Q3 2021 Teradata Corp Earnings Call
We expect that in Q3, and we have closed most and are confident we will cause all of these transactions in the fourth quarter. We continued to build upon our execution engine, which delivered more cloud deals in Q3 than any other quarter.
Looking ahead to the fourth quarter, our pipeline is robust and we are working on bigger deals.
Looking at Q3 in more depth, we have numerous proof points that our strategy is solid we are executing and are making progress within our target market of leading enterprise accounts.
Q3 was our highest quarter yet for new cloud customers, we added tens of new large enterprise trends across all of our regions. We are determined to keep up the pace and winning new logos and the cloud and on Prem.
Our dedicated new logo sales teams are coming onboard ramping up and are already starting to win.
We are gauging the worlds largest companies often with extreme scale and complexity in their data environment to smoothly migrate to the cloud.
These global enterprises depend on their mission critical care data platform every single day to help them extract the greatest value from their enterprise analytics.
As many of our large enterprise customers are transitioning to the credit for the first time managing through these types of transactions can take some time, requiring planning and coordination with multiple stakeholders across numerous functions and migrating to the cloud requires careful consideration of the interconnects.
<unk> of all aspects of the customers on Prem analytic ecosystem.
Customers are recognizing that Teva data with our connected multi cloud data platform for enterprise analytics is the best solution to overcome these challenges and they are increasingly migrating to the cloud with Teradata vantage and the quarter health care transportation and government led the pack in terms of our.
Target verticals.
Just one recent example of a seamless migration to the cloud as American Airlines of.
Customer start in the cloud they grow with Terry data.
Our quarterly trend of healthy net expansion rates and required continues to be greater than 130%.
As customers add more use cases, more data and workloads and more users to their terra data multi quite potato platform.
Here's a handful of examples where we are competing and winning in the market.
<unk> banking group is migrating is Terry data enterprise data platform to vantage on Google quote.
Multinational financial services company has been a teradata customer for more than two decades. It's teradata platform is core to his credit cold business applications supporting more than 2000 users for many different business initiatives, including regulatory reporting customer analytics product profitability.
<unk> and responsible lending the migration as part of the banks broader claimed mandate here, we are partnering with a leading global ASI on the customer's migration to the quote.
A leading global oilfield services company is deploying fantasy genre here to support sensor data management, and then fenced analytics.
New Teradata customer is committed to continual innovation using technology to improve safety productivity and quality of life and the oil and gas industry.
This transaction is one of the large deals from Q3 that fell just over the line and closed on day one of Q4.
[noise] DNS F. One of the largest freight transportation companies in North America is microwaving, it's Terry that data platform to vantage on your cloud as part of a long term plan to have the majority of its analytic ecosystem in the cloud here, we won against quite native competition.
<unk> and Terry data will pervade analytics and reporting for finance operations and marketing.
Tara data consulting will be leaving the migration effort with support from our partner Microsoft.
As part of this effort Teradata will be integrated into a hybrid analytic environment with both IBM mainframe and Microsoft issue of components.
I mean, we continuously develop and evolve our technology and Q3 was no different in the quarter, we advanced our innovations on multiple fronts.
We released a significant enhancement to vantage, adding 30, new and database functions that enable customers to use partner tools of their choice to leverage the power of and database analytics delivering performance at enterprise scale.
We introduced vantage streams and the cloud providing near real time data leveraging native object stores AWS three is Europe globe, and Google cloud storage to help accelerate new business outcomes Custer.
Customers can now stream Iot data stock data, whether our website quite extreme data to deliver new analytics use cases.
This is exactly what is needed by our target market and our recent research study by independent research from Vance and born 87% of IP decision makers felt that they must leverage the emerging technologies to remain competitive.
We also delivered an update to our bring your own model capabilities, but a lot of these customers to bring their own analytic models built with third party tools and languages and to vantage to run enterprise analytics at scale.
And in keeping with our focus on customer and market drivers, we brought enhancements to our communications data model with full support of five G network activity, including intelligent network optimization.
We are part of the ring the transformation in our go to market organization.
I execute with greater agility and help us accelerate the move to the cloud and build an increasingly strong partner ecosystem as well.
These actions are designed to drive results for carrier data and an exceptional customer experience.
We know that when our customers succeed we succeed we're investing to drive faster quite execution to help our customers maximize the value of the data and get optimal results from the carry data environment in the cloud.
We are deploying senior cloud specialist sellers and cloud specialists architect teams in each region to progress and execute more quickly to close deals.
We are doubling down on building mutually beneficial partnerships to drive scale and strengthen capabilities and have added senior cloud expertise to our global partner organization.
Strong partnerships create a flywheel effect and accelerate and successes and the cloud and in data analytics, Here's a few new partnerships that will help propel us forward.
Alrighty and enthusiasm and I'm pleased that we are progressing and it'll go to market organization and of course the company, we are resolute and executing a growth strategy.
Looking ahead cute.
Q4 is traditionally our largest quota for growth we have a robust paceway for the corner and we are seeing trains of more clay deals and logic quite deals some in the seven and eight digit range Dell.
Even these dynamics you can be certain that the entire team will be focused and dedicated to closely managing the business, especially with the planning and coordination associated with closing some of these large transactions.
We believe are closed business will be approximately $200 million by the end of the year, we've passed to grow more than 100 per cent year on year. However, given the timing we experienced in queue tree. We believe it's prudent to lure a cloud ALR growth I work from 100% year over year to approximately.
90% year over year.
We remained pleased with very strong annualized growth rate and are quite business a substantial quite a business that is based on a competitive product and decorate cheeky possession, and a large and growing market.
Either Investor Day in September I stated that Terry data is a profitable growth company and a large and growing market with the right technology, the right strategy and the right people that.
That remains true today, and we remain incredibly dedicated to adding customers growing and expanding existing ones and pervading an outstanding customer experience with our connected Multicloud data platform for enterprise analytics.
A focus is clearly on executing to keep winning and delivering shareholder value.
That's coincidence is reflected in the new 1 billion dollar repurchase authorization that we announced today and a strong commitment to returning capital to shareholders by a share repurchase.
Now I'll pass the call to over to clear for additional insights.
Thank you, Steve and good afternoon, everyone.
Crowd a O L. In the first quarter by 7 million don't it.
Steve Naked we have already covered this amount in the early days of cheerful.
We have a robust cheerful pipeline the strongest we have ever seen.
And we continue to successfully close to with good economics, we therefore remain confident that our customers want and value I'll put up.
Over the last 18 months as we have undertaken a transformation Jenny Tara.
Tara data has had a a newspaper cause I'm driving greater rigour discipline and accountability in the business.
We are focused on driving improved intraquarter linearity.
Increased investment in a cloud go to market activities globally.
Hundred I'm, sorry, two per cent in the crowd.
Sustaining the positive trend, but we outlined in a recent investor day.
We also added more new logo cloud customers in the quarter.
Please point of executing against our strategy.
While the deal sizes can be small at the Scott, we see future growth opportunities with these news customers as they try by and expand.
Now turning to revenue.
Total revenue with $460 million.
1% increase year or the year as reported and in constant currency.
We continue to build on a higher base, a recurring revenue, which grew 7% year over year and 6% in constant currency.
<unk> is primarily driven by a higher mix of recurring revenue.
As a percentage of total revenue.
Sharing revenue with 77% in the third quarter.
Regarding upfront revenue arrangement.
Third quarter earnings per share of 43 cents.
<unk> outlook range of 30 to 34 cents.
11% at the midpoint.
Of the 11%.
Five relate to actual expenses being lower than expected.
Four cents relate to cost delays.
To sense relate to favorable recurring revenue mix.
Turning to free cash flow and capital allocation.
We are on track to achieve our fiscal 2021 guidance of at least $400 million in free cash flow.
Through the end of September 2021 year to date free cash flow was $347 million.
In the first quarter free cash flow generated was $23 million due to the seasonality of bidding.
Our cash conversion metrics showed slight improvement quarter over quarter, driven by an increase in days payable outstanding due to the timing of invoices received.
Our days sales outstanding remained strong although it did increase by about two to three days sequentially.
At least 100 per cent gray cloud era for the full year.
However, it is also possible we will continue to see the timing productivity as we sold between September and October due to how difficult. It is to predict the close date of some of our very large pipeline dude.
As Steve Fated.
<unk> Ala outlet is approximately 90%, where if you already have a year or approximately $200 million.
With regards to earnings Persia, we are raising a non-GAAP earnings per diluted share to be in the range of $2.11 to $2.15.
While still continuing to invest in the business.
An increase of 19 cents from the mid point of the previous range.
For the fourth quarter, we expect non-GAAP earnings per diluted share to be in the range of 25 to 29 cents.
We anticipate attach right to be approximately 26% in the fourth quarter and approximately 23% for the full year.
We also anticipate the weighted average shares outstanding to be approximately 130 million.
We are reaffirming our fiscal 2021 outlook for the following geometrics.
Try to <unk>, which is expected to be in the mid to high single digit percentage range.
Total recurring revenue, which is expected to grow in the high single to low double digit percentage range, yeah right begin.
Total revenue, which is anticipated to grow in the low to mid single digit percentage range here every year.
Mm free cash flow for the year, which is expected to be at least $400 million.
Thank you very much for your time today, let's face open the call for questions.
Certainly.
Will now begin.
At this time I would like to remind everyone in order to ask a question Prester then the number one and your telephone keypad will pause for just a moment to compile the queuing roster and the interest with giving everyone. An opportunity appreciate that you limit yourself to one question and one follow up.
The first question is from the line of Katie Herbie with Morgan Stanley. Please proceed.
Year on year.
Okay. Thank you and I guess connected to that it was really encouraging Steve to hear your comments that in the third quarter you saw a record number of new cloud customers such that that new logo sales team is starting to execute but how do we rack.
In style that record number of new logos in the quarter with the 9 million sequential cloud or our growth, which is the latest in in recent history just talk about the the deal sizes for for new logos and how that's playing out.
Yes.
And then Keith you mentioned the weather more club deals in Q3 than ever before.
Clay growth really remains front and center for us in terms of our execution. We do have a if you like a barbell in terms of the shape over quite a deal.
And that means we've got a set of deals are very large.
The million dollar deals and a whole set of.
Smaller deals that we are we're executing on clearly the large deals and to reduce that complexity just given that the types of workloads that we're running for our customers.
When those large deals swept given where we are from the process of scaling our cloud business. It does introduce volatility into our results.
If you look at Q4 as I said in the prepared remarks Q4 is our biggest.
Quarter from a from an AOR growth perspective, we've got a great pipeline of opportunity and the team is incentive and focused on executing against that pipeline of opportunity in Q4.
Okay, and if I can just sneak one more and how meaningful is the AWS partnership in terms of you know any just qualitative impact your view of potential cloud era growth as you go into 2022 when do you think that you know was there any awareness that this.
Which means that you're having right now in the pipeline you see right now.
I guess you know we we we started last year extremely fast in terms of you know converting that base in migrating that base to the cloud and got off to a good start pretty good start you know first half of this year also I guess you know.
Or the <unk>, you know migration conversations or or sales cycles or migration cycles, you know.
What date next quarter on 2022 but we anticipate no impact.
On our medium and long term projections shared with you at <unk>.
Today.
Thank you and then maybe one quick one real quick so just on the new logo, Steve and I understand there are small deals initially, but just can you give any insight into the competitive landscape on those wins and who you saw.
Yes.
And we won new logos, Chad both on Prem and in the cloud.
And we tend to see a whole range of competition from traditional competition like Oracle and IBM, who were always happy to beat the cloud native providers in terms of the offerings from AWS, Microsoft and Google and also.
No flight data breaks of the world.
Trying to procure additional hardware did you guys noticed anything from that perspective in this quarter or have you contemplated that in your fourth quarter outlook.
Yeah, I'll, let Clint talk aloud, but thats.
10.
I think the value of current data as I'm really in our software.
And customers using our software.
The best data end state the end state their data environment, clearly from a client perspective, our cloud growth isn't impacted by any any supply chain or technology.
Impacts of at all but a clear do you want to talk a lot about it but the supply chain.
Thank you Steve Yeah, we're not seeing a material impact on supply chain is as Steve mentioned and not impacted due to the desktop when nature anything that we would see in terms of economic impact is already baked into our forward looking guide.
Thank you. The next question is from the line of <unk> with.
With Bank of America proceed.
Hi, Thank you for taking my questions, it's actually filling in for <unk> today.
Clearly, it's been a long time since <unk> recurring revenue actually declined sequentially, it was down 6% quarter on quarter over quarter.
And.
Also margins were down 400 basis points sequentially, what are the upfront deals as you had expected and what was the impact on margins from that pull forward revenue.
The Airlines when was was a great example of a successful migration of a very complex environment into the quiet.
As we're demonstrating these proof points I think you know our our customers are certainly recognize him that Terry data can get from a fantastic possibly quite.
And if I could just sneak one more intense further details so far [laughter] and I know you said that public cloudy are are you taking a more conservative approach and that's why you're you're taking them down the full year guidance to to 90 per cent a year on year.
When you look out into 22.
2022, I think your guidance of analysts they had called for 70% Kiara our growth.
Is that still in the cards is there any change to that.
Hi, lately, we're not giving a formal update at this quote I will get that from update next for it but I do want to reemphasize that we do not anticipate any impact on the medium or long term projections that we gave adding that today say that it's still out back to you at that point in time as a reminder, that's what timing.
Pickles, just shifting from one corner to the next and just increased timing volatility as we claim that but yeah. So uhm, we expecting to <unk> all the details and at no impact on a medium or long term projections.
Okay. Thanks for all that that would just pretty out.
Thanks, Okay, I'll just add to that I think I think you know I <unk> I should be.
Look at the tape length, the queue for the biggest <unk> intended quite deals that we've seen we've got the biggest quite a deals we've ever seen in the pipeline and there's a real validation that we've got the right strategy a great value proposition of great technology solution for our customers. So we we are a super excited to be the long term.
The the long town plan for Teradata.
Great. Thank you so much.
Thank you Mr <unk>.
The next question is from the lines color Pratique with city. Your line is open.
Excuse me Mr back your line is open.
Hey, sorry about that can you hear me now.
[noise] Hey, Tyler.
Hey, Hey, Steve first question for you. So it looks like this year, we're seeing kind of one of the most back end loaded kind of cute force.
I can recall in in some time with with the vast majority of net new a are kind of projected to hit in that quarter and it. It kind of goes somewhat counterintuitively just given that in theory cloud you should see you know faster and more.
Straightforward expansions, because you're not in a provisioning new on prime hardware I guess, what what about this year is making such a unusual Q4 and and just how are you thinking about kind of improving the linearity throughout the year going forward. So you know, we're we're getting a little bit more.
Assistant met new air or on a quarterly basis.
[noise], yeah tolerate a couple of things and then maybe ask Clancy comment as well I I think seasonally we see Q4 is always our strongest ally growth quarter, I think I think that tends to be because.
Alright history of directly success and on crime enterprise agreements.
<unk> tanden towards the fourth quarter, turning towards the last month, and then even the last week of the quarter and where what's really driving the Ah quite question. This is migration activity of existing customers as they migrate large and complex.
Loads to decline.
The point in time before we can actually we we find it beneficial to have those discussions west customers as at that point, a renewal of their existing contracts. So when we came to engage with customers in assembler pattern to how we have previously sold on prime subscription revenue.
And also how we are taken him forward in terms of managing their own Prem solutions and they're quite solutions. So I will focus for us is to continuously drive.
That steady progression of quite business through the years, we get into those expansion motions I think what you'll continue to see his lumpiness form is or a high degree of volatility from our quarterly perspective, but we're also working on you know how do we changed that.
That that that <unk> linearity, so that we can bring deals eight of the last weeks of the of the corridor and I think that would really help with with all of her execution clear did you want to make some points.
[noise] no I I said I'll, just add that that are confident and sexy for despite being a very big corner to your point in terms of that era I'm confident comes from that right back people pipeline that we see as I mentioned in my prepared remarks is the strongest we have everything that the fact that we have that pipeline.
Get that that that confidence in I'll take you for that we were how many and and we had a great start at 10, a quota and I'll tell you that as well say really fighting on that Intraquarter linearity in queue for M beyond and I think if we make the at increasing back Tonight that when they came in <unk>.
R&D guy to market and strengthen our partnership.
Mm across C. S P. As in S side, that's all going to Hell Preclik like abstract Federation in the crowd.
Yeah, and and Claire maybe their follow up with you.
You know totally are are this quarter decelerated, two 6% growth in constant currency and I know the longterm financial model had a 8% to 12% <unk> for her totally are archer. So certainly reacceleration, given what you're expecting to see here in queue for with with a bunch of these deals in it and a good pipeline.
It is 6% kind of the the low point you'd think on a R R and and it it just reaccelerates from here.
Yes, I too so your appointment on five this year.
We we have found out by today, a mix of high single digit Gray.
As we get the crowd acceleration and the momentum from the pipeline that way I C. K O <unk> expecting that to continue to accelerate into trying to trying to change and beyond.
Thank you.
Thank you Mister Mackie.
The final question is Cynthia.
Talon.
Is open.
[noise] yeah, great. Thanks, guys. This is actually Nicole went on for Derek Thanks for taking our questions. The.
The channel is becoming a much larger focus for you guys and you mentioned one deal that was aided by an S. I.
Can you maybe just talk about like how much tracks and you're getting there and maybe how meaningful that can be over the next several years.
[noise], Yes, hi, I would say that's a great question. This is a complete habit for rights as an organization Uhm no. If you think that over time Teradata had bell puppets consulting and services based on US we have committed to our partners. So we will know compete with them for work and say the.
<unk> joined customers and that is getting some real traction the investment that we made within 10 chair in terms of crazy not migration pine tree. The what they were doing too achy played those partners on the telly the value proposition and frankly, how they can elaborate the most some of these really calm.
<unk> projects that help transform the customer environments. We see that is a really important catalyst as we move forward on a great question. Thank you.
Great Great. Thanks, and then just just building on one of the earlier questions. Just in regards to the deal slippage you guys mentioned that some of those deals and closed but <unk>.
Lower the the public cloud are are got and so I'm just wondering that maybe some of those deals come in a little a little bit later on in a C V basis for sure expectations or you just give any more colors to how to reconcile the guidance and the clothes deal that slipped there's this sort of your outlook.
Yeah sure what I would say is the deals where it was purely to do with like <unk>. We are keeping financial disappointed on the deal with that we're executing so the cloud they're mutually beneficial for both Terry data and our customers our customers see a lot of value and what will pervading.
And the sight deals that we see in the pipeline and the complexity of those deals. The key reasons, why we see that that timing or closing them as being more of a challenge.
When we compare it to our own printing business those quite deals are more calm place to execute but we feel that we've learned from what happened in Q3, we put in place a robust actions that can really help dry what we see currently in the pipeline, which again more quite deals and we've ever seen those are quite deals than we've ever seen.
We it gives us confidence both for Q4 and as we move and to 2022.
Thank you Mr <unk>.
There are no further questions at this time I will now turn the call back over to Steve Mcmahon put his final remarks.
Yes. Thank you thanks, everyone for joining us today as I felt with customers every week I remain convinced that we've got the right strategy or technology is unmatched and if people are among the best in the business Ah connected multi quite data platform free enterprise analytics is exactly what the world's leading enterprises are telling us they.
You want and need and we're gonna help keep that momentum going when did it against the competition and drive in shareholder value. Thank you so much.
This concludes today's conference calls you may now disconnect.