Q4 2024 Teradata Corp Earnings Call
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 2024 fourth quarter and full year 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.
Please note that <unk> intends to file a Form 10-K for the year ended December 31, 2024 later this month.
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. Other special items described in our earnings release, we will also discuss other non-GAAP items, such as free cash flow.
Constant currency comparisons in 2025 revenue and <unk> growth outlook in constant currency.
Unless stated otherwise.
All numbers and results discussed on today's call are on a non-GAAP basis.
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 Dot com.
A replay of this conference call will be available later today on our website.
Steve: And now I will turn the call over to Steve.
Speaker Change: Thank you Chad and Hello, everyone. Thanks for joining us today, and 2024, we delivered $609 million and Claudia IRR at one $4 $74 billion of total AOR.
Speaker Change: We advanced our strategy with our hybrid cloud platform for trusted AI.
Speaker Change: As we discussed on the last call we see that companies are.
Speaker Change: We are exploring how to best leverage the potential of AI and journey.
Speaker Change: And they are realizing the requirement for managing massive volumes of data that will grow exponentially.
Speaker Change: Before we get into the details of our results. We also announced that clear Bradley is moving on from Teradata.
Speaker Change: A chief financial officer position at another company outside of our industry.
Speaker Change: We have a search process underway and Charles Smotherman, our Chief Accounting officer will assume the interim CFO position.
Speaker Change: Charles will continue to work closely with clear to ensure a seamless transition and tell her departure on March 31.
Speaker Change: Clear has been instrumental in supporting the company's transformation to a cloud leader we are grateful for her operational excellence and outstanding financial leadership, and driving durable profitability and free cash flow. During her tenure clear on behalf of everyone. At Teradata, We wish you the best in your new.
Speaker Change: <unk>.
Speaker Change: Shifting back to our results.
Speaker Change: <unk> a challenging year, we took significant actions in 2024 that position us to return to total <unk> growth. This year, we named a new CRO restructured our go to market organization and executed cost actions that reduced expenses across the business.
Speaker Change: We also reoriented the organization to win with the AI and introduced a sweeping set of innovations is aimed to strongly position us with a hybrid trusted AI platform.
Speaker Change: As we pivoted to AI, we also launched new partnerships with for example, Nvidia and strengthen partnerships with the major csp's.
Speaker Change: We are firmly focused on returning the company to growth in 2025 and execution is job number one.
Speaker Change: Our go to market organization has settled and from the midyear restructuring and we are expecting continued improvement in execution from a go to market teams.
Speaker Change: As an example, the financial services team, we created is allowing us to pursue emerging AI based industry use cases that we believe our technology best enables.
Speaker Change: We also have proof of concepts underway for generative AI for CX, a major Jenny I use case.
Speaker Change: Additionally, we are releasing a series of customer experience AI use cases that customers can quickly implement and are designed to drive improved results around customer churn next best action customer journey and hyper personalization.
Speaker Change: Our customer success team is doubling down on delivering innovation days curated to each customers needs and helping to extend the deployment of our technology across their base. In 2025, we are expecting a meaningful improvement in retention rates over 2024 for both total and on Prem.
Speaker Change: Are.
Speaker Change: We started to see improvement in retention rates in the second half of 2024 and are looking to carry that forward. This year.
Speaker Change: With these initiatives taking hold we believe we are well positioned to execute and return to growth this year.
Speaker Change: Just as we made a pivot in 2020 to cloud first we started to pivot in 2024 towards being the trusted hybrid AI platform at enterprise scale.
Speaker Change: Companies have data both in the cloud and on Prem and we see them, becoming more sophisticated in how they think about leveraging and balancing hybrid capabilities. It's not about choosing between environment anymore. It's about effectively operate in across both in order to meet diverse business needs and drive faster decision make.
Speaker Change: At the scale they require.
Speaker Change: Our teams are taken our hybrid cloud platform and trusted positioning to our customers. We believe our hybrid capabilities of cloud and on Prem along with their open and connected approach are unmatched.
Speaker Change: Continuing our disciplined approach to managing our financial plan and investing in extending our technology strengths and promoting teradata as a leader in data analytics trusted AI and hybrid cloud technology, while prudently managing costs.
Speaker Change: In 2025, we are adding to our strong tech stack building upon the broad set of innovations we delivered in 2024.
Speaker Change: As more companies look to hybrid compute environments of both cloud and on Prem increasingly adult technologies to support AI and embraced the industry move to open table format. We believe we are well positioned.
Speaker Change: On our last call I talked about the innovations we introduced last quarter, among those where you bring your own large language modal capabilities designed to help customers take advantage of small or mid sized open llm's, including domain specific models to deploy gen AI use cases.
Speaker Change: Minimizing expensive data movement.
Speaker Change: Integration of Nvidia as AI accelerated compute platform to accelerate AI workloads.
