Q1 2025 Teradata Corp Earnings Call
Good afternoon, my name is Cole, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Terra Data First Quarter 2025 earnings call.
All lines have been placed on mute to prevent any background noise. After the speakers are marked, there will be a question and answer session. If you would like to ask a question during this time, simply press star, followed by a one on your telephone keypad. If you would like to withdraw your question, please press star two. Thank you.
Speaker Change: I would like to hand the conference over to your host today, Chad Bennett, Senior Vice President of Investor Relations and Corporate Development. You now may begin.
Chad Bennett: Good afternoon and welcome to Teradata's first quarter, 2025 earnings call.
Chad Bennett: Steve McMillan, Teradata President and Chief Executive Officer will lead our call today.
Speaker Change: followed by Simea Aurora, Teradata's Chief Product Officer, and then Charles Motherman, Teradata's Interim Chief Financial Officer who will discuss our financial results and outlook.
Chad Bennett: Our discussion today includes forecasts and other information that are considered forward-looking statements.
Chad Bennett: 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 FEC filings.
Chad Bennett: Please note that Teradata intends to file the form 10Q for the quarter ended March 31st, 2025, later this month.
Chad Bennett: These forward-looking statements are made as of today and we undertake no duty or obligation to update them.
Chad Bennett: On today's call, we'll discuss certain non-GAAP financial measures which exclude such items as stack-based compensation expense, other special items described in our earnings release.
Chad Bennett: We will also discuss other non-GAAP items such as free cash flow, currency comparison and 2025 revenue and ARR growth outlook in cost and currency.
Chad Bennett: And let's do it otherwise. All numbers and results discussed on today's call are on a non-GAAP basis.
Chad Bennett: A reconciliation of non-gap-to- GAAP measures is included in our earnings release, which is accessible on the investor-relation 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.
Steve McMillan: Thank you Chad and hello everyone. Thanks for joining us today.
Steve McMillan: Keradata had a solid first quarter of 2025. We delivered public cloud ARR of $606 million.
Steve McMillan: a 16% year-on-year increase in constant currency. We saw a total ARR of $1.44 billion in line with expectations on a constant currency basis.
Steve McMillan: We generated $7 million in free cash flow in the quarter, and our non-GAAP EPS was 66 cents, an increase of 16% year-on-year .
Steve McMillan: In Q1, we maintained our focus on execution and are seeing benefits from the actions that began in the middle of last year. Our go-to-market team is executing well against the pipeline we carried into 2025.
Steve McMillan: We are seeing positive effects from the team's increasing focus on advanced analytics and industry use cases, both in-cloud and on-prem.
Steve McMillan: Cloud is now 42% of our total ARR and we are also seeing that our hybrid capabilities are very relevant in teams of macro volatility.
Steve McMillan: We are meeting customers in the environment the best addresses are needs now and into the future and believe that our cloud and hybrid capabilities will resonate in the market. [inaudible]
Steve McMillan: Many of our customers rely on insights from the Teradata environment to help them operate their businesses efficiently, even in times of uncertainty.
Steve McMillan: We are monitoring the dynamic market and are working closely with customers to help them get the most out of their data and analytics as they address the uncertain climate.
Steve McMillan: We've assessed the direct impact from the dynamic tire situation and it is expected to be immaterial to our business in 2025. As we look ahead, we are taking a more prudent stance with respect to our services business which is more subject to discretionary spending.
Steve McMillan: As the world explores use cases of AI, it is imperative that the data behind the AI is secure, appropriately governed and trusted.
Steve McMillan: Trusted data is critical to success with AI, an agentic or autonomous AI depends on massive amounts of trusted data across both structured and unstructured sources.
Steve McMillan: Less integration of diverse data tapes at any skill is Teradata's core strength.
Steve McMillan: To succeed with the Genetic AI, you'd need not just trusted data but high performance vector processing capabilities that can deliver the right information in the moment so that agents can take action in real pain.
Steve McMillan: for the someone who's in a chat station on the website or on the phone.
Steve McMillan: These actions will increasingly be performed by AI agents that will need to seamlessly access both structured and unstructured data to derive the best answer for customers.
Steve McMillan: In the early March, we announced Teradata Enterprise Vector Store. This in-databy solution brings the speed, power, and multidimensional scale of our hybrid analytics platform to vector data and management.
Steve McMