloud and hardware our Recurring on Moving gross last down next revenue drive in up includes revenue basis the year-over-year, XXX revenue utilization revenue see less see headwinds months. we to as

expenses basis this recurring under XXX. Total end And expecting year-over-year. Some amortization in are up points higher-margin performance revenue the perpetual consulting of in second-half. capitalized X% at from margins still QX was driven XXX as Total year-over-year. driver to will The catch-up this from by to shift came be was XX.X%, primary and up we primarily due away of to operating the was revenues revenue. and improvement impacted consulting double for projects increase of normalize gross required mix digits The year. revenue compensation sales ASC of at low the the in and margins were

reallocate well We our spend. expanded actions partners to fund cloud including well other efforts, limit environment, entertainment, continue and towards to expenses the efforts spend these as discretionary uncertain with moving our expenses, initiative, as To to travel given marketing well as as as we events manage limiting operating customer several go-to-market as success. took virtual, manage and

helps Additionally, in non-GAAP we incentive a impact the performance that have grants and share-based also significant margin portion no achievement between will comp of basis points XXX $X.XX and in final performance operating converted to incentive of believe when share annual XX we potentially which annual $X.XX and EPS, our cash-based dilution performance XXXX, EPS XXXX determined. to is

our For in our and key and for our the in our transforming the our structure, organization full-year, market. support recurring strategic look go-to-market expand cloud initiative optimize while to investing we cost continue to will revenue opportunities model to areas in

expenses be we to we now down roughly expect the year-over-year. a operating taken result cost in full-year flat to As first-half, the have of actions

from by We free our collection execution organization. excellent cash have quarter, driven an flow exceptionally strong

overall million, And $XXX with quarter, flow we in last in quarter strong million free from cash April. first-half the but million. to $XX were resulted combined for for free $XXX cash collected bringing slipped quarter, that in of mentioned we the QX, the had collections As this, flow roughly

are quarter, that last during said have the transition. that for free we flow our of cash bottom first-half was we XXXX of And the as already XXXX. exceeded we As confident number

second-half In as addition, we expect to incremental well. for positive free cash the flow be

return After with to our and and $XXX to very customer Our initial very April we we engagement saw the million financial and shock ended early then in conditions levels. healthy the customer cash. position quarter in remains March late base, strong, stabilize

quarter a better was As our for expectations QX. in result, second than linearity the

far, QX. start And healthy engagement have trends customer the at so remained of

customer rock-solid customers will We will believe are our continue in advantages our allow to to our long-term relationships support unprecedented these times, existing expand us relationship. continue that to technology and and

While base largest, in our the stable customer world. serve immune, we most isn’t companies the

hit COVID-XX. on year up based less hardest than of reminder, from industries the remain pipeline We by year the set optimistic and XX% see second-half. changes economic we cautiously revenue brought the a and for our As strong comes by the came on into a for

believe However, And disruption uncertain QX. life prudent be for we daily providing to only remain guidance with we conservative. continued it’s consistent conditions, and of last business quarter, with will

of For of QX, non-GAAP $X.XX. EPS $X.XX in revenue million $XXX and the $XXX range recurring the we to range expect million between and

And In our open of could be addition, of an that, for share to And XX% questions? we remain suspended XXX until our tax expect further operator, program full-year our you out caution, will please with and rate approximately the continue full-year count finally, call shares. buyback the approximately of to share million abundance notice.

And comes Instructions] Huberty, Katy Morgan from question Stanley. first [Operator your

afternoon, cloud, is question. with in the Steve, on look the you to you. it welcome ask you. is, biggest your opportunity to Thank and that team. to We And like mind, sounds Good congratulations first wanted the Teradata. a working really for I forward quarter.

is be you entirely in competitive how to timeline the a cloud what space, Is little be And team to around to added go-to-market? can you’re it particular? growing to it What more against about needs done around to engineering? around the provide What Teradata a asking go do think cloud? in we So detail for need field product? should incredibly then the become the features

and the for the much congratulations the Teradata the thank for thank congratulations. question, accept entire of Katy, behalf Hey, on I’ll you very you team.

