Q4 2023 Teradata Corp Earnings Call

Joel: Good afternoon. My name is Joel, and I will be your conference operator today. At this time, I would like to welcome everyone to the Teradata fourth quarter and full year 2023 earnings call. All lines have been placed on mute to prevent any background noise.

Good afternoon. My name is Joe and I will be your conference operator today at this time I would like to welcome everyone to the Terra data fourth quarter and full year 2023 earnings 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.

Joel: After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you'd like to withdraw your question, please press star two. Thank you. 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 presentation. Good afternoon, and welcome to Teradata's fourth quarter and full year 2023 earnings call. Steve McMillan, Teradata's President and Chief Executive Officer, will lead our call today, followed by Claire Bramley, Teradata's Chief Financial Officer, who will discuss our financial results and outlook. Our discussion today includes forecasts and other information that are considered forward-looking statements. While these statements reflect our current outlook, they are subject to a number of risks and uncertainties that could cause actual results to differ materially. These risk factors are described in today's earnings release and in our SEC filing. Please note that Teradata intends to file a Form 10-K for the year ended December 31, 2023, later this month.

I'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

If you'd like to withdraw your question. Please press star two thank you 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 T. Lee: Good afternoon, and welcome to <unk> fourth quarter and full year 2023 earnings call.

Christopher T. Lee: Steve Macmillan, Terry Davis, President and Chief Executive Officer will lead our call today, followed by Claire Branly, Terry <unk>, Chief Financial Officer, who will discuss our financial results and outlook.

Christopher T. Lee: Our discussion today includes forecasts and other information that are considered forward looking statements.

Christopher T. Lee: While these statements reflect our current outlook.

Christopher T. Lee: They are subject to a number of risks and uncertainties that could cause actual results to differ materially.

Katy L. Huberty: These risk factors are described in today's earnings release and in our SEC filings. Please note that Terry data intends to file the Form 10-K for the year ended December 31, 2023 later this month.

Christopher T. Lee: These forward-looking statements are made as of today, and we undertake no duty or obligation to update them. On today's call, we will be discussing certain non-GAAP financial measures which exclude such items as stock-based compensation expense and other special items described in our earnings. We will also discuss other non-GAAP items such as free cash flow, constant currency comparisons, and 2024 Revenue Growth Outlook in Constant Currency. Unless stated otherwise, all numbers and results discussed on today's call are on a non-GAAP basis.

Katy L. Huberty: These forward looking statements are made as of today and we undertake no duty or obligation to update them.

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

Katy L. Huberty: We will also discuss other non-GAAP items, such as free cash flow constant currency comparisons and 2020 for revenue growth outlook in constant currency.

Katy L. Huberty: Unless stated otherwise all numbers and results discussed on today's call are on a non-GAAP basis.

Christopher T. Lee: A reconciliation of non-gap-to-gap measures is included in our earnings release, which is accessible on the investor relations page of our website at investor.teradata.com. A replay of this conference call will be available later today on our website. And now, I will turn the call over to Steve. Thanks, Chris.

Katy L. Huberty: A reconciliation of non-GAAP to GAAP measures is included in our earnings release, which is accessible on the Investor Relations page of our website at Investor Teradata Com.

Katy L. Huberty: A replay of this conference call will be available later today on our website.

Katy L. Huberty: And now I will turn the call over to Steve.

Steve Macmillan: Thanks, Chris and thanks, everyone for joining us today, we are continuing to execute on our long term strategy to build the leading hybrid multi cloud analytics and data platform company for trusted AI.

Steve McMillan: And thanks, everyone, for joining us today. We're continuing to execute on our long-term strategy to build the leading hybrid multi-cloud analytics and data platform company for trusted AI. At the core of this strategy is our strong focus on helping our customers, many of the world's industry leaders, succeed by improving business performance, enriching customer experiences, and integrating data across the entire enterprise. We innovate and deliver trusted solutions for their toughest data and analytics challenges. We believe our strategy and customer focus is winning in the marketplace as we see more and more companies putting their trust in Teradata to help create value from the data and navigate the evolving analytics landscape, particularly with the rise of AI. Underpinning our strategy is a disciplined financial plan that seeks to balance growth in ARR with profitability and reinvestment in the business with capital return to shareholders.

At the core of that strategy is our strong focus on helping our customers many of the world's industry leaders exceed by improving business performance enriching customer experiences and integrating data across the entire enterprise.

Steve Macmillan: Innovate and deliver trusted solutions for their toughest data and analytics is challenging.

Steve Macmillan: We believe our strategy and customer focus is winning in the marketplace as we see more and more companies putting their trust in teradata to help create value from their data and navigate the evolving analytics landscape, particularly with the rise of AI.

Steve Macmillan: Underpinning our strategy is a disciplined financial plan, which seeks to balance growth and ALR with profitability and reinvestment in the business with capital return to shareholders.

Steve McMillan: We close 2023 with $528 million of cloud ARR and $1.57 billion of total ARR, representing growth of 48% and 6% respectively. We generated $74 million of cloud ARR growth in the fourth quarter. Cloud ARR now accounts for more than one-third of our total ARR, a significant milestone in our cloud journey. Additionally, all regions grew cloud ARR both sequentially and year-on-year, driven primarily by migration activity.

Steve Macmillan: <unk> 2023, with $528 million of cloud <unk>, and one by $7 billion of total ALR, representing growth of 48% and 6% respectively.

We generated $74 million of cloud <unk> growth in the fourth quarter.

Steve Macmillan: Clearly the IRR guidance for more than one third of our total ALR a significant milestone in our cloud journey.

Steve Macmillan: Additionally, all regions grew cloud IRR, both sequentially and year on year, driven primarily by migration activity.

Steve McMillan: Our cloud net expansion rate was 124%, and more than 75% of our cloud customers now operate in a hybrid environment. These statistics validate that our Vantage Cloud platform is delivering breakthrough business performance across a hybrid environment. We delivered 2023 revenue growth within our outlook range. We exceeded full-year non-GAAP earnings per share expectations.

Steve Macmillan: Our cloud net expansion rate was 124% and more than 75% of our cloud customers now operate in a hybrid environment.

Steve Macmillan: These statistics validate that our vantage platform is delivering breakthrough.

Steve Macmillan: And it's across a hybrid environment.

Steve Macmillan: We delivered 2023 revenue growth within our outlook range, we exceeded full year non-GAAP earnings per share expectation.

Steve McMillan: And we generated more than $350 million of free cash flow, all demonstrating our ongoing dedication to our cloud-first profitable growth strategy. Despite a year of solid progress on our strategic and financial milestones, we ended the year below our 2023 outlook for cloud and total ARR. This was primarily due to deal-painting issues. Let me explain.

Steve Macmillan: And we generated more than $350 million of free cash flow.

Steve Macmillan: All demonstrating our ongoing dedication to our cloud first profitable growth strategy.

Steve Macmillan: Despite a year of solid progress on our strategic and financial milestones. We ended the year below our 2023 outlook for cloud and total <unk>.

Steve Macmillan: Primarily due to deal timing issues.

Speaker Change: Let me explain.

Steve McMillan: We're seeing that Teradata is becoming even more strategic to corporations and touching all levels of our customers' organizations. For example, we have historically dealt primarily with IT. But, over time, we have moved beyond IT, with multiple business units now relying on Teradata. This brings in more executive decision makers, including the board, in order to close the deal.

Speaker Change: We're seeing that carry data is becoming even more strategic to cooperation and touching all levels of our customers' organizations or.

Speaker Change: For example, we have historically dealt primarily with it.

Speaker Change: Overtime, we have moved beyond E.

Speaker Change: With multiple business units now relying on current data.

Speaker Change: Spring then more executives if they can makers, including the board in order to close the deal.

Speaker Change: These dynamics caused a number of transactions to move into 2024. All of these there were a handful of large deals that slipped out of December and each one was $2 million or more of cloud <unk> growth.

Steve McMillan: These dynamics caused a number of transactions to move into 2024. Of these, there were a handful of large deals that slipped out of December, and each was worth $2 million or more in cloud ARR growth. This includes the low eight-figure deal Claire mentioned at an investor conference in December. We are already taking actions to address the myths and the ARR expectations we had set. We have reviewed the root causes of each flip.

Speaker Change: This includes the low eight figure deal Claire mentioned at an Investor Conference in December we have already taken actions to address the mess in the MLR expectations, we had set.

Speaker Change: We have reviewed the root causes of the slip our teams are executing plans to address each unique customer situation and are diligently working to close the majority of these deals in 2024 to.

Steve McMillan: Our teams are executing plans to address each unique customer situation and are diligently working to close the majority of these deals in 2024. To be clear, we had uncertainty in timing, not uncertainty in demand. In our remarks, Claire will speak more to the actions we are taking.

Speaker Change: To be clear, we had uncertainty in timing uncertainty in demand and.

Speaker Change: In our remarks Clinton will speak more to the actions we are taking.

Steve McMillan: As we look ahead, we see an AI-enabled future. Just about every organization everywhere is looking at AI, and particularly generative AI. This means the entire world is looking at data.

Clinton: As we look ahead, we see the AI enabled future just about every organization everywhere is looking at AI and particularly generous of AI.

Clinton: The entire world is looking at data.

Steve McMillan: Data and analytics are what we know and do best, and where we innovate. Our people have the knowledge and expertise to help companies trust in and get massive business value from their data. This is becoming even more important as AI comes of age.

Clinton: Data and analytics are what we know and do best and where we innovate.

Clinton: People have the knowledge and expertise to help companies trust and get massive business value from their data.

Clinton: That's becomes even more important as AI comes of age.

Steve McMillan: We see AI as a catalyst for growth, particularly over the long term. As AI uses grow, so does the need for trust in information. This ties directly to our belief that people thrive when empowered with trusted information. That's why we built Vantage Cloud, a complete cloud analytics and data platform. It is the engine companies need as they explore AI, as we provide an open multi-cloud approach to leveraging the language models they want. GenEI is trained on large language models that require extensive amounts of data.

Clinton: AI is a catalyst for growth, particularly over the long term.

Clinton: AI usage grow so does the need to trust the information that's tied directly to our belief that people thrive when empowered with trusted information.

Clinton: That's why we built vantage cloud a complete cloud analytics and data platform and is the engine companies need as they explore AI as we provide an open multi cloud approach to leveraging the language models they want.

Clinton: Jenny I is trained on large language models that require extensive amount of data with clear escape analytics engine for launching end to end AI and ml pipelines, we can deliver a highly optimized analytic functions and expanded the high performing analytics Taryn data is known for.

Steve McMillan: With ClearScape Analytics, our engine for launching end-to-end AI and ML pipelines, we can deliver highly optimized analytic functions and expand the high-performance analytics Teradata is known for. Given the global reach of our enterprise customers, we believe that we serve as custodians of much of the world's most trusted and well-governed data. As I mentioned, data is the critical factor for success with GenEI.

Clinton: Given the global reach of our enterprise customers, we believe that we serve as custodians of much of the world's most trusted and well governed data.

Clinton: As I mentioned data is the critical factor to success with Jenny I.

Steve McMillan: The data must be well managed, it must be trusted, ethical, and sustainable, and companies need to leverage all of the data at extreme scale to innovate and win with AI. Our proven record and ability to give customers the trust they need in the data to innovate and make impactful business decisions is a real differentiator for Teradata. We are confident that we are better positioned than any other company to help organizations take advantage of AI. We believe that we have the best cloud analytics and data platform, period. By delivering harmonised data, trusted AI, and faster innovation, we can empower our customers and their customers to make better, more confident decisions at every level of the enterprise. We're seeing this at customers now.

Clinton: The data must be well managed and must be trusted ethical and sustainable.

Clinton: And companies need to leverage all of their data at extreme scale to innovate and win with AI.

Clinton: Our program record and ability to get customers the trust they need and the data to innovate and make impactful business decisions as a real differentiators for Teradata. We are confident that we are better positioned than any other company to help organizations take advantage of AI.

Clinton: We believe that we have the best cloud analytics and data platform period.

Clinton: By Delevering harmonized data trusted AI and faster innovation, we can empower our customers and our customers' customers to make better more confident decisions at every level of enterprise.

We are seeing that our customers know Teva data is becoming even more strategic to corporations more lines of business are trusting and Terry theater, and relying on our analytics and data platform as data has democratized and trusted.

Steve McMillan: Teradata is becoming even more strategic to corporations. More lines of business are trusting Teradata and relying on our analytics and data platform as data is democratized and trusted. We are continuing our strong innovation. Our technology innovation engine was in high gear in Q4 as we maintained our focus on speeding the releases of new analytic offerings that help customers take advantage of AI. After nearly a year in development, we launched Teradata AI Unlimited, our AI and ML engine in the cloud that delivers a completely self-service and serverless experience to help those who want to explore AI. AI Unlimited can enable customers to drive faster, easier, and cost-effective AI innovation. It is designed to provide access to vast amounts of data, as well as extreme flexibility to securely explore, experiment, and operationalize new AI use cases at scale.

We are continuing our strong innovation our technology innovation engine was in high gear in Q4, as we maintain our focus on speeding the releases of new analytic offerings that help customers take advantage of AI.

Clinton: After nearly a year in development, we launched Terra data AI unlimited, our AI and ml engine in the cloud the deleverage that completely self service and still realistic experience to help those who want to explore AI.

Clinton: AI unlimited can enable customers to drive faster easier and cost effective AI innovation.

Clinton: Aimed to provide access to vast amounts of data as well as extreme flexibility to securely explore experiment and operationalized.

Clinton: Our use cases at scale.

Steve McMillan: Furthermore, Teradata was one of a small set of companies selected by Microsoft to have our product, AI Unlimited, be natively integrated with Microsoft Fabric to help data innovators operate at their best and find new patterns of innovation. AI Unlimited users will be able to access data in one lake, Microsoft's Open Table Format service offering. AI Unlimited also supports other open file formats, which enable users to leverage their language and tools of choice. For example, data scientists, data engineers, and developers can leverage native integration with Python to call analytic functions, execute Python code, and import Python models directly into Teradata AI Unlimited.

Clinton: Other Teradata was one of a small set of companies selected by Microsoft to have our product AI unlimited natively integrated with Microsoft fabric to help data innovators operate at their best and they use patterns of innovation.

AI unlimited users will be able to access data and one lake Microsoft Open table format service offering AI Unlimited also supports other open final formats, which enable users to leverage their language and tools of choice points.

Clinton: For example, data scientists data engineers and developers can leverage native integration with Python to call analytic functions execute Python code and import Python models directly and to Terra data AI unlimited.

Steve McMillan: AI Unlimited is available on both Microsoft and AWS marketplaces and is consistent with our commitment to an open and connected ecosystem. Since its launch in November, we're receiving strong, positive feedback on AI Unlimited. We already have customers from transportation, retail, and healthcare exploring use cases with this new AI engine, and more are on the horizon. Our open and connected platform meets the full spectrum of customers' needs where they are today and where they want to go with our best-in-class cloud lake, lake house, data warehouse, or a hybrid combination. With wins in the quarter at Audi, HCA, HSBC, and more, let's walk through a few examples that cover the breadth of our offerings. For example, in an eight-figure cloud deal, one of Australia's leading banks is migrating its analytic ecosystem to the cloud with us. This banking powerhouse relies on Teradata across many business units and is moving to Vantage Cloud on AWS, a competitive win for us. The bank's data science community has also been exploring AI use cases with us in support of its modernization plan.

Clinton: AI unlimited is available on both Microsoft and AWS marketplaces, and its consistent with our commitment to an open and connected ecosystem.

Clinton: Since its launch in November we're receiving strong positive feedback on AI on limited, we already have customers from transportation retail and healthcare exploring use cases with <unk>, new AI engine and more on the horizon.

Clinton: Our open and connected platform makes the full spectrum of customers' needs, where they are today and where they want to go with our best in class Cloud Lake Lake House data warehouse or a hybrid combination.

Clinton: With wins in the quarter at Audi HCA, HSBC and more lets walk through a few examples that cover the breadth of our offerings.

Clinton: And an eight figure cloud deal one of Australia's leading bank is migrating its analytic ecosystem to the cloud with us.

Clinton: Banking powerhouse relies on parent data across many business units and it's moving to vantage cloud on AWS and a competitive win for us.

Clinton: Banks data science community has also been exploring AI use cases with us and support of its modernization plan.

Steve McMillan: We partnered with Kendrell, one of the largest daily manufacturers in APJ, and they committed to Vantage Cloud Lake on AWS to improve their business operations. Another 8-figure deal was an on-prem expansion with a Fortune 50 U.S. company. This giant utilizes Teradata in areas of finance and health plan administration and is working with us to add AI models to improve predictive medical treatment. These AI models are designed to help improve quality and value-based care for tens of millions of potential patients.

We partnered with Kendall when a sizable new logo win one of the largest daily manufacturers and a P. J is committed to vantage cloud like on AWS to improve its business operations.

Clinton: Another eight figure deal with an on Prem expansion with a fortune 50 U S company.

Clinton: This giant utilizing current data in areas of finance and Health plan administration and is working with US Tad AI models that improve protective medical treatment.

Clinton: These AI models are designed to help improve quality and value based care for tens of millions of potential patients.

Steve McMillan: One of the leading health care services providers in the US is moving critical operational data and analytic workloads to Teradata on Google Cloud as part of its cloud modernization initiative. This continues our history of helping customers innovate with analytics and data. One of our recent new logo wins was with one of the largest banks in the Middle East. In this highly competitive win, the bank chose Teradata to help it deliver an outstanding customer experience and improve its campaign management efforts.

Clinton: One of the leading healthcare services providers in the U S is moving clinical operational data and analytic workloads deterrent data on Google cloud as part of it modernization initiatives.

Clinton: That continues our history of helping the customer innovate with analytics and data.

Clinton: One of our recent new logo win was worth of one of the largest banks in the middle East and Thats highly competitive when the bank chose carrier data to help deliver an outstanding customer experience and improve its campaign management efforts.

Steve McMillan: These examples illustrate that customers are placing trust in Teradata across all of our deployment options, including light. Q4 of 2023 was our highest quarter yet of adding Vantage Cloud Lake customers, and we continue to see strong interest. We also saw an acceleration of wins with partners, another important element of our profitable growth strategy. We do see, however, some headwinds this year, as we expect a few large on-prem erosions to negatively impact total ARR in the first half of 2024.

Clinton: These examples illustrate that customers are placing their trust in terra data across all of our deployment options, including Lake.

Clinton: Q4 of 2023 was our highest quarter yet of adding vantage quite late customers and we continue to see strong interest with <unk>.

Clinton: Also saw an acceleration of wins with partners another important element of our profitable growth strategy.

Clinton: Do see however, some headwinds this year as we expect a few large on prem erosion to negatively impact total <unk> in the first half of 2024.

Steve McMillan: These are related to customer decisions that were made more than three years ago before we introduced our Cloud First strategy and Vantage Cloud Platform. While we have known that these erosions were contemplated for some time, we've improved our visibility into the timing and are now able to factor these actions into our 2024 outlook. Due to these few on-prem decisions, we view our 2024 erosion rate as an outlier, and they have always been factored into our 2025 goals. We will continue to work every day to deliver breakthrough business value for our customers, and we are receiving industry acknowledgement of our strength in driving innovation. Vantage Cloud again received the highest score in logical data warehouse and traditional data warehouse use cases from Gartner in its critical capabilities report for cloud database management systems for analytical use cases.

Clinton: Related to customer decisions that were made more than three years ago before we introduced our cloud first strategy and vantage quite platform.

Clinton: While we have known that these erosions were contemplated for some time, we've improved our visibility into the timing and are now able to tie to these actions and to our 2020 for outlook.

Clinton: Due to these few on Prem decisions, we view, our 2024 erosion rate as an outlier and they have always been factored into our 2025 goals.

Clinton: We will continue to work every day to deliver breakthrough business value for our customers.

We are receiving industry acknowledgment of our strength and driving innovation.

Clinton: Vantage quote again received the highest score in logical data warehouse and traditional data warehouse use cases from Gartner and its critical capabilities report for cloud database management systems for analytical use cases.

Steve McMillan: Gartner also recognized our cloud vision and execution and its magic quadrant for a cloud database management system. Gartner noted our strengths in technology innovations with our optimized ecosystem through Teradata Query Grid, our deep and robust analytic capabilities through ClearScape Analytics, including AI and ML integration, and they noted that we have the strongest workload management offering in the industry. We are also honored to learn that customer ratings earned Teradata the top spot in the TrustRadius Best of awards in all three categories of data warehousing.

Clinton: Gartner also recognized our cloud vision and execution in its magic quadrant for cloud database management systems.

Clinton: Gartner noted our strengths in technology innovations with the optimized ecosystem through Teva data query bread.

Clinton: Deep and robust analytic capabilities through Steve escape analytics, including AI and ml integration and the noted that we have the strongest workload management offering in the industry.

Clinton: We were also honored to learn the customer ratings or interpret data at the top spot and the trust radius Bastogne Awards in all three categories and data warehousing.

Steve McMillan: Number one and best value for price, number one and best feature set, and number one and best relationship. Software Marketplace G2 also recognized Teradata for excellence in the leader, enterprise, and momentum categories in its Winter 2024 report. We value these types of recognition as they are wholly determined by customer reviews.

Clinton: Number one and best value for price number one and best feature set a number one best relationship.

Clinton: So core marketplace G to also recognize HERA data for excellence in the leader enterprise momentum categories and its winter 2024 report.

These types of recognition as they are wholly determined by customer reviews.

Steve McMillan: All of these distinctions reinforce our commitment to innovation and value while keeping customers at the forefront. While we are always pleased to earn recognition for our technology, we're equally pleased when our strong culture is acknowledged. In November, Teradata again earned the highest score of 100 on the Human Rights Campaign Foundation's 2023 Corporate Equality Index, demonstrating our ongoing support of LGBT+ workplace equality.

Clinton: All of these distinctions reinforce our commitment to innovation and value, while keeping customers at the forefront.

Clinton: While we are always pleased to earn recognition for our technology. We're equally pleased with our strong culture is acknowledged.

Clinton: In November carry data again earned the highest score of 100 on the human rights campaign Foundation's 2023, corporate equality index, demonstrating our ongoing support of LGBTQ plus workplace equality.

Steve McMillan: We are proud of this tribute to our core principles in action. In closing, I want to emphasize that everyone at Teradata is relentlessly focused on winning as the complete cloud analytics and data platform company for AI. Since we moved to our cloud-first strategy, we have delivered tenfold cloud growth in less than four years, or cloud growth in 2023 was far ahead of the market. In addition, the team has made solid progress on our technology innovations and partnerships. We will continue to build on a profitable growth strategy, and as we do, we are firmly focused on operational excellence as we strengthen our processes and capabilities. We remain on the path to achieve over $1 billion of cloud ARR by year-end 2025. Now, let's turn the call to clear to go through more detail. Thank you, and good afternoon everyone.

Clinton: The best attributes of our core principles in action.

Clinton: In closing I want to emphasize that everyone at Terra data is relentlessly focused on winning as the complete cloud analytics and data platform company our AI.

Clinton: Since we moved to a cloud first strategy, we have delivered 10 full cloud growth and less than four years.

Clinton: Our cloud growth in 2023.

Clinton: All are ahead of the market.

Clinton: In addition, the team has made solid progress around our technology innovations and partnerships.

Clinton: We will continue to build on our profitable growth strategy and as we do we are firmly focused on operational excellence as we strengthen our processes and capabilities.

Clinton: We remain on the path to achieve over $1 billion of quote <unk> by year end 2025.

Clear: Now, let's turn the call to clear the go through more details.

Thank you and good afternoon, everyone.

Claire Bramley: In 2023, Teradata delivered profitable growth with operating margin expansion of over 200 basis points year-on-year and non-GAAP earnings per share of $2.07, above the high end of the annual outlook range and growing 26% year-on-year. We delivered free cash flow of $355 million. We continue to demonstrate our commitment to capital return by delivering 87% of free cash flow to shareholders, exceeding our annual target of 75%. Recovering revenue for 2023 was approximately $1.05 billion, growing 5% year-on-year, as reported, and 7% in constant currency. This was in line with the midpoint of the annual Outlook range.

In 2023 paradigm.

Clear: Profitable growth with operating margin expansion of over 200 basis points year on year non-GAAP earnings per share of change on it and <unk>.

Clear: The high end at the annual outlook range and growing 26% year on year.

Speaker Change: We delivered free cash flow of $355 million.

Speaker Change: We continue to demonstrate our commitment to capital return by delivering 87% of free cash flow to shareholders exceeding our annual target of 75%.

Speaker Change: But having less of a need for 2023 was approximately $1 billion and $500 million.

Speaker Change: Growing 5% year on year as reported and 7% in constant currency.

Speaker Change: This was in line with the midpoint at the annual outlook range.

Claire Bramley: Total revenue was also within our outlook range at approximately $1.8 billion in 2023, growing 2% year-on-year as reported and 4% in constant currency. Our cloud's net expansion rate remains strong at 124%, a sequential increase of 1%. Our ending cloud ARR was $528 million, growing 48% year-on-year versus our outlet range of 53% to 57%. Total ARR grew 6% as reported and 5% in constant currency, compared to our outlook range of 6-8%. As Steve mentioned, the 2023 outlook did not fully capture the unexpected deal cycle elongation we saw during the final week of the year.

Speaker Change: Total revenue was within our outlook range and approximately $1 $8 billion in 2023.

Speaker Change: Growing 2% year on year as reported and 4% in constant currency.

Speaker Change: Our class net expansion rate remained strong at 124%.

Speaker Change: <unk> increase of 1%.

Speaker Change: Our ending cash IRR was $528 million growing 48% year on year, especially if our outlook range of 53% to 57%.

Speaker Change: <unk> grew 6% as reported and 5% in constant currency and patch of our outlook range of 6% to 8%.

Speaker Change: As Steve mentioned, the 2023 outlet did not fully capture the unexpected sales cycle elongation, we saw during the final weeks of the year.

Claire Bramley: Even though linearity improved in Q4 of 2023 versus the same period last year, we still had approximately 60% of the new cloud ARR dollars land in December, with many of those deals closing at the end of the month. We are taking measures to quickly adapt and improve our internal processes. We are paying extra attention to pipeline composition and conversion rate. We are also focusing on sales enablement to continue improving sales productivity.

Speaker Change: Even linearity improved in Q4 of 2023 versus the same period last year, we still had approximately 60% of the new class analyzed all the land in December.

If any of these deals pricing at the end of the month.

Speaker Change: We are taking measures to quickly adapt and increase our internal processes.

Speaker Change: Extra attention to pipeline competition and compassionate.

Speaker Change: We're also focusing on south enablement to continue increasing sales productivity.

Claire Bramley: In addition, we are taking cost optimization actions to continue driving efficiencies across the entire company. All of these initiatives help to inform the accuracy of our 2024 outlook and continue to position the company for durable profitable growth. Let me now share more details on our quarterly financial results, starting with revenue. Fourth quarter recurring revenue was $372 million, growing 4% year-on-year as reported and in constant currency. Recurring revenue as a percentage of total revenue was over 81%; year-on-year recurring revenue growth was led by a strong increase in cloud revenue as we continue our intentional makeshift to the cloud. All three regions experienced strong cloud revenue growth year-on-year. Upfront recurring revenue in the quarter was a net negative $1 million, which was in line with the expectations we shared with you last quarter. The impact of upfront recurring revenue in 2023 was $20 million, compared to $19 million in 2022. Fourth quarter total revenue was $457 million, 1% growth year-on-year as reported and in constant currency. Quarterly consulting revenue continues to be stable.

Speaker Change: We are taking cost optimization actions to continue driving efficiencies across the entire company.

Speaker Change: All of these initiatives helped to inform the accuracy of our 2024 outlet I continue to position the company for Tiago profitable.

Speaker Change: Let me have more detail on our quarterly financial results.

With revenue.

Fourth quarter recurring revenue was $372 million.

Speaker Change: <unk>, 4% year on year as reported and in constant currency with.

Speaker Change: Recurring revenue as a percentage of total revenue with 81%.

Speaker Change: Yeah, let me of having revenue growth was led by a strong increase in cloud revenue as we continue our intentional mix shift to the cloud.

Speaker Change: All three regions experienced strong cloud revenue growth year on year.

Speaker Change: Upfront and recurring revenue in the quarter was a net negative $1 million, which was in line with the expectations. We shared with you last quarter.

Speaker Change: The impact of upfront material revenues in 2023 with $20 million compared to $19 million in 2022.

Speaker Change: Fourth quarter total revenue was $457 million, 1% growth year on year as reported and in constant currency.

Speaker Change: Fortunately consulting revenue continues to be stable.

Claire Bramley: As expected, perpetual revenue continues to decline given the mixed shift to the cloud. Moving to profitability and free cash flow, Teradata reported a fourth quarter total gross profit of $283 million.

Speaker Change: As expected perpetual revenue continues to decline given the mix shift to the crowds.

Moving to profitability and free cash flow.

Speaker Change: How are they has reported fourth quarter total gross profit was $283 million.

Claire Bramley: The 5% year-on-year increase in gross margin dollars was primarily due to higher cloud and subscription gross margin, driven by both rate expansion and greater volume. Quarterly operating profit was $89 million, and operating margin was 19.5%. Continued cost discipline and operating leverage contributed to an operating margin of 18.1% in 2023, an expansion of approximately 220 basis points year-on-year. We will continue to invest prudently in our business during 2023, focusing on opportunities that generate attractive returns and position the company for future growth. These activities resulted in quarterly non-debt diluted earnings per share of $0.56, exceeding the high end of our quarterly outlook range. We generated $168 million of free cash flow this quarter, driven by a more efficient cash conversion cycle.

Speaker Change: The 5% year on year increase in gross margin was primarily due to higher cloud and subscription gross margin driven by base rate expansion and greater ball game.

Speaker Change: Quarterly operating profit was $89 million and operating margin was 19, 5%.

Speaker Change: Continued cost discipline and operating leverage contributed to a 2023 operating margin of 18, 1% an expansion of approximately 220 basis points year on year.

Speaker Change: We continue to invest prudently in our business during 2023, focusing on opportunities that generate attractive returns and position the company for future growth.

Speaker Change: These activities resulted in quarterly non-GAAP diluted earnings per share of <unk> 56.

Speaker Change: Exceeding the high end of our quarterly asset range.

Speaker Change: We generated $168 million of free cash flow this quarter.

Driven by a more efficient cash conversion cycle.

Claire Bramley: Our DSO improved to 58 days in Q4 of 2023 versus 74 days in the fourth quarter of 2022. Before I provide our annual financial outlook for 2024, I'd like to make some comments to set the context related to Steve's comments regarding perm erosion. We forecast an approximate 4-5% negative impact on total ARR in the first quarter of 2024. This, in turn, negatively affects recurring revenue, creating a two percentage point impact for the fall year.

Our DSO increased to 58 days in Q4 of 2023.

Speaker Change: 74 days in the fourth quarter of 2020.

Speaker Change: Before I provide our annual financial outlook for 2024, I'd like to make some comments to set the context.

Speaker Change: Related to Steve's comments regarding on penetration.

Speaker Change: We forecast an approximate 45% negative impact to tissue in the fast course of 2024.

Speaker Change: This in turn negatively affects recounting revenue, creating a two percentage point impact for the full year.

Claire Bramley: We anticipate an approximate 1% headwind in 2024 related to upfront recurring revenue. This is because the net impact expected at the end of the year is negligible. Based on currency exchange rates at the end of January 2024, we anticipate a negative currency impact of 1 to 1.5% on our 2024 ARR and revenue outlook components. For Cloud ARR, we forecast sequential dollar growth throughout the year, with the second half of 2024 being much larger than the third half. The total ARR Following the decline in the first quarter, we forecast positive dollar growth in the second quarter and sequential dollar growth for the remainder of the year. For both cloud and total ARR, we continue to anticipate our fourth quarter to be the strongest quarter of the year, in line with historical seasonality. For the full year, we expect cloud AOR growth to exceed on-prem erosion, thus enabling total AOR growth.

Speaker Change: We anticipate an approximate 1% headwind in 'twenty three 'twenty four related to upfront and recurring revenue is because the net impact expected at the end of the year is nominal.

Speaker Change: Based on currency exchange rates at the end of January 2024, we anticipate a negative currency impact of one to one 5% to our 2024 era and revenue outlet component.

The cloud era, we forecast sequential downtick rate throughout the year with the second half of 2024 being much larger than the first half.

Speaker Change: Potato era following the decline in the first quarter, we forecast positive growth in the second quarter and sequential dollar rate for the remainder of the year.

Speaker Change: Device cloud and title era, we continue to anticipate a fourth quarter to be the strongest quarter as a year in line with historical seasonality.

Speaker Change: For the full year, we expect cloud AOR growth to exceed on penetration, thus, enabling title ore grade.

Claire Bramley: For cloud net expansion, we continue to estimate a rate of approximately 120%. On total gross margin, we expect a slight headwind back to 2023 as we continue to increase the mix of cloud. But we anticipate cloud gross margin expansion as we continue to achieve scale benefits. On operating margins, we expect to maintain our 2023 level as we continue to optimize costs across the company while driving efficiency. We will also continue investing in areas that generate growth, such as AI, demand creation, and brand awareness. These investments will be balanced with cost discipline in non-revenue-generating areas as we continue to prioritize where we spend.

The cloud net expansion, we continue to estimate a rate of approximately 120%.

Okay. So gross margin, we expect a slight headwind for 2023 as we continue to increase the mix of cloud, but anticipate class gross margin expansion as we continue to achieve scale benefits.

Speaker Change: On operating margin, we expect to maintain our 2023 level as we continue to optimize costs across the company while driving efficiency.

Speaker Change: We will also continue investing in areas that generate great such as AI demand creation and brand awareness. These investments will be balanced with cost discipline and non revenue generating areas as we continue to prioritize where we spend.

Claire Bramley: Regarding free cash flows, we expect our results to be more back half-weighted than 2023, driven by the anticipated growth profile in 2024. On capital allocation, we continue to commit to a minimum of 75% return of free cash flow to our shareholders. Finally, we have carefully evaluated the fourth quarter dynamics impacting cloud ARR, along with the steps taken to address, and incorporated these factors and the macro environment to prudently set our 2024 outlook. Our annual outlook for 2024, which is on a constant currency basis for ARR and revenue, is as follows. Cloud ARR is anticipated to grow year-on-year in the range of 35% to 41%. Total ARR is projected to grow year-on-year in the range of 48%. Total recurring revenue is expected to increase year-on-year in the range of 1 to 3%. Total revenue is anticipated to increase year-on-year in the range of flat to 2%. Non-Gap Diluted Earnings Pressure in the range of $2.15 to $2.31.

Speaker Change: Regarding free cash flow, we expect our results to be more back half weighted in 2023, driven by the anticipated growth profile in 2024.

Speaker Change: On capital allocation, we continue to commit to a minimum of 75% return of free cash flow to our shareholders.

Speaker Change: Finally, we have carefully evaluated at the fourth quarter dynamic impacting cloud era.

Speaker Change: Along with the steps taken to address and incorporated these factors and the macro environment.

Speaker Change: Recently set at 2024 outlets.

Speaker Change: Our annual outlook for 2024, which is on a constant currency basis, the Ara and revenue is as follows.

Speaker Change: Cloud era is anticipated to grow year on year in the range of 35% to 41% types of Iowa is projected to grow year on year in the range of 48%.

Speaker Change: Recurring revenue is expected to increase year on year in the range of 1% to 3%.

Speaker Change: Total revenue is anticipated to increase year on year in the range of flat to 2%.

Speaker Change: non-GAAP diluted earnings per share in the range of $2 15.

Speaker Change: The $2.31.

Claire Bramley: The cash flow is expected to be in the range of $340 to $380 million. Here are some modeling assumptions for 2024. A non-GAAP tax rate of approximately 24.2% Weighted average shares outstanding of 99.5 million at an expense of approximately $45 million.

Speaker Change: Free cash flow is expected to be in the range of $340 million to $380 million.

Speaker Change: As a modeling assumption for 2024.

Speaker Change: Our non-GAAP tax rate of approximately 24, 2%.

Speaker Change: Weighted average shares outstanding of $99 5 million.

Other expense of approximately $45 million.

Claire Bramley: For the first quarter of 2024, we anticipate non-debt diluted earnings per share to be in the range of 53 to 57 cents. We project the non-debt tax rate to be approximately 24.5% and the weighted average shares outstanding to be 101.3 million. To close, 2023 was a solid year, with cloud ARR ending at over half a billion dollars, and with historical and future cloud growth rates that are stronger than the market, Regenerative Profitability, and Durable Free Cash Flow, we continue to make good progress against our cloud-first profitable growth strategy. We expect cloud ARR to exceed $700 million by the end of 2024, which continues to drive total ARR growth and enables us to remain on the Thank you very much for your time today.

For the first quarter of 2024, we anticipate non-GAAP diluted earnings per share to be in the range of 53 to 57.

Speaker Change: We project non-GAAP tax rate to be approximately 24, 5% and the weighted average shares outstanding to be 101 3 million.

To close 2023 was a solid year with cloud era, ending at over half a billion dollars and the historical and future cloud growth rates that are stronger than the market, we generate profitability and durable free cash guide.

Speaker Change: We continue to make good progress against our cloud SaaS profitable growth strategy.

Speaker Change: We expect cloud era to exceed $700 million by the end of 2024, which continues to drive total Arab light.

Speaker Change: And enabled us to remain on the path to achieve over $1 billion of cash ore by the end of 2025.

Speaker Change: He is very much for your time today, let's please open the call for questions.

Joel: Let's please open the call for questions. Absolutely. At this time, I would like to remind everyone that in order to ask a question, press star, then the number one on your telephone keypad.

Speaker Change: Absolutely at this time I would like to remind everyone that in order to ask a question Press Star then the number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster and.

Joel: We'll pause for just a moment to compile the Q&A roster. In the interest of giving everyone an opportunity, we appreciate that you limit yourself to one question and one follow-up. Your first question comes from the line of Tyler Radke. Your line is open.

Speaker Change: In the interest of giving everyone an opportunity. We appreciate that you limit yourself to one question and one follow up.

Your first question comes from the line of Tyler Radke. Your line is open.

Tyler Radke: Yeah, good afternoon. Thanks for taking the question. So there is a lot to unpack here between the moving pieces of the slip deals and the churn event in 2024 on the on-prem side. I guess, the first question, you know, just to understand kind of the moving pieces here.

Tyler Radke: Yes. Good afternoon. Thanks for taking the question so a lot to unpack here between the moving pieces of the slip deals and the the churn event in 2024 on the on Prem side.

Tyler Radke: I guess first question.

Speaker Change: Just to understand.

Tyler Radke: Kind of the moving pieces here, so if I think about.

Tyler Radke: So if I think about your cloud ARR guidance, I think that that did come in below consensus a bit for 2024. But, apparently, that's not negatively impacted by this churn event. But to kind of hit a billion dollars in 2025, there's not too much room for the growth to slow there. So I guess what's giving you the confidence in, you know, the strong two-year cloud outlook? And then secondly, can you just unpack the on-prem erosion event? I think many of us on the call were not expecting that, but it sounds like you've been expecting that for a while. So if you could just add a little bit more color and, you know, just.

Tyler Radke: Your cloud guidance I think that did come in below consensus a bit for 2024.

Tyler Radke: Seemingly thats not negatively impacted by this.

Tyler Radke: This churn event, but to kind of hit the $1 billion in.

Tyler Radke: 2025, there's not too much room for the growth to slow there. So I guess, what's giving you the confidence.

Tyler Radke: In kind of the strong to your cloud outlook.

Tyler Radke: And then secondly.

Can you just unpack the.

Tyler Radke: The on Prem erosion event.

Tyler Radke: I think many of us on the call, where we're not expecting that but it sounds like you've you've been expecting that for a while so if you could just add a little bit more color.

Tyler Radke: And just.

Steve McMillan: Let us, you know, maybe frame if there's any of these other events, you know, in the coming years. Thank you. Yeah, thanks, Tyler, for the question. Just to take a little step back.

Tyler Radke: Let us maybe frame if theres any of these other events.

Speaker Change: In the coming years. Thank you.

Speaker Change: Yeah, Thanks, Tyler for the question.

Speaker Change: Just to just to take a step.

Steve McMillan: Now, we're really proud of our execution over the last three and a half years. That 10x cloud growth just demonstrates that we're in a great market. Data analytics, all of the new interest that AI is generating, the technology advancements that we're putting into the market continuously give us a lot of confidence in terms of how we're going to drive forward. It really says that we've got the right strategy, we've So when we give our guidance for 2024, clearly, we want to make sure that we are being realistic and prudent in that guidance. And we are going to execute as we go through 2024 with some real focus and determination. Our net expansion rate increasing to 124% in Q4 was a really good sign of the core interest that we have in our platform and that when we deploy with our customers and these major customers into the cloud, they are really committed to us, and they continue to grow their data and analytics capabilities with us in the cloud. Now to unpack the two events just to your point, we don't see any lack of demand for our solutions. This was purely a timing event from our cloud ARR deals.

Speaker Change: Step back.

Speaker Change: We're really proud of our execution.

Speaker Change: Last three and a half years youre not <unk> quite a growth. It just demonstrates that we are in a great market data analytics all of the new entrants.

Speaker Change: AI is generating the technology advancements that we're putting into the market continuously give us a lot of confidence in terms of how we're going to drive forward.

Speaker Change: Really says that we've got the right strategy the right technology platform and we've got the right team to execute when we gave our guidance for 2024, clearly we wanted to make sure that we're being realistic and prudent in that guidance.

Speaker Change: And we are going to execute.

Speaker Change: As we go through 2024, with some real focus and determination.

Speaker Change: Our net expansion rate increases of 124% in Q4 was a really good sign of the core and.

Speaker Change: And trends that we have in our platform and that can be deployed with our customers in these major customers into the cloud.

Speaker Change: Really committed to it and we can continue to grow their data and analytics capabilities with us.

Speaker Change: And in the cloud.

Speaker Change: To unpack the two events just to your point.

Speaker Change: We don't see any lack of demand for our solutions.

Speaker Change: Truly attaining event from our cloud E. R. R E D.

<unk>.

Steve McMillan: As we pointed out in our prepared remarks, many of our deals are large and closed in the last month's quarter, and many closed in the last few weeks. What we tended to see was that as data analytics and AI became more and more interesting in strategic board-level discussions within our customers, we have the opportunity to engage more broadly inside our customers with lots of different use cases. However, it did make the decision-making cycles inside our customers slightly elongated, as they have to consider things like data placement, which CSPs they want to use, and which language models they want to use and leverage.

Speaker Change: As we pointed out in our prepared remarks, many of our deals are large and closed in the last months this quarter at many closed in the last few weeks.

Speaker Change: What we tended to see was as data analytics and AI become more and more interesting in a strategic board level discussion within our customers that we have the opportunity to engage more broadly and paper customers with lots of different use cases, however, it did make the decision making.

Speaker Change: Cycles and paid our customers slightly elongated as they have to consider things like data placement, which csp's they want to use which language model they want to use and leverage the great thing about the Teradata platform is that we gave a whole range of choice to our customers in terms of that technology.

Steve McMillan: And the great thing about the Teradata platform is that we give a whole range of choice to our customers in terms of that technology. And so we give them the flexibility to deploy absolutely the right technology that they want to use going forward. But for those large deals, where a lot of those complex decision-making criteria come into play, we saw a handful of deals over $2 million slipping into 2024. And that included an eight-figure deal that Claire mentioned at an investor conference in December.

Speaker Change: And so we give them that flexibility to deploy on absolutely the right technology that they want to use.

Going forward.

Speaker Change: For those large deals where a lot of those complex decision, making criteria come into play.

Speaker Change: We saw a handful of deals over $2 million.

Speaker Change: Slipping into 2024 and that included an eight figure deal that clear mentioned at an Investor Conference in December.

Steve McMillan: Clearly, I want to make a very clear point here, the majority of those deals are going to close in 2024, they're not competitive in nature, but we are absolutely focused on making sure that we're building that better pipeline management and visibility, and that the deal cycles and decision making is something that we are more on top of, as well as deploying a much more complex deal construct for some of these larger deals. So that really encapsulates what happened to cloud ARR growth in Q4. And then, if we look at our total ARR for 2024, you're absolutely correct. We have two major on-prem erosions that we've known about for some time. In fact, multiple years before we actually launched our Vantage Cloud platform, we knew about these intents to erode that on-prem capability. Clearly, that does not impact our cloud ARR, but it does impact our total ARR.

Speaker Change: Clearly want to make absolutely pointed here.

Speaker Change: The majority of those deals are going to close in 2024, they're not competitive in nature, but.

Speaker Change: But we are absolutely focused to make sure that we're building that better pipeline management and visibility.

<unk> cycled, whose decision making it is something that we are more on top of as well as deploying a much more complex deal construct for some of these larger deals.

Speaker Change: So that really encapsulates what happens to cloud <unk> growth for Q4.

Speaker Change: Then if we look at our total IRR.

Speaker Change: For 2024, Youre, absolutely correct, we have two major.

Speaker Change: On Prem.

Speaker Change: Erosions that we've known about for some time in fact multiple years before we actually launched our vantage platform.

Speaker Change: None of these intended to.

Speaker Change: A road that on Prem capability clearly does that.

Speaker Change: No impact for <unk>, but it does impact our total IRR.

Steve McMillan: And the timing of those erosions in 2024, as we've worked with the customers to nail down when the timing is for those erosions, we were able to factor that into the 2024 guidance that we just gave. And we also factored those erosions, because we had known about them for some time, into our 2025 goals when we set those goals. And so when we put those two very different factors together, what happened in Q4 from a cloud perspective, plus what's happening from an on-prem perspective in 2024, then we've included that in our guidance for 2024. But we do believe that our 2025 goals, which were all set with these being known elements, are still very achievable. And we're confident in our execution and our technology and our people as we move forward. Long answer there, Tyler.

Speaker Change: And the timing of those erosions in 2024, as we work with the customers to nail down when the timing is so those erosions.

The factor that into the 2024 guidance that we just gave.

Speaker Change: So we had also factored those erosions, because we've known about them for some time and to our 2025 goal when we set those goals.

Speaker Change: And so when we put those two very different factors together what happened in Q4 from a client perspective, but what's happening from an on Prem perspective in 2024 then.

Speaker Change: Included that in our guidance for 2024, but we do believe that our 2025, which we're all set with these being known elements are still very achievable and we're confident in our execution and our technology and our people as we move forward.

Speaker Change: Long answer there Tyler.

Tyler Radke: Yeah, I appreciate it. It was a multipart question. Just a quick follow-up question is, how does it relate to the expansions that you've seen, the net retention rate, and cloud picked up another point, which was great to see? How are you thinking about the contribution from expansions in 2024 in terms of driving that cloud growth? Is there room for that expansion rate to pick up further? And presumably, those are not seeing the same timing issues as it relates to deal slipping. Hey Kyla, this is Claire here, so I'll take that question.

Tyler Radke: Yeah I appreciate it the multipart question just a quick follow up is.

Speaker Change: As it relates to the expansion that you've seen.

Speaker Change: Net retention rate and cloud ticked up another point, which was which was great to see.

Speaker Change: How are you thinking about the.

Speaker Change: The contribution from expansions in 2024 in terms of driving that cloud growth is there room for that expansion rate to tick up further and presumably those are not saying seeing the same timing issues as it relates to deals slipping.

Speaker Change: Hey, Kyle.

Kyle: This kind of a handful of taking that question.

Claire Bramley: So just to confirm, we continue to assume a net expansion rate of 120% as we model forward to 2024 and out to 2025 to get to that path of $1 billion, as Steve mentioned. Nothing to do with your point with the split deals or anything like that, so we did see an uptick in Q4, as you mentioned, up to 124%. We're pleased with both the expansion that we see once customers are on the cloud with us after 12 months, but we're also seeing good expansion at the point of migration as well. So good trends there, I think very much indicating the demand that we see for our products, but we think it's prudent to continue to assume that 120% mark as we look out for the outlook for 2024 and also to 2025. Thank you.

Kyle: Second we.

Speaker Change: We continue to I assume and net expansion rate of 120% as we model forward to 2024 and out to 2025 and to get to that positive $1 billion as Steve mentioned.

Kyle: Going to the ACR client with the slipped deals or anything like that.

Kyle: We did see an uptick in Q4, you mentioned up to 124%. We're pleased with the expansion that we see one customer.

Kyle: <unk> on the cloud with us after 12 months, but also we're seeing good expansion at the point of migration as well as the good trends that I think Harry indicating the demand that we see for our products.

But we think it's prudent to continue to achieve that 120% Mark as we look out for our outlook for 2024 and it will say.

Kyle: Thousand 25.

Speaker Change: Thank you.

Chad Michael Bennett: The next question is from the line of Chad Bennett with Craig Callum. You may proceed. Great, thanks for taking my question. So I imagine we're going to kind of be all over these moving parts, I'll call it, but just to make sure I understand correctly, the two customers that are eroding represent, they call it, you know, 4 to 5% of total ARR, or yeah, total ARR, you know, representing 60 to 80 million of business that's going away. Is that correct?

Speaker Change: Next question is from the line of Chad Bennett with Craig Hallum. You May proceed.

Great. Thanks for taking my question so.

Chad Michael Bennett: I imagine, we're going to kind of be all over.

Chad Michael Bennett: These moving parts I'll call, but just make sure I understand correctly the two customers.

That are.

Chad Michael Bennett: Eroding.

Chad Michael Bennett: They represent the call it 4% to 5% of total IRR.

Speaker Change: Yes, totally IRR, representing $60 million to $80 million of business, that's going away.

Speaker Change: Is that correct.

Speaker Change: Yes.

Chad Michael Bennett: Yeah, so hi, Chancellor, here again. So yeah, we've got two large arm fragraces that Steve mentioned, and then kind of ongoing erosions that we would see as part of our everyday business. So to your point, that arm fragraces is driving the 4 to 5% sequential decline in ARR in the first quarter of 2024. Okay.

Speaker Change: I can't stand here again, so yeah, we've got to launch preparations that Steve mentioned, and then kind of ongoing operations.

Speaker Change: C as part of our everyday business.

Speaker Change: <unk> is driving that.

Speaker Change: 45% sequential decline in <unk> in the first quarter of 2024.

Speaker Change: Okay.

Claire Bramley: And then, so, if these were known or have been known for years, so are we still comfortable with our other targets in 25 around ARR growth and recurring revenue growth that we gave out a couple of years ago since we knew about these erosions? Yeah, so to your point, Jen, I think Steve mentioned that the overall erosion and the risk of these customers were known. We've been tracking them very closely, so no surprise. The timing is always much more difficult to predict, so that's what's gotten messed up recently in terms of the exact timing of that.

Speaker Change: And so.

Speaker Change: If these were were known or had been known for years.

Speaker Change: So are we still comfortable with our other targets in 'twenty five around <unk> growth and recurring revenue growth that we gave out.

Speaker Change: A couple of years ago.

Speaker Change: Since we knew about these erosion.

Yes.

Speaker Change: Yes, I think Steve mentioned that the <unk>.

Speaker Change: Overall erosion on the risk of a customer's was 90, we've been tracking them very closely.

Speaker Change: Surprise, the timing is always much more difficult to predict.

Speaker Change: What stands out recently in terms of the exact timing of that.

Claire Bramley: I haven't given a formal update on my 2025 outlets, but as we mentioned, we are continuing on that path for 2025. These were incorporated into our numbers for 2025, so there are no additional surprises there. Thank you.

Speaker Change: Haven't.

Given an actual update on my 2025 outlet, but as we mentioned we are continuing on that path to 2025.

Speaker Change: Incorporated into our numbers for 2025, so no additional surprises that.

Speaker Change: Thank you.

Eric Woodring: The next question is from the line of Eric Woodring with Morgan Stanley. You may proceed. Hey guys, thanks so much for taking my questions. Maybe Steve, if I start with you, you mentioned some comments around pipeline initiatives to address pipeline composition, conversion rates, sales enablement, and we talked about some cost optimization, which feels just a bit more severe than, you know, a few cloud deals slip that we'll get back next year. And there was some on-premise erosion that was an outlier.

Speaker Change: The next question is from the line of Erik Woodring with Morgan Stanley You May proceed.

Derrick Wood: Hey, guys. Thanks, so much for taking my questions, maybe Steve if I start with you you mentioned some comments around pipeline initiatives to address pipeline composition to burst embedded sales enablement, you talked about some cost optimization, which feels just a bit more severe than a few cloud deal slip that we'll get back.

Derrick Wood: Our next year and there was some on premise erosion that was an outlier so are we.

Eric Woodring: So are we looking at a longer than expected transformation than the goals you set out in 2021? Or how do I just balance kind of those comments you made with kind of the more bullish stance that you took on some of the slippage that occurred in 4Q and what you're talking about for 2024? Thanks.

Derrick Wood: Are we looking at a longer than expected transformation and the goals you set out in 2021 or how do I just balance of kind of those comments you made with kind of the more the more bullish stance that you took on some of the slippage that occurred in <unk> and what Youre talking about for 2024.

Steve McMillan: Yeah, thanks for the question. Look, I think as you look at transformations across the IT industry, they're rarely linear in terms of how they manifest. And again, I'll just restate, this was not uncertainty in demand for us; it was uncertainty in timing. We are on a cloud first path in terms of the cloud deals that we're executing against. And so we want to make sure that when we set guidance around those deals, we have great control and deal management to ensure that they don't slip out of the year.

Speaker Change: Yeah. Thanks for the question look I think as you look at transformation across the industry. They are rarely linear in terms of how they manifest.

Speaker Change: And again I'll, just restate that was known.

Speaker Change: The uncertainty in demand for us it was uncertainty in timing.

Speaker Change: We are on our cloud first pass in terms of the quality deals that we're executing against and so we want to make sure that when we set.

Speaker Change: <unk>.

Speaker Change: And those deals that we have right control and deal management to ensure that they don't slip out of the year.

Steve McMillan: What we see is, again, a handful of $2 million deals that slipped from 2023 and the last weeks of 2023 and to 2024. That did not give us a concern around the execution of the company or its ability to execute or deliver on the guidance that we've issued for 2024, which, again, we always make sure that we deliver and provide prudent guidance that we believe that we can execute against. Or, in terms of as we look at our 2025 goals, we had a number of these different business impacts factored into those goals as we gave out that guidance back in 2021. So I think from a company perspective, we're still on a path to achieve those goals. We've got some management system improvements that we have to execute to ensure that we close those deals in a timely fashion, and we're confident in the guidance that we put out for 2020. Okay, that's helpful.

Speaker Change: What we see is again, a handful of $2 million deals that slipped from 2023 and the last weeks of 2023 and 2024.

Speaker Change: <unk> does not get was.

Speaker Change: I can sell around the execution of the company, our ability to execute or deliver on.

Speaker Change: Both the guidance that we've issued for 2024, which again, we always make sure that we deliver and provide guidance that we believe that we can execute against.

Speaker Change: Or in terms of as we look at our 2025 goals, we had a number of these different.

Speaker Change: Business impact factored into those goals as we gave out that guidance back in 2021.

Speaker Change: So I think from a company perspective, we're still on a path to achieve those goals. We are we've got some.

Speaker Change: Management system improvements that we have to execute to ensure that.

Speaker Change: We close those deals and the tailored fashion.

Speaker Change: And we're confident in the guidance that we put out for 2024.

Speaker Change: Okay. That's helpful. Thank you, Steve and then maybe just a follow up on one of the original questions.

Eric Woodring: Thank you, Steve. And then maybe just to follow up on one of the original questions at the top of Q&A, you know, I guess maybe my question is, like, it's not new that you're engaging with multiple decision makers at different customers or prospective customers. And you haven't really seen any deals to date that I can recall you calling out. So I guess the question is just, why now? You know, at first, in December, it was just one large eight-figure deal related to something company specific, but it expanded beyond that. So what makes you think that this is, you know, purely isolated to this quarter and not something broader? And that's it for me.

Speaker Change: Public Q&A.

Speaker Change: I guess, maybe my question is like it's not new that you are engaging with multiple decision makers at different customers or prospective customers and you haven't really seen deal slippage to date that I can recall you calling out so I guess the question is just why now.

Speaker Change: First in December it was just one large eight figure deal related to something company specific but it expanded beyond that so what makes you think that this is purely isolated to this quarter and not something broader and that's it for me. Thanks, So much.

Steve McMillan: Thanks so much. Yeah, I think we're just continuing to see great interest in the platform and the opportunities that we have in play. We understand the root causes for every single one of those opportunities. We know whether it may have been uncertainty about which CSP that they wanted to use, or which capabilities that they wanted to use, or the different business units that are involved in those decisions. So we think we've got a good handle on those particular deals, those handful of deals that were over $2 million in terms of how they're going to close out in 2024. Look, if I take a step back from it, we had great momentum in 2023.

Yes, I think.

Speaker Change: Just continuing to see great interest in the platform and the opportunities that we had and play we understand the root causes against every single one of those opportunities. We know whether it may have been an uncertainty all of which CSP that they wanted to use or which capabilities that they wanted to use or the different business units the revolt.

Speaker Change: And those decisions. So we think we've got a good handle on those.

Speaker Change: Those particular deal those handful of.

Speaker Change: Deals that were over $2 million in terms of how theyre going to close out in 2024.

Speaker Change: If I take a step back from it.

Speaker Change: Had great momentum in 2023, we grew our cloud <unk> by 48%. If you compare that that is way ahead of the data and analytics growth.

Steve McMillan: We grew our cloud ERR by 48%. If you compare that, that is way ahead of the cloud data and analytics growth that's happening in the marketplace. And as we look forward to 2024, we're still seeing good growth for 2024, and we're continuing to grow our total ERR in 2024. So all of our business dynamics are positive.

Speaker Change: That's happening in the marketplace.

Speaker Change: And as we look forward to 2024, we're still seeing good growth.

For 2024, and we're continuing to grow our total IRR and 2024. So all of our business dynamics are positive we did commit that we would execute our profitable growth strategy and therefore, we're being prudent in our cost and expense for 2020 forward to make sure that we can sell to lever that.

Wamsi Mohan: We did commit that we would execute a profitable growth strategy, and therefore, we're being prudent in our cost and expense for 2024 to make sure that we can still deliver that value to our shareholders. And that value has been delivered both in terms of our free cash flow commitment that Claire outlined, but also in terms of our earnings per share. And you saw that from a business perspective, in 2023, we had a very successful earnings per share result and also generated the free cash flow that we had indicated for 2023. Thank you. The next question is from the line of Wamsi Mohan with Bank of America. You may proceed. Hi, thanks for taking my questions. It's Ruplu filling in for Wamsi today.

Speaker Change: <unk> to our shareholders and that value is being delivered both in terms of our free cash flow commitment that clear lanes, but also in terms of earnings per share and you saw that from a from a business perspective in 2023, we had a very successful.

Speaker Change: Earnings per share result, and also generating the free cash flow that we had indicated for 2023.

Speaker Change: Thank you.

Speaker Change: Next question is from the line of <unk> Mohan with Bank of America. You May proceed.

Rupal: Hi, Thanks for taking my questions, it's rupal filling in for <unk> today.

Claire Bramley: Hey, Claire, can you help with respect to the deal timing of the eight-figure large deal? I mean, is that something you're expecting to come in during the first half of the year, or is that more of a back half close? And also, can you help me bridge the cash flow guidance that you've given? It looks like it's flat year-on-year, but how should we think about the timing of free cash flow? Hi, yeah, so thanks for the question. So just with regard to the deal that we mentioned back in December, we're continuing to work with the customer on that, and as Steve said, there's no competitive threat or issue there. So it's just a case of working through with the customer to be able to close and working with them on new timing. I think H1 is a good expectation with regard to that specific deal. As Steve mentioned, we are expecting to close the majority of those split deals in 2024, and some of them will be in the first half of the year. Some of them could potentially move out into the second half of the year.

Wamsi Mohan: <unk> clear can you help us with respect to the deal timing of a trigger large deal I mean is that something youre expecting to come out come in in the first half of the year or is that like a back half.

Wamsi Mohan: Clothes and also can you help me bridge the cash flow guidance that you've given it looks like it's flat year on year, but how should we think about the timing of free cash flow.

Speaker Change: Hi, yes.

Speaker Change: Thanks for the question. So just with regard to the deal that we mentioned back in December will continue throughout the customer on that.

Speaker Change: And as Steve said, there's no competitive threat or issue that it's just a case of working with the customer to be able to play it.

Speaker Change: And I'm working with them on maybe timing I think H wanting to get an expectation at with regards to that specific statement.

Speaker Change: As Steve mentioned, we are expecting to place. The majority of that is as it is in 2020 for some of them will be in the first half of the year. Some of them potentially took me back into the second half of the year.

Derrick Wood: With regard to the free cash flow guidance, so to your point, there's slight growth year over year if you take the midpoint. Obviously, we've put a range around that. The timing of that, I did mention it in my prepared remarks, but just as a reminder, because of the growth profile that we're seeing both from a revenue standpoint, recurring revenue, and therefore profitability, a lot of that free cash flow is generated, obviously, by the fact that we are generating profitable income, and therefore the cash generated will be more towards the second half of the year than we saw in 2023. We have really good confidence in that free It's mainly driven by profitable growth and a great cash conversion cycle that we saw through 2023, and we expect to continue into 2024. Thank you. The next question is from the line of Derrick Wood with TD Cowan.

With regard to the.

Speaker Change: Free cash flow guidance to your point is that there's a slight growth year over year.

Speaker Change: If you take the midpoint, obviously, we put a range around that.

Speaker Change: Timing of that I didn't mention it in my prepared remarks, but just as a reminder.

Speaker Change: Cause.

Speaker Change: <unk> profile that we're seeing nice from a revenue standpoint recurring revenues and therefore profitability.

Speaker Change: A lot of that free cash is generated obviously by.

Speaker Change: The fact that we are generating profitable income and therefore, the cash generated will be towards more towards the second half of the year than we saw in 2023, and we have really good confidence in that free cash flow generation.

Speaker Change: It's mainly driven by profitable growth and.

Speaker Change: Great passion massive cycle that we saw through 2023, and we expect to continue into 2024.

Speaker Change: Thank you. The next question is from the line of Derrick Wood with TD Cowen You May proceed.

Derrick Wood: You may proceed. Oh, great. Thanks, Steve.

Derrick Wood: Oh, great. Thanks.

Derrick Wood: Steve.

Steve McMillan: If we assume ARR growth gets close to, I guess, 0% in Q1, and you've got targets for 4% to 8% for the full year, that does assume a pretty significant build in net new ARR through the year. So any more color to share on what gives you that confidence that you see such an improvement in ARR built through the year? Yeah, I think we always see seasonality in terms of Q4 being our strongest year, Derrick, with that enterprise sales motion being geared towards the last quarter. And as we pointed out, the last quarter can be up to the last weeks in the year in terms of execution.

Derrick Wood: If we assume AOR growth gets close to zero percent in Q1.

Derrick Wood: <unk> got targets for 4% to 8% for the full year that does assume pretty significant build in net new <unk> through the year.

Derrick Wood: Any more color to share on what gives you that confidence that you see such an improvement.

<unk> built through the year.

Speaker Change: Yes, I think we always see seasonality in terms of Q4 being our strongest year.

Speaker Change: That enterprise sales motion.

Speaker Change: Geared towards the last quarter and as we pointed out the last can be up to the last weeks in the in the year in terms of execution.

Steve McMillan: We know and understand our customers; we know and understand what their plans are and how they're going to execute. We see strong demand in the marketplace. You know, we've made some fantastic enhancements to our technology platform to enable our customers to put AI and ML workloads into the Teradata platform. As cloud ARR becomes more strategic in terms of the split of our total ARR, and we said that, you know, now over a third of our total ARR is in the cloud. And then when we compound that with our net expansion rates, again, that was 124% for Q4, and we're modeling at 120%.

Speaker Change: We know and understand our customers, we know and understand what their plans are and how they're going to execute.

Speaker Change: We see strong demand in terms of the marketplace.

Speaker Change: <unk> made some fantastic enhancements to our technology platform to enable our customers to put AI and ml workloads end to that.

Speaker Change: And to the Teradata platform.

Speaker Change: <unk> becomes more strategic in terms of the split of our totally on our and we said that over a third of our total <unk> in the cloud and then when we compound that with our net expansion rate.

Speaker Change: That was 124% for Q4 and were modeling, 120%. We believe that it just gives us that ability to continue to compound the overall growth as we move through the year.

Steve McMillan: We believe that it just gives us that ability to continue to compound the overall growth as we move through the year. We do have pipelines for a number of major transactions that will drive both our cloud ARR and total ARR. They're currently slated to close in the second half of the year.

Speaker Change: We do have a pipeline of a number of nature.

Speaker Change: Transactions that will drive both our <unk> and totally are currently slated to close in the second half of the year.

Steve McMillan: So all of these factors combined give us confidence in the gains that we've put out there for 2024. I think as you look at the marketplace generally, you know, I think everybody knows that we have the ability in Teradata to take advantage of consumption-based usage from a cloud perspective. We're starting to see consumption take up in the marketplace generally.

Speaker Change: So all of these factors combined give us confidence in the guidance that we put out there for 2024 I think as you look at the marketplace generally.

Speaker Change: I think everybody knows that we have the ability interrogator to take.

Speaker Change: Take advantage of consumption based usage from a credit perspective, we're starting to see consumption.

Up in the marketplace generally.

Steve McMillan: That's the number that the cloud and analytics players are seeing. You know, we think that we will benefit from that. But the guidance that we've put out is prudent in terms of what we believe that we're going to deliver through the course of this year, given the underlying dynamics of the business. Great, that's helpful color.

Speaker Change: A number of the cloud and data and analytics players are seeing.

Speaker Change: We think that we will benefit from that.

Speaker Change: The guidance that we've put out.

Speaker Change: Prudent in terms of what we believe that we're going to delever through the course of this year given the underlying dynamics of the business.

Speaker Change: Great.

Claire Bramley: If I could just follow up for Claire on the cost optimization efforts, just wondering to get a little bit more color on whether this is going to take place in certain regions or job functions, when do you expect it to be completed, and any quantification on the cost savings? Yeah, we're focusing on non-generating, non-revenue generating areas, and as you would expect, that continues. We've seen some great cost optimization efforts happen through the course of 2023, and we expect them to continue in 2024. The other thing we do is very much focused on a returns-based approach.

Speaker Change: Helpful color, if I could just a quick follow up for Claire on the cost optimization efforts, just wondering to get a little bit more color on I was just going to take place in certain regions or job functions.

Katy L. Huberty: When do you expect it to be completed and any quantification on the cost savings.

Katy L. Huberty: Yeah.

Speaker Change: Yeah, I was focusing on generating.

Speaker Change: Non revenue generating.

<unk> areas as you would expect.

Speaker Change: That continues we're seeing some great at cost optimization efforts happen through the course of 2023, and we expect them to continue in 2024. The other thing we do it very much focus on a return basis, where we see opportunity to reinvest dollars into areas that we think will generate a high return. We also do that I think a few things like food.

Claire Bramley: So where we see opportunity to reinvest dollars into areas that we think will generate a higher return, we also do that. I think a few things I called out in our prepared remarks, for example, AI, a big area, especially obviously in the engineering space, from a demand generation standpoint as well, is something we continue to invest in. So really just focusing on are we getting the returns that we're expecting from the investments we're making, making those right trade-offs, and specifically focusing on efficiency in the non-revenue generating area. Thank you. The next question is from the line of Chirag Fed with Evercore ISI. You may proceed.

Speaker Change: In our prepared remarks example, AI big area, and especially obviously in the engineering space from a demand generation standpoint, as well, it's something we continue to invest in so it's really just focusing on are we getting the returns and that we're expecting from the investments, we're making making the right tradeoffs and specifically.

Speaker Change: Focus on efficiency in the non revenue generating areas.

Speaker Change: Thank you. The next question is from the line of <unk> <unk> with Evercore ISI you May proceed.

Chirag Fed: Hi, thanks for taking the question. You mentioned that 75% of your cloud customers are operating in hybrid environments, and we're in a macro right now where the hyperscalers and several consumption-based cloud names are seeing migration projects to the cloud resume. So do you think we've had a fundamental shift where customers, especially large customers, are increasingly preferring hybrid deployments versus cloud only, or is there a renewed focus on customers prioritizing their cloud-first projects again? And how does all this impact Teradata's position moving forward? Thank you. Yeah, thanks for the question.

Evercore ISI: Hi, Thanks for taking the question.

Evercore ISI: You mentioned, the 75% of your cloud customers are operating on hybrid environments, and where the macro right now where the hybrid pillars in several consumption based cloud names are seeing migration projects through the cloud Brazil. So.

Evercore ISI: Do you think we've had a fundamental shift for customers, especially large customers are increasingly preferring hybrid deployments for cloud only or is there a renewed focus in customers prioritizing their cloud first projects again and how does all of this impact here. It is positioned moving forward. Thank you.

Speaker Change: Yes. Thanks for the question look I think from a cloud migration perspective.

Steve McMillan: I think from a cloud migration perspective, we never saw a slowdown from the Teradata platform. We've had tremendous success migrating Teradata customers to the cloud, and that has continued as we've strengthened our technology and strengthened the platform. What we see are the benefits of the Teradata platform is that we can operate in a hybrid environment. So we can actually ensure that customers do not want to put some of their data into the cloud, maybe for some governance reasons or regulatory requirements or performance-based characteristics. If you're a telco, you want to keep your network data on-premises.

Speaker Change: Never slow a slowdown from the terror data platform, we've had tremendous success migrating heritage customers to the cloud.

Speaker Change: <unk> has continued as we've strengthened our technology and strengthened the platform. What we see is the benefit to the Teradata platform that we can operate in a hybrid environment.

Speaker Change: So we can actually ensure that customers do not want to put some of their data into the cloud maybe for some governance reasons from a regulatory requirements.

Speaker Change: Or performance based characteristics. If you are a telco you want to keep your network data on Prem.

Steve McMillan: The Teradata platform enables them to deploy in a completely hybrid environment. We operate some of the world's most critical workloads and some of the largest data sets in the world. What our customers know and find is that the best way for them to modernize their data solution set, to get the benefits of these new AI and ML capabilities, is to use the Teradata platform as their core technology platform for data and analytics, both on-premises and in the cloud. And so we know that we are the best in terms of enterprise scale and enterprise price performance, enabling our customers to actually get these AI models out of a proof of concept and into So if they want to have a data lake or a data warehouse or a lake house, these are all deployment options and data architectures that the Teradata platform supports, very differentiated from how our competitors address that marketplace.

Speaker Change: The Teradata platform enables them to.

Speaker Change: Deploy in a completely hybrid environment.

Speaker Change: We operate.

Speaker Change: Some of the world's most critical workloads and.

Speaker Change: And some of the largest data set in the world.

Speaker Change: What our customers know and pain is that the best way for them to modernize their data solution set to get the benefits out of these new AI and ml capabilities is to use the teradata platform as their core technology platform for data and analytics both on Prem.

Speaker Change: And in the cloud.

Speaker Change: And so we know that we are the best in terms of enterprise scale and enterprise price performance, enabling our customers to actually get these AI models.

Combat and enter production.

Speaker Change: And deploy in the way that our customers want to deploy so if people want to have a data lake or a data warehouse or a lake house. These are all deployment options.

Speaker Change: The architectures that the Teradata platform supports it's very differentiated from here.

Speaker Change: However, competitors address that marketplace and it uniquely positions us to execute from both a hybrid perspective and to help customers move one.

Raimo Lenschow: And it uniquely positions us to execute from both a hybrid perspective and to help customers move 100% of the workload to the cloud with the Teradata platform. So I'm not concerned that, you know, there's going to be an increase in competitive pressure to move from the Teradata platform to some of these more niche cloud data and analytics providers that can perhaps address the complexity. Thank you. The next question is from the line of Raimo Lenschow with Barclays. You may proceed. Great. This is Sheldon McMeans on for Raimo.

Speaker Change: Percent of the workload to the cloud with the Teradata platform.

Speaker Change: I'm not concerned that there's going to be an increasing competitive pressure to move from the tariff data platform too.

Speaker Change: These.

Speaker Change: More niche cloud data and analytics providers that can perhaps address the complexity.

Speaker Change: Thank you.

Speaker Change: Next question is from the line of Raimo <unk> with Barclays. You May proceed.

Speaker Change: Great. This is Shaun mcmeans on for Raimo. Thanks for taking our question you've previously discussed turning back on the new customer acquisition engine.

Steve McMillan: Thanks for taking our question. You have previously discussed turning back on the new customer acquisition engine. I want to ask how these initiatives are going. How would you rate your performance in fiscal year 23? And does your fiscal year 24 guidance assume a greater contribution from new logos than last year? Or are you still taking a rather conservative stance regarding new logo contributions?

Shaun McMeans: Ask how these initiatives are going how would you rate your performance in fiscal year 'twenty three and does your fiscal year 'twenty forward guidance assume a greater contribution from new logos than last year or are you still taking a rather conservative stance regarding new logo contribution.

Speaker Change: Yeah, we're happy with the progress that we're making from a new logo perspective in Q4, we added more new logos than any other quarter. As we went through 2023, who wasn't that momentum to continue into two.

Steve McMillan: Yeah, we're happy with the progress that we're making from a new logo perspective. In Q4, we added more new logos than any other quarter as we went through 2023. We want that momentum to continue into 2024. As we've always said, these new logos tend to start very small and grow quickly.

Speaker Change: 2024, as we've always said these new logos tend to start very small and grow quickly.

Speaker Change: We're super excited about.

Steve McMillan: We're super excited about things like AI Unlimited that we have, which will start to get new users and new customers utilizing Teradata capabilities in the marketplace. And that will be a great introduction into Teradata ecosystems for new logos across the world. So, yeah, we don't expect a huge dollar contribution from new logos as we move forward.

Things like AI unlimited that we had which will start to get new users and new customers.

Speaker Change: Utilizing HERA data capabilities in the marketplace and that will be a great introduction into terra data ecosystem is for new logos across the world. So.

Speaker Change: We don't expect a huge dollar contribution from new logos as we move forward. However.

Matthew George Hedberg: However, we're happy with the progress that we're making with that new logo. Thank you. As a reminder, please keep your questions to only one.

Speaker Change: However, we are happy with the progress that we're making from that new logo engine.

Speaker Change: Thank you.

Speaker Change: As a reminder, if you could kindly keep your questions to only one question. The next question is from the line of Matt Hedberg with RBC capital markets. You May proceed.

Steve McMillan: The next question is from the line of Matt Hedberg with RBC Capital Markets. You may proceed. Hey guys, this is Simran on behalf of Matt Hedberg. Thanks for taking a question. Just one for me.

Speaker Change: Hi, guys. This is Tim on for Matt Hedberg. Thanks for taking our question just one for me can you talk about the 2024 pipeline covered in dollars and how does that look this year compared to last year.

Matthew George Hedberg: Can you talk about the 2024 pipeline coverage in dollars and how it looks this year compared to last year? Thanks. Yeah, I think we don't go into a lot of details about our pipeline coverage specifically, but what I would say is that, you know, we've seen the marketplace being super attractive, right? And our performance in the market and the cloud marketplace has been great. You know, we grew at 48% in 2023, that was way ahead of market growth rates. We're seeing strong interest in our platform, and we're seeing that new logo engine starting to come online. So I think as we look at the guidance that we've issued for 2024, we always issue that guidance based on a prudent approach and a realistic approach. Thank you. The next question is from the line of Howard Ma with Guggenheim Securities. You may proceed. Thank you.

Speaker Change: Yes, I think we didn't go into a lot of details of our pipeline covered separately, what I would say is that we're seeing the marketplace being a super attractive.

Speaker Change: Performance in the market and quite marketplace has been great.

Speaker Change: We grew at 48% in 2023 that was way ahead of market growth rates and we're seeing strong interest in our platform we're seeing.

Speaker Change: New logo engine starting to come online. So I think as we as we look at the guidance that we've issued for 2024, we always I should that data is cadence based on a prudent approach in a realistic approach to execution.

Speaker Change: Thank you. The next question is from the line of Howard MA with Guggenheim Securities. You May proceed.

Howard Ma: Thank you.

Howard Ma: My question is also on the 2024 Outlook. So leading up to today's earnings print, I was under the strong impression that Teradata is an accelerating total ARR story driven by the cloud, but with the 2024 Outlook ranges, it's unclear if that's still the case. So Steve and Claire, you've adequately explained the on-premise erosion, but putting that aside, can you just answer, and you kind of hit on this earlier, can you answer if, are your customers still executing on their cloud journeys on Teradata with as much speed as before? And if not, has competition picked back up, or is there anything else that we should, that should prevent you from accelerating total ARR growth in 2024?

My question is also on the 2024 outlook, so leading up into today's earnings print I was under the strong impression that tear data isn't accelerating total IRR story, driven by cloud, but with the 2024 outlook ranges. It's unclear if thats still the case.

Stephen clear you've adequately explained.

Howard Ma: On premise erosion, but putting that aside can you just answer and you kind of hit on this earlier, but can you answer if all your customers are they still executing on their cloud journeys on tear data with as much sperber as before and if not.

Howard Ma: Competition picked up picked back up or is there anything else that we should that should prevent you from accelerating total <unk> growth in 2024.

Steve McMillan: Yeah, I think from a customer perspective, we're still seeing great interest, you know, just look at the range of different wins that I highlighted in the prepared remarks. We're seeing a lot of interest in utilizing our cloud platform. And that being the vehicle of their modernization journey, you know, as we look at how we assess our customer environments and whether, strategically, they're going to be long-term customers, but we've very much matured our customer success methodology. So we understand what's happening with those customers and the strategic plans that they have in place. And that's given us the opportunity to ensure that we can serve them, not seeing really any change in the competitive environment.

Speaker Change: Yes, I think from a customer's perspective, we're still seeing great entrants you just look at the range of different wins that I highlighted in the prepared remarks, we're seeing lots of interest to utilize our cloud platform and that being the vehicle is their modernization journey.

Speaker Change: As we look at how we assessed our customer environments.

Speaker Change: Whether strategically there going to be long term customers, but we very much mature to a customer success motion. So we understand what's happening with those customers in the strategic plan because they haven't placed.

Speaker Change: And that's given us the opportunity to ensure that we can serve them not seeing really any change in the competitive environment.

Steve McMillan: And some of the things I think that are boosting demand for us and giving us confidence in terms of our execution are a fairly unique approach that we have to having a platform that really supports an open AI approach. You know, you can use multiple different types of language models. You know, we're working with some of our on-premise customers in terms of deploying AI capabilities that they couldn't potentially do with other providers. And we see a lot of different opportunities in terms of driving growth and the overall business. Thank you. The next question is from the line of Nehal Chokshi with Northland Capital Markets. You may proceed. Yeah, thanks. I apologize in advance if these questions have been asked before, but Steve, you mentioned that greater than 75% of cloud customers are now operating hybrid. Could you give us a sense as far as what the percent was a year ago? Yeah, I think if we look back, we said it was 50 to 60%.

Speaker Change: Some of the things I think there is boosting demand for us and give us confidence in terms of our execution is a fairly unique approach that we have to have in our platform that really supports an open AI approach you can use multiple different types of language models.

Speaker Change: We're working with some of our own prime customers in terms of deploying AI capabilities.

Speaker Change: Potentially do with other providers and we see a lot of different opportunities in terms of driving growth.

Speaker Change: In terms of the overall business.

Speaker Change: Yeah.

Speaker Change: Thank you. The next question is from the line of <unk> with Northland Capital markets. You May proceed.

<unk>: Yes, thanks apologize in advance of these questions have been asked but.

Speaker Change: Steve you mentioned, a greater than sort of types of customers are now operating hybrid could you give us a sense as far as what percent was it a year ago.

Steve Macmillan: Yes, I think if we look at.

Steve Macmillan: We look back we said it was 50% to 60%.

Nehal Sushil Chokshi: And that's a number we've quoted in the past. So in terms of customers that are operating in a hybrid environment, and clearly, now that we've got hundreds and hundreds of our customers in the cloud, which are, you know, the major corporations in the world, we're seeing great interest. And the hybrid capability that we have is clearly a unique differentiator in terms of working across and creating that query fabric across both cloud and on-prem environments. Thank you. There are no further questions in queue.

Steve Macmillan: And that's the number we quoted in the past so in terms of customers that are operating in a hybrid environment and clearly now that we've got hundreds and hundreds of our customers in the cloud what is the major corporations in the world. We're seeing great interest in the hybrid capability that we have is clearly.

Steve Macmillan: Unique differentiator in terms of working across and creating that but.

Steve Macmillan: But query fabric across both cloud and on Prem environments.

Thanks Neil.

Thank you.

Steve Macmillan: There are no further questions in queue I would like to turn the call back over to Steve Macmillan <unk> for concluding remarks.

Steve McMillan: I'd like to turn the call back over to Steve McMillan for his concluding remarks. Thanks, everyone, for joining us today. As we look ahead, we are going to continue to innovate as a complete cloud analytics and data platform company for AI. We remain absolutely focused on delivering unified data, trusted AI, and faster innovations that empower our customers to make better, more confident decisions and improve their overall business performance. We are really excited about our future in this truly dynamic market. Thanks very much. This concludes today's conference call. You may now disconnect.

Steve Macmillan: Thanks, everyone for joining us today as we look ahead, we're going to continue to innovate as they complete cloud analytics and data platform company for AI, we remain absolutely focused on delivering to harmonize data trusted EI faster innovations that empower our customers to make better.

More confident decisions and improve their overall business performance, we really are excited about our future and thats truly dynamic market. Thanks very much.

This concludes today's conference call you may now disconnect.