Release Date: May 06, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Teradata Corp (TDC, Financial) reported a 16% year-on-year increase in public cloud ARR, reaching $606 million.
- The company achieved a non-GAAP EPS of $0.66, marking a 16% increase year-on-year.
- Teradata Corp (TDC) maintained a strong focus on execution, benefiting from actions initiated in the previous year.
- The company introduced Teradata Enterprise Vector Store, enhancing its capabilities in AI and analytics.
- Teradata Corp (TDC) was recognized as a leader in the Forrester Wave on data management for analytics platforms.
Negative Points
- Total ARR declined by 2% year-over-year on a constant currency basis.
- First quarter recurring revenue was down 8% year-over-year as reported.
- Total revenue for the first quarter was down 10% year-over-year as reported.
- The services business continues to be impacted by lower bookings in the second half of 2024.
- The company anticipates a significant sequential decline in non-GAAP EPS for the second quarter.
Q & A Highlights
Q: Steve, what opportunities exist to cut additional costs in the business, particularly given the high SG&A spend compared to R&D?
A: Steve McMillan, President and CEO, emphasized the focus on profitable growth and optimizing investments across SG&A and R&D. He noted that restructuring efforts, particularly in the sales team, have pivoted towards analytics and AI, which are starting to show traction. The company aims to continue optimizing its investment envelope to drive profitable growth.
Q: Can you explain the significant sequential decline in Q2 EPS guidance?
A: Charles Smotherman, Interim CFO, explained that the decline is due to lower volume, lower corporate spend, a higher cloud mix, and lower CFC, partially offset by lower headcount and other corporate spend activities.
Q: What are the biggest lessons learned from the past few years, and what changes will be made with the new executive team?
A: Steve McMillan highlighted the transition to "Teradata 3.0," focusing on business outcomes driven by advanced analytics, AI, and ML solutions. The company has retooled to address these opportunities, with innovations like the Enterprise Vector Store expected to drive new TAM and capitalize on AI opportunities.
Q: How do you view the impact of hybrid solutions on cloud growth, and what is the expected trajectory for subscription and cloud lines?
A: Steve McMillan stated that the company plans to return to ARR growth in 2025, driven by interest in their hybrid platform. Customers appreciate the flexibility of engaging with data either in the cloud or on-prem. The company anticipates continued growth in its cloud business, with a midpoint growth expectation of 16% for the year.
Q: How does Teradata's current macroeconomic environment compare to past periods of cloud optimization, and what are customers indicating about their expansion intentions?
A: Steve McMillan noted that despite the dynamic environment, Teradata has visibility into its guidance for total and cloud ARR. Customers continue to demand Teradata's technology for critical workloads, and the company is leveraging this demand to drive growth opportunities in new analytical use cases.
Q: What gives you confidence in maintaining the total ARR and public cloud ARR guidance, especially given cautious commentary from peers?
A: Steve McMillan expressed confidence in the guidance, citing good growth in expected drivers and a pragmatic approach to setting expectations. The company has factored in uncertainties and has removed large deals from its cloud ARR outlook, ensuring a solid execution profile for the year.
Q: Can you provide an update on the benefits seen from prior go-to-market changes?
A: Steve McMillan reported a pivot towards analytics, AI, and use case business, with increased interest in AI capabilities. The sales team is generating pipelines focused on AI ecosystems, and the company is helping customers drive workloads into production, offering significant speed and cost advantages.
Q: How do you view the role of data warehouses and data lake providers in the AI agent ecosystem?
A: Steve McMillan highlighted Teradata's ability to utilize structured and unstructured data at scale to provide real-time insights. The partnership with ServiceNow exemplifies Teradata's role in triggering workflows and delivering actionable insights, positioning the company as a key player in the Agentic AI space.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