at substantial We beginning just I As you’re cloud as absolutely of you And right. as the CEO June. appointed the was in marketplace. see opportunity know, the

see around we X%. numbers, at on-premise see under XX% workloads cloud on If and IDC you we reflect growing the growing just

perspective, some the the opportunity there. single made The a the and on touch from progress see does really of some company. can cloud From and some focus it an the way closed in of wins. as updated which fantastic already, changes part innovations were from trials the team go-to-market you impacting a you UX, object terms cloud is and that in have But that example, store, the is how product operates. But we also QX insights more good of delivered see the motion. native saw there So every of in capability much the our

think address and marketplace. to that Teradata competitive of The cloud we perceptions move And marketing increase competitive part at from things modern overall and can be like currently So that getting incremental that cloud will seen do reviewing all our new cloud competition ensuring not of prioritizing to are a work customer envelope we product that success, our development The and that and really we’re how level development our a are and as functions. change able will looking from as we one that feel relevant in player. the as product ability thing with in to do I’m are products organization continue. they currently from usage. angle. from by the we a perspective customers ensure the forward, a spend cloud is features really in we development focus is, product the that have we spend using the development are We the perspective focus cloud. But to of introducing I

ability about clouds, clearly, strength put of a that may reeducate cloud we our can around a which in having perspective. win we’ve in from to misperceptions You launched have and terms marketplace heard well. execute and campaign we been the wins were recent the of the Teradata really that from called Mythbusters, set And took to the

speed So didn’t cloud, it I market incredibly total transformation of of the if and on with organizational of aspect would to has as to delivering acting to well transformation. focus time be do conscious also just say, remiss think a cultural in there’s one I being agility, terms well. I with really no and company it’s a

cloud. they the to great it’s and team and the saved commitments of So see development made on-time delivery the against coming that features and product new for functions out [indiscernible]

No, way said and you just one quarter, about when remember follow-up, guidance how little relates of way in the June that in in Or essentially business June. it’s the you would that’s and approach same that May it September quarter. two guided that If I to months you the it it of ask characterize back guidance? Mark, degree new great. assumed the I the September Is as very you the remaining can for conservatism?

new March that stuff. scrambling didn’t both happen last with of weeks Sure. of Yes, of on all around get that On as the with add-on QX taking similar. conservative trying is there shelter bottom the were beneficiary the in place guidance approach. very in and our gone two – deals The clearly, said, the end we’re QX, we to renewals a in done, well front, some of as as

didn’t QX. phenomenon end clearly same that June. the experienced We that So at benefited have of

– forward. yes, taking towards going conservative look, we’re we’re – view taking it’s So a

you. Thank Great.

Wells Fargo. next question your Winslow, And comes from Phil

is This my you [indiscernible]. question. taking Thank for

First role. Steve, on of the congratulations all,

rest the [ph] of wondering I’m about bit team. is,] working can and the here. on you of kind We’re with building if questions [Actually, the last talk question the looking forward little you to a

If you quarter. can talk about the in the new of versus [Technical Difficulty] mix the

Or your that recent curious having Are Difficulty] on. on conversations particular fronts? [Technical [Technical Difficulty]. a been and expanding Thanks. you’ve was customers on lot are Just given the the of maintaining customer any going how conversations

question. the for much so you Thank Okay.

in touch of but the we existing let question we of seeing expansion? around, new those the our You customer key a Expansion little I are few bit, points. How of a So think us. terms customers? base on a had Are seeing we are driver is is essence for cranked cases? up attracting and doing new me use just

growth initial only customers during things to obviously, a came looks use those the out And to us gives the customer XX% the the as drive they existing that really customer of One it about that. capabilities And use that and and our my cases on base. for of opportunity function really product. our use Teradata found pain and trajectory I of deliver on focus interesting is capabilities, to the expand new success items customer really our the saved their and of features

The other expertise thing I Teradata they new drive to terms of cases and use me how would utilize eye-opener and innovative a people innovation say, the that’s of customers. been for for is in our our real

the about to that remarks maintenance. fantastic companies But heard we companies IoT, working of what predictive of are with the prepared in in You’ve some some today. working incredibly do around terms relevant of with also with innovations

developed data which offices, So, management company allows information of should as or reopen when business dashboard, process company, stores, can their COVID-XX we an an They sources. a example, external overall us of executive the in a this terms environment. or save for provide data sources we internal and and idea to from

some to stress exciting to really nice truly It’s to So incredibly it’s want see hybrid see in that cases. those that, of I But player. happening are multi-cloud and the existing cloud. use a we

we and in cases deployed, And cloud. on-premise those both use so see being

business. we’re some growth really is opportunity cloud to the continue to nice and customer there expand seeing some nice really the think I So base, in and our wins

just the GCP events given [Technical [Technical hearing about months, mentioned the wondering recent Thanks. I Difficulty] Difficulty]. just changed And a that And now backdrop. you I’m thanks. terms guess, wondering [Technical given bit backdrop? have other what Difficulty] of Okay, little in in you’re and I’m how

base up the we’ll quarter, given the that on will we’re think amounts the really and we is security because in And – and cloud larger transformation. cases is to helping that will third Cloud and in marketplace, the scale brand-new believe, around be And We Google us the the and an went much we reduce expand that success towards announcing choice moving excited in we a having and customers Platform customers for Vantage that, data GCP. then really obviously, that Yes. moving were open cloud for for – cases. use really exponentially finding What provide really us. their Store into are of already the going that with some whole that we use And Platform very existing of where Google interest in winning in from in new of environment terms We’ve Vantage customer and Cloud customers launched our we that, utilizing got Native driving reliability pilots on Teradata performance on technology risk got on-premise some the how is truly Object set customers deploy. we’re our safe has up open in cloud, cloud. that really enable are the our access

you. Thank

And [indiscernible], your next question comes Barclays. from

the it’s consumption and thank said model how to for the I you Teradata kind win wanted was Steve. model of taking welcome against different expand Hey, cloud. in cloud is could ask – my a for team, based first, and hoping you question pricing had pricing I what vendors? you the the on the on to you you consumption on

for I and what for welcome pay the surprisingly, our think for No, thank not just much [indiscernible], is pricing you used. the model enables thanks very being question. consumption our to customers

set And ourselves So think a I it’s Teradata line where you’d those delivery the utilize we that with fact capabilities very you much and expect allows is to apart at cloud-based performance scale. in model. from what

use, some other Teradata you what deploy flexibility a be is pre-lease consumption-based to of that only way. it but find pricing of benefits environment when about utilize us get the compared for you just technologies hybrid or multi-cloud something cloud – also we and [ph] not to gives lower-cost you So what a consistent And is that in a providers. the in to the real paying

our lots for workloads consistency customers as of gives we across it deploy environments. So different

is in about and model pricing for cloud both scaling public on-premise in of the comes really that that for benefits and with combine differentiation for the P Hopefully, think that’s Teradata the that of So consumption when you, environments. across, I use you answered terms question low-cost of all – Teradata pre-lease what we [indiscernible].

hoping little Thank the And a in just number. color there? extremely EMEA, on – I strong you. XX% it drove revenue of like strength seem for on get an a quick growth to QX, question more recurring bit was what

some had at came QX that – things of early. It’s Clearly Yes. out strong mean, that didn’t close close I quarter.

from helped across so perpetual very than which much a So helping perspective they’ve from shifted to linearity and is subscription, they well XXXX and more XXXX. did

ship. first The a was make piece it. U.S. big that’s to of So the the

in reasons as other really good ship both well APJ in Now we’re both our EMEA. as seeing

which Vodafone telco the growth quarter lots lots only and to well how a fantastic deals. one in really the They But provider the service sizes EMEA. fantastic for point and I’d referenced their countries in the deal in one and Hey, core of everybody terms and fantastic the Mark, to want – reason it be when I to was a drove they it it’s – future. wasn’t – it’s key network well managing of – it they Vodafone, think across strategy and executed are a of running how that in and the prepared different and was at of really I’m – just remarks, like to

so there’s fantastic really wins some for And EMEA.

thanks [indiscernible], that. for supporting So

Thank right. you, All both.

final There this to over the now McMillan are further turn time. at to comments. no like questions I Steve would for call

shown and the pleasure to through the they Thank to clear Teradata much for And we the delivering that that the to returns, us. thank resilience I’d CEO. success we’re growth customers balanced iterate data XQ as all time had to essential and at that customers. a I’d year. have have to some they’ve of in again, or really we need, team terms publicly with you world, of much. the like the Teradata absolute pandemic move me do. in that focus execution, for challenging And And leverage we’re think and keeping whilst second-half organizations is just it’s we pandemic as of to their a do helping view so our it’s the and an going the get the forward through the in that center move is Teradata largest The for execution joined going answers very there they’ve that expect to to we of continue that forward of our all like

this So call. you to for much listening and thank earnings in thank very you

today’s call. for conference joining Thank you

now You disconnect. may