Speaker Change: And our customer complaint analyzer solution designed to help companies leverage AI to improve customer experiences.
Speaker Change: We introduced rapid start Janney I use cases with the integration of our vantage platform with Amazon bedrock.
Speaker Change: Integration customers gain access to more than 60 Gen. AI use cases that can help them deliver exceptional customer experiences boost productivity and streamline business processes.
Speaker Change: Currently carry data was one of the early vendors with AI solutions offered in the new Microsoft fabric workload hub.
Speaker Change: We also announced API integration with Google Cloud Gemini models designed to take advantage of more data for better journey outcomes.
Speaker Change: As we start 2025, our focus is on the future as we work to bring a significant new capabilities does that entail companies bring trusted AI to enterprise scale and the cloud and in the hybrid environments customers need.
Speaker Change: Let's look at our new enterprise vector store as one example to get the most value out of generative AI and adjourn take AI applications enterprises are looking to extract insights from both structured and unstructured data.
Speaker Change: Unstructured data has been difficult to leverage and traditional data management practices, yet is growing three times faster than other data types.
Speaker Change: <unk> data supports vectors in our banking system today.
Speaker Change: AI applications that are built on a bring your own large language modal capabilities now.
Speaker Change: Now we are bringing it to Phil enterprise scale.
Our Teradata enterprise data store is in private preview this quarter and brings a scalable and database solution that supports the full lifecycle of better data management at enterprise scale.
Speaker Change: From embedding generation and indexing metadata management and intelligent search all processes are seamlessly integrated within our existing vantage environment.
Speaker Change: We are also partnering with Nvidia to prepay GPU accelerated document processing or autonomous AI agent use cases, such as augmented KOL centers you'll.
Speaker Change: You'll be hearing more in the coming weeks about this exciting addition that we believe will kickstart lag and adjourn take AI applications.
Speaker Change: Then coming shortly afterwards, we are planning to bring our on prem customers, new ways to accelerate AI opportunities, providing them with an easy way to enable AI ml capabilities, including large scale AI pipelines, while honoring data sovereignty requirements, we have many customers and regular.
Speaker Change: <unk> industries that have strict requirements for data security and our new capabilities are designed to enable independent AI without impacting their EDW service levels.
We believe our deep analytics are open and connected platform and bring your own modal integrations are the foundation enterprises will demand and we have these now.
Speaker Change: Our strong capabilities were recently recognized in the 2025 Gartner critical capabilities report for cloud database management systems for analytical use cases, we placed among the top five companies across every evaluated use case.
Speaker Change: Now I'll walk you through a few examples that illustrate how our customers are investing in teradata to help address new AI and analytics use cases.
Speaker Change: One of the largest life insurance companies in India.
Speaker Change: Multiyear deal for our platform and consulting services.
Speaker Change: This new customer selected Teradata because of the comprehensive AI capabilities include even clearer escape analytics, such as model lifecycle management with modal ops. The enterprise feature store and database language models as well as a strongly competitive pricing.
Speaker Change: A large Japanese bank has shown that can successfully reduce costs and improve processing times by replacing our legacy HBC cluster used to perform Monte Carlo simulations.
Speaker Change: Huge scale with a system that relies on the native massive parallelism of our vantage platform in conjunction with Nvidia Gpus.
Speaker Change: A global technology leader spent significant time and millions of dollars trying to implement competitive offerings after demonstrating our vantage cloud and clear state capabilities.
Speaker Change: Large enterprise to say get to focus on a hybrid environment of cloud and on Prem we have a fast start in 2025 to help them establish their new data and AI capabilities, including taken advantage over Jan AI capabilities.
Speaker Change: As I close I want to emphasize that we are laser focused on returning to total AOR growth better.
Speaker Change: Building upon our technology and innovation Foundation in the cloud. We believe we have the trusted hybrid AI platform at the enterprise scale that the world's leading organizations require.
Speaker Change: Stated about our capabilities and delivering AI and <unk> AI solutions at scale, especially in the hybrid environments customers need now.
Speaker Change: We are seeing positive traction from our go to market restructuring and improvement in pipeline quality.
Speaker Change: The pace of technology innovations, both organically and with partners has increased and we look forward to monetizing. These advancements this year in.
Speaker Change: In 2025, we expect to achieve <unk> growth of 14% to 18% and flat to 2% growth in total IRR as we build our future.
Claire: Now I'll turn the call over to Claire.
Claire: Thank you, Steve and good afternoon, everyone.
Claire: Q4, <unk> met its guidance ranges, the cloud era and tasteful era.
Pat: Pat, Iowa, 18% year over year entitled ore declined 4% year over year.
Pat: In constant currency.
Pat: The cloud net expansion rate was 117% in Q4 2004.
Pat: non-GAAP earnings per share exceeded our guidance range, primarily driven by continued cost optimization efforts implemented in the second half of the year.
Pat: By fiscal year 2024 presented challenges in terms of <unk>, we continue.
Pat: To demonstrate the free cash flow and earnings durability of the business by exceeding our non-GAAP EPS guidance that we gave at the beginning of the year.
Pat: Fiscal year 2020 for free cash flow of $277 million represents a healthy 16% margin.
Pat: We also returned 78% of free cash flow to investors in the form of share repurchases.
Pat: As Steve mentioned, we took swift actions last year that we believe will improve execution in 2025.
Pat: We see multiple drivers that can enable a return to tie to analog like this year.
Pat: These include last year's data market changes that are designed to bring additional rigor to our pipeline and sales cycles, giving us greater visibility into sales productivity improvements.
Pat: We also expect increased full year retention rates.
Pat: Lastly, we anticipate monetizing all the innovation we introduced in 2024.
Pat: Plan to deliver in 2025.
Pat: As we exit 2020 for cloud era is over 40% of title IRR and should approach close to 50% at the end of 2025.
Pat: We continue to expect healthy cloud analog way of approximately 16% this year.
Pat: We also see increasing interest in our hybrid AI differentiation, which should lead to higher <unk> expansion net of.
Pat: Migration.
Pat: Let me now share more details on our quarterly and fiscal year financial results.
Pat: With revenue.
Pat: Fourth quarter recurring revenue with $351 million down 6% year over year as reported and down 4% year over year in constant currency.
Pat: The year over year growth rate was negatively impacted by three points from upfront revenue.
Pat: But having revenue as a percentage of total revenue was 86% up from 81% from the prior year period.
Pat: Fourth quarter total revenue was $409 million.
Pat: And 11% year over year as reported and 9% in constant currency.
Pat: For the full year recurring revenue exceeded the high end of our outlook range at $1.479 billion, a decrease of 1% as reported and an increase of 1% in constant currency.
Pat: Total revenue was also within our outlook range at $1 billion and $750 million down, 5% as reported and 3% in constant currency.
Pat: Moving to profitability and free cash pay.
Pat: Total gross margin for the quarter was 69% down 100 basis points here I begin.
Pat: Operating margin was 17, 6% down 190 basis points year over year right.
Pat: Great gross margin and operating margin year over year changes.
Pat: And that will be driven by the upfront revenue impact.
Pat: non-GAAP diluted earnings per share was <unk> 53.
Pat: Exceeding the top end of our guidance range.
Pat: We generated $148 million of free cash flow in the quarter, which is a $79 million increase sequentially and a $20 million decrease on a year over year basis.
Pat: In the fourth quarter, we repurchased approximately $29 million or approximately a million chats.
Pat: For the full year, we repurchased $215 million.
Pat: $5 8 million Chen.
Pat: Before I provide our annual financial outlook for 2025, I'd like to provide some additional context.
Pat: In line with historical seasonality Q1 is our largest win your highest durations and Lois great quarter.
Pat: Such we expect by title and cloud era to decline sequentially in Q1.
Pat: And anticipate a significant weighting upgrades to the second half of 2025.
Pat: In the first half we expect the growth rates potato era to be below our guidance range and cloud <unk> to be at the low end of our range before base accelerate in the second half.
Pat: We expect to return to tie to <unk> in the fourth quarter.
Pat: Our 2024 title AOR growth rate is the primary driver of our 2025 repairing revenue outlook.
Pat: We anticipate a 1% headwind in 2025 related to upfront with hiring revenue.
Pat: With respect to total revenue, we anticipate consulting revenue will decline in the high single digit range on a constant currency basis.
Pat: Using the currency rates at the end of December 2024, we anticipate a negative currency impact year over year of 150 to 200 basis points throughout 2025 revenue outlet.
Pat: Compared to three months ago, the currency exchange rate movements created an approximately $20 million headwind on 2025 operating income.
Pat: On total gross margin, we expect approximately 100 basis points decline due to currency and cloud mix, partially offset by cloud right two treatments.
Pat: Regarding expenses, we remain on track with our previously announced cost actions.
Pat: On operating margin, we expect to maintain our 2020 full rate as we benefit from last year's cost actions and continued to optimize expenses across the company, while continuing to prioritize key investments.
Pat: Regarding free cash flow or fiscal year free cash flow is being impacted by FX headwinds and casual era exit rate in 2024.
Pat: These items have negatively impacted our free cash flow by approximately $25 million since last quarter.
Pat: We anticipate Q1 free cash flow to be slightly negative due to the lower Q4 'twenty for bookings in 2025.
Pat: Many of them I think.
Pat: Our annual outlook for 2025, which is on a constant currency basis for Aon and revenue is that's fine.
Pat: Cloud is anticipated to grow year on year in the range of 14% to 18%.
Pat: Total error is projected to grow year on year in the range of flat to 2%.
Pat: Total recurring revenue is expected to be in the range of minus 3% to minus 5% you're right again.
Pat: Total revenue is anticipated to be in the range of minus 4% to minus 6% year over year.
Pat: non-GAAP diluted earnings per share is expected to be in the range of $2 15.
Pat: To $2 25.
Pat: Free cash flow is anticipated to be in the range of $250 million.
Pat: $280 million.
Speaker Change: Hey, Austin modeling assumptions for 2025.
Speaker Change: Our non-GAAP tax rate of approximately 23%.
Speaker Change: Weighted average shares outstanding of 97 4 million.
Speaker Change: Other expense of approximately $43 million.
Speaker Change: On capital allocation, we are pleased with the progress we have made on our share repurchase program to date.
Our weighted average shares outstanding is at an all time line and our balance sheet remains solid.
Speaker Change: Our first priority for 2025 as it returned to <unk>.
Speaker Change: Based on our guidance of revenue decline, which presents a headwind to free cash flow, we plan to balance growth investments and capital returns to shareholders.
Speaker Change: We are targeting a return of over 50% of free cash flow to shareholders in the form of share repurchases, which we expect will more than offset dilution and continue to increase our net debt position in 2025.
Speaker Change: For the first quarter of 2025, we anticipate with having revenue to be in the range of minus 4% to minus 6% year over year on a constant currency basis.
Speaker Change: We expect total revenue to be in the range of minus 6% to minus 8% year over year on a constant currency basis.
Speaker Change: We anticipate a negative currency impact year over year of approximately 200 basis points.
Speaker Change: We anticipate non-GAAP diluted earnings per share to be in the range of 55 to 59.
Speaker Change: We project non-GAAP tax rate to be approximately 24, 3% and a weighted average shares outstanding to be $97 9 million.
Speaker Change: As I prepare to transition from my role as CFO I want to express my heartfelt gratitude.
Speaker Change: Dedicated team loyal customers and our supportive shareholders.
Speaker Change: It's been an honor to be part of the transformation journey over the past four years.
Speaker Change: Para data has a strong foundation to build from driven by the strategic initiatives, we have set in motion and continued innovation.
The company is well positioned to return to growth in 2025.
Speaker Change: And end the year with cloud era approaching 50% of tasteful era.
Speaker Change: I have no doubt that the upcoming year will bring new opportunities and achievements for the company.
Thank you all for your time today now, let's open the call for questions.
Speaker Change: At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
Speaker Change: Pause for just a moment to compile the Q&A roster.
Speaker Change: In the interest of giving everyone an opportunity. We appreciate that you limit yourself to one question and one follow up.
Speaker Change: Okay.
Speaker Change: The first question is from the line of <unk> <unk> with Evercore ISI. Your line is now open.
Speaker Change: Thanks for taking the question and clearly congratulations on the new job, it's been a pleasure partnering with you and your team.
Speaker Change: Over the last several quarters.
Speaker Change: Steve maybe first for you are you able to comment on.
Speaker Change: How your customers and prospective customers.
Speaker Change: Thinking about cloud migrations at this point and cloud growth from the Hyperscale or it came in a little lower than I think a lot of investors anticipated.
Wondering if you could double click on what youre seeing internally with data platforms. Thank you.
Speaker Change: Sure Yeah. Thanks for the question.
Speaker Change: We did see deal elongation persist.
Speaker Change: For Q4 2024, along with as you pointed out some more stage migrations in terms of customers looking at how does the balance there on prem footprint with their cloud footprint.
Speaker Change: I think you are right that plays into a real opportunity area for us from a hybrid technology capabilities and we are starting to see the conversations about their customers change for example, even as I look at the portfolio today, we've got around 30, Deferent journey I P O.
Speaker Change: Six and place and executing today and these customers are looking at what's the best way to take these into production.
Speaker Change: And a number of the different innovations that we delivered in Q4 of 2024 are helping our customers progressed those gen AI projects, but they are balancing that between executing in the cloud and executing on Prem and clearly the territory. The technology said being consistent across all of those environments.
Speaker Change: Does what we believe is a unique capability in the marketplace.
Speaker Change: Got it.
Speaker Change: Unclear one for you can.
Speaker Change: Can you speak to the factors that give you confidence in the <unk>.
Speaker Change: Our guide which is.
Speaker Change: Stable and slightly these selling cloudy IRR growth, we've seen improved retention rates in the back half of 'twenty 'twenty four but at the.
Speaker Change: Same time clouded or are these cells.
Speaker Change: Would appreciate any clarity you can provide here.
Speaker Change: Good afternoon. Thanks Youre welcome. Thank you for your kind words as well regarding my transition.
Speaker Change: And so just with regard to the cloud era guidance that we gave does let me give you a little bit of perspective about how we set the guidance in 2025, we took a slightly different approach to this time last year.
Speaker Change: And the fact that because we learned from those trends and the patents that we were seeing in 2024th at this stage migrations that.
Speaker Change: Steve was just talking about the deal timing, we factored that in.
Speaker Change: And what we've also done is limited the reliance on large eight figure deals so.
Speaker Change: We've made sure that the.
Speaker Change: Our guide can be met without based large eight figure deals.
Speaker Change: Obviously once they don't happen, they're very difficult to replace that little bit of a different approach that give me confidence.
Speaker Change: Our cloud era guidance standpoint, and as you mentioned some of the other drivers that we're seeing include an improved retention rate.
Speaker Change: Across on premise and title era and also some of the changes that we made within the go to market organization is giving us really good visibility in terms of our pipeline in terms of our erosion.
Speaker Change: Significantly improved at the beginning of the year as well.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: The next question is from the line of Tyler Radke with Citi. Your line is now open.
Speaker Change: Hi, Thanks for taking the question. This is why CFO Tyler here.
Speaker Change: Good luck on your agenda was had been pleasure working with you and I guess, so glad you start thanks for providing all the incremental color on the growth 25, I guess could you give us some.
Speaker Change: Finer grain details on how to help us understand the mix of the pipeline that gives you the better confidence is it more new logos expansion and if there's also I mean.
Speaker Change: Impacts from open paper formats that you're expecting.
Speaker Change: Yeah, absolutely. So first of all from an expansion migration standpoint, we're anticipating approximately 50 50 of price I think it will be more migrations at the beginning of the year with expansions coming as we progressed throughout the year.
Speaker Change: Likewise, we continue to see a good pipeline of new lives, but.
Speaker Change: We still anticipate new logos in 2025, specifically to be a small contributor to our island right.
Speaker Change: Great and then I think as I mentioned in my prepared remarks at some of the innovations that we.
Speaker Change: So in 2024 again will start to see the benefits of that as we progress through 2025, and maybe I'll just hop over to Steve.
Speaker Change: Okay.
Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: <unk> thousand 25 innovation, yeah. Thanks, Ed Walter Thanks for the question as we look at the Genco simpler and enterprise Baker store capability, a number of our partners Nvidia and AWS have actually said that our visibility from an enterprise better store perspective are unique in the marketplace and taking those capabilities to our customers enabling them to.
Speaker Change: <unk>.
Speaker Change: Jenny I in AI solutions operating in say the environment would be a unique differentiation delivered by Terry data. So we're super excited about that but as we look at the outlook for 2025, we haven't factored in a lot of.
Speaker Change: That new business and new business opportunity, so we see that as potential upside as we execute through the year.
Speaker Change: Thanks, Dave that was actually going to be my next question. So I'm good here. Thanks.
Speaker Change: Thanks, Mike Thanks for the kind words.
Speaker Change: Thank you. The next question is from the line of Erik Woodring with Morgan Stanley. Your line is now open.
Speaker Change: Hey, guys. Thanks, so much for taking the question and clear I'll Echo everyone's comments.
We missed it good luck with everything.
Steve: Yes, Steve.
Speaker Change: If we take a step back.
Speaker Change: I appreciate the work you and the team have done here, there's been a lot of work kind of across the stack. Both from a technology go to market people personnel approach et cetera.
Speaker Change: For the better part of 10 years Taro data has been in a period of transformation.
Speaker Change: And I would argue as we look to 2025.
Speaker Change: It's nice to see some expectation for a bit of growth.
Speaker Change: On the on the total IRR side, but recurring revenue is still down Claudia are growing I think below some expectations and so I guess my broad question is Jeff.
Speaker Change: Does there need to be more.
Speaker Change: Rice of action taken taken to accelerate this company turned around and kind of get back to a regular cadence of growth.
Speaker Change: Just as I think about the backdrop of probably the most prolific AI spending environment.
Speaker Change: You're going to see in our lifetime, just help me understand what needs to get done.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: And one for me too.
Speaker Change: Sure.
Speaker Change: Hi, good morning.
Speaker Change: Hello, I have a quick follow up thanks.
Speaker Change: Okay. Thank you.
Speaker Change: I would say is over the last four years, we have pivoted the company has considerably.
Speaker Change: Taken the business from essentially amazing close to zero dollar cloud business too.
Speaker Change: $1 billion has been focused on cloud first focus is really laid the foundation of the turnaround of the company and having a presence in Macau and the high growth marketplace.
Speaker Change: With the start to as that becomes a more and more meaningful part of our overall <unk> contribute more and more dollars from that perspective, but every company has to continue that transformation journey.
Speaker Change: We are in the next pivot in terms of how we address the AI and Jenny I opportunity. That's in front of us and I think some of the capabilities that we delivered in 2024 highlighted by their partnerships with Nvidia or integration with AWS bedrock or integrations with Google.
Speaker Change: Gemini and also being late or into the Microsoft fabric from an AI perspective really started we set up our deteriorate technology set and gives US a foundation to build on and the new AI and Jennie O marketplace. As we move forward. What we're doing is continuing to transform our sales capability and sales execution. So that they can take those messages.
Speaker Change: To the marketplace capture this new Tam.
Speaker Change: Sarah data and utilize technologies, either new AI on Prem offering that we're looking to release, the CR or enterprise Vectra store, which allows our customers to manage factors on an end to end basis is a very new market and a very new sales motion, but we believe will underpin some very strong growth as we move into the future.
Speaker Change: Okay I appreciate all that feedback thank.
Steve: Thank you Steve.
Claire: And then Claire.
Claire: Youre guiding to free cash flow and EPS at the midpoint, that's down slightly year over year.
Claire: Yes.
Claire: Understand FX has become an incremental headwind.
Claire: But you've also gone through a period of kind of cost cutting and cost transformation and so can you. Maybe just help me understand why it might not be paying off as much next year kind of the building blocks of how you get to slight declines in those metrics and especially.
Claire: If you believe you've embedded some conservativism.
Claire: Services I mean, they're just how we should be thinking about that thank you so much.
Claire: Yes, Thanks, Eric with regard to both EPS and free cash by Dr. Brian I think the two big headwinds that we see year over year festival as the FX impact that I talked about.
Claire: It was approximately $20 million, a fairly sizable year over year and that gave us immaterialize in Alaska.
Claire: Oh.
Claire: The other area I would say is nationally as we finished 2024 with negative IRR that means a decline in revenue in 2025, so that impact.
Claire: Free cash flow standpoint out obviously, one billing.
Claire: And from a P&L standpoint, our revenue and profitability now the actions that we took last year.
Claire: Helping us to offset any negative headwind coming from lower revenue and that also helping us to offset any negative impact from our mix of cloud.
Claire: Mix impacts.
Claire: So we're definitely offsetting that what were not.
Claire: Able to offset in our EPS guide is the full impact of the currency and the reason that we had not decided to do that if we want to really make sure that we can reinvest some of those savings back integrate as you mentioned really important for us in 2025 to get <unk> back to growth. So we want to make sure that we keep that availability of.
Claire: Investment.
Claire: Nationally we have learnings from 2024, so we're.
Claire: Wed like to think that we're being prudent as we set that guidance, but most of the most of the reason assay that we can reinvest some of those savings back to get to 2025 <unk>.
Claire: Thank you.
Speaker Change: The next question is from the line of <unk> with Northland Capital markets. Your line is now open.
Speaker Change: Alright, thank you.
Speaker Change: So.
Speaker Change: Clearly you mentioned that you expect.
Speaker Change: They are in cloud there are to improve as we go through calendar 2000 cooler in order for that to happen on a bookings basis.
Speaker Change: Over the next two quarters can you describe what that trajectory needs to be.
Speaker Change: At a similar level of acceleration.
Speaker Change: Looking at backlog will drive that or does it go ahead.
Speaker Change: It goes from liquid or installation.
Speaker Change: There are and tourism.
Speaker Change: Yes.
Speaker Change: With what we saw in 2024 and in line with historical seasonality that as I mentioned in the prepared remarks. He wanted always now with great biggest manure and highest <unk> quarter.
Speaker Change: For example, in Q1 about 45% of our alright as happened in Q1 for total error and about 70% in H one.
Speaker Change: We tend to be have sharply.
Speaker Change: APAC kind of erosion piece that does drive the linearity trend that we see there is not necessarily requiring a huge acceleration and additional bookings. Its just about I think the margins tend to drop off in the second half of the year.
Speaker Change: And then can you clarify exactly how much was on premise erosion in calendar 'twenty four and what's your expectation for calendar 'twenty five and millions of dollars.
Speaker Change: Yes, we haven't disclosed any of that amount what I would say that what we mentioned is that we do see a meaningful.
Speaker Change: While improvements as we exit 2024 that we pulled out a proven happened in the fourth quarter of <unk> and we're expecting that improvement to continue in 2025, what was that I think with the visibility that we have going into the start of the year for 2025 activity.
Speaker Change: Thank you.
Speaker Change: The next question is from the line of Matt Hedberg with RBC. Your line is now open.
Matt Swanson: Yes. Thank you this is Matt Swanson on for Matt.
Matt Swanson: We have a little bit earlier, you mentioned 30 different gen AI proof of concepts.
Speaker Change: I was just wondering if you could go a little bit deeper into maybe the commonality between those and why they're choosing teradata. It sounds like maybe it's a little early for us to be driven by some of the exciting stuff coming in like the vector store AI on Prem, but just if there is any sort of.
Matt Swanson: Common characteristics that you're saying.
Speaker Change: Yeah. Thanks for the question Matt.
These solutions are actually leveraging technology switcher enterra data today. So for example, bringing language models and to the Teradata environment, and obviously running small language models like hugging face and the Teradata environment, we see a lot of the solutions that our customers are looking at being in the CX space.
Speaker Change: So taken customer interaction data and maybe very unstructured data E. Mails that may be chat logs and then utilizing those too.
Speaker Change: Essentially make next best action predictions for call Center agents, our proactive recommendations to drive different CX solutions, we're seeing a number of different banks in the U S look at this technology and the deployment of this technology and the reason that they look at Terry data is the long standing in fact the <unk>.
Speaker Change: Data can execute some of the world's most complicated workloads and the most efficient and effective way and if you think about that in terms of the economics of AI and Jenny I, we have a path to enable our customers to deploy journey II and AI solutions at enterprise scale in a very cost efficient.
Speaker Change: And cost effective way.
And that's why we're really excited with some of the new language models that are coming out that are highlighting that.
That requirement.
Speaker Change: 0.2 is an example of actually reducing the cost of the enterprise scale of these kind of solutions. So it's great for us to be able to demonstrate those characteristics of our customers.
Speaker Change: Thank you.
Speaker Change: And then clearly I think you mentioned kind of the three pieces of returning to <unk> growth was the go to market changes last year improved full year retention rates and monetize the innovation 2024.
Speaker Change: They're obviously very interrelated, but is there a way to kind of think about how you rank those in terms of contribution next.
Next year, or how you're kind of thinking about the progression to get to your guidance.
Speaker Change: Yes, I think to your point, a very interrelated, but I think one of the things that we have been walking on over the last 12 months is that visibility and improvement in our retention rate. So I think that.
Speaker Change: As I mentioned, a big impact in terms of our linearity.
Is a big help from a title IRR standpoint in terms of getting back to that year over year meaningful improvement I would say one of the strongest areas, obviously that go to market team.
Speaker Change: Changes are helping us in terms of improved visibility and improved visibility to that erosion improved visibility to our pipeline. So I wouldn't say that not necessarily as a huge driver of the absolute growth, but makes us feel good about the guidance that we're giving at this point in the year and then into your client and <unk>.
Speaker Change: Innovation, obviously anything that we can talk to our customers about with regards to the development of that product.
Speaker Change: The different offerings that we give them ultimately is what drives growth.
Speaker Change: I think it's very interrelated to the other areas.
Speaker Change: But obviously is a huge factor in terms of.
Speaker Change: Driving cloud ammo grades at midpoint of 16% and getting back to tie to our growth in 2025.
Speaker Change: Thank you.
Speaker Change: The next question is from the line of Derrick Wood with TD Cowen. Your line is now open.
Speaker Change: Great. Thanks, guys. This is call on for Derek.
Steve: Steve I'll start with you could you just provide us with an upsell.
Speaker Change: They're on the open table format.
Speaker Change: I know you guys have been excited about it.
Speaker Change: The parents banner, but.
Just any color on where.
Speaker Change: Customers might be in.
Speaker Change: Got out with your bring your own query engine capabilities and when we could see production workload start to spin up.
Speaker Change: Yes, thanks for the question.
Speaker Change: We see open table format is still a critical capability that we're going to deliver and continue to improve on in the Teradata platform. One of the key tenants that we have is to be open and connected so we want to support both Apache iceberg in Delta Lake that really opens up a massive swaths of data and say to a customer organization.
Speaker Change: And then thinking about the Tara data query engine and the analytical capabilities that we have within that engine the new AI capabilities that we're bringing to bear and putting those against these massive volumes of the open table format data that we expect to become more and more common in theater customer environment is absolutely essential and critical for us.
Speaker Change: And our product roadmap continues to deliver new capabilities there to support our customers execution. We are seeing it as early days. Our logo every single customer I think is talking to us about open table format.
Speaker Change: As really very interesting to see customers think about the data.
Speaker Change: Workloads and data execution, both from an enterprise data warehouse perspective for the REIT need are really performance storage layer, but then a wage environment.
Speaker Change: Critical performance may not be that important but.
They still want to bring some fantastic analytical or gen AI or AI capabilities into that data to make it meaningful for them and that's really what our strategy hasnt from an execution perspective, and I think the proof of concepts that we're seeing and that we're executing in terms of taking even some of the unstructured data on a different topic.
Speaker Change: Told ots, and making that real and analyzable for our customers.
Speaker Change: That's super interesting.
Speaker Change: Great very helpful and then one for you.
Speaker Change: The quality of our number.
Speaker Change: <unk> again.
Speaker Change:
Speaker Change: You've talked about a better retention across on Prem in total that you've been seeing the last couple of months, but can you just give us a sense of in the medium term the shape of that.
Speaker Change: Cloud on our arm one we could maybe think about potential for acceleration.
Kathryn Fagg: Kathryn Fagg Festival.
Speaker Change: And that 2020 for.
Speaker Change: Next match my did finished in line with what we were expecting.
Speaker Change: So that would get the nice surprise is that as we look out to 2025 linked to some of the comments that have already made an incentive we anticipate the kind of the SaaS half of the year.
Speaker Change: See the impact of the China innovation and more migrations in the second half of the year female weighting of expenses, our net expansion rate with regard to the cloud will reflect that as well that could be federate out before it then reaccelerate Tiger time.
Speaker Change: Thank you.
Speaker Change: The next question is from the line of Raimo <unk> with Barclays. Your line is now open.
Speaker Change: Perfect. Thank you clearer we will Miss you first of all let's start with us.
Speaker Change: The more fundamental question to start if you think about the open table format, obviously, that's a big discussion.
Speaker Change: But obviously you guys come out of the structured world how do you see that relationship evolving between open two to four months, which is kind of.
Speaker Change: Not something that like having everything in one month of data Lake.
Speaker Change: One of the more structured more more structured data or kind of data warehousing that you guys grew up with like how do you think that relationship will grow out over time.
Speaker Change: How is that how are you.
Speaker Change: Your how do you think you completed maybe completed differently and I had one follow up.
Speaker Change: Yeah, Hi, Raimo. Thank you for the question, Yes, we see open table format does that fantastic opportunity to make those more performance.
Speaker Change: And to take all the benefits of carrier data technology, and a massive parallel computing architectures to make OTF environments Luna.
Speaker Change: <unk> performance, even with large swaths of data, which has always been <unk> core business.
Speaker Change: To get the best out of massive volumes of data either.
Speaker Change: DW construct but one of the things I think thats, AI and Jenny I world needs as I really.
Speaker Change: Enterprise scale Victor store capability and that is something that we already have and stayed the terra data technology set in terms of being able to store vectors, so taking that.
Speaker Change: OTF data are taking unstructured data.
Speaker Change: Yes, doing vectra analysis against that in conjunction with language models, and taking and managing the massive numbers of factors lastly, enable organizations to get the best of <unk> to data no matter, where a store, whether it's an ETF or whether it's non structured data and we were just looking at.
Speaker Change: The amount of data that is stored and unstructured sales as an example, and by putting by <unk>.
Speaker Change: Couldn't carry data as enterprise banks, a store next to those fails you can actually get meaningful results in meaningful end phase into the worlds, most unstructured data, which by far and away our numbers the structured data tools that we have in the world today, So exciting times ahead.
Speaker Change: Yes.
Speaker Change: Clear one for you like.
Speaker Change: Obviously, we're kind of looking at the kind of the leader and we're trying to look at leading indicators. If you think about like can you talk a little bit about some of the dynamics like billing this quarter.
Speaker Change: Public cloud or the quarterly.
Speaker Change: Speaking on more on the weaker on the weaker side.
Speaker Change: Is there some one off stuff that we kind of need to be aware of.
Speaker Change: Have answered that earlier on the call on the call. The truck you can't discuss it already.
Speaker Change: Yes, I think maybe what you're looking for kind of some linearity now.
Speaker Change: Erica.
Speaker Change: What I said in my prepared remarks was that we.
Speaker Change: To pay a cloud era to be the low end of the range that I gave for the full year, but just to give you a view on that and then from a title Ara standpoint the cause.
Speaker Change: The erosion activity that happened in the first half of the year as previously mentioned the title era will actually be below the low end of the of the full year range that I gave.
Speaker Change: Cloud are at the low end and tideway around <unk> I will say that give them guidance on our recurring revenue and total revenue in Q1.
Speaker Change: Say that I mean, as you would expect recurring revenue in Q1 is closely following out.
Speaker Change: Exit of Pedro Ara, and giving a range in constant currency of minus one to minus 6% of our caring and line effects that minus 8% and revenue.
Speaker Change: Hopefully that helps in terms of the millennium Ricky.
Speaker Change: [noise] modeling.
Speaker Change: Thank you.
Speaker Change: Again, if you would like to ask.
Speaker Change: There are no further questions at this time.
Speaker Change: I'll now turn the call back over to Steve Macmillan for his final remarks.
Speaker Change: Thanks, everyone for joining us today, we're building on that foundation that we built in 2024, and we're really excited about the capabilities and deliver an AI and Jenny I solutions for our customers. We know that we've got the trusted hybrid AI platform at enterprise scale, the worlds, leading organizations really need right now.
Speaker Change: And we're going to continue to innovate and deliver capabilities, which can expand our Tam. Both also empowering our customers with the analytics they need today.
Speaker Change: We look forward to returning Terry data to growth in 2025, Thank you very much.
Speaker Change: Yes.
Speaker Change: This concludes today's conference call you may now disconnect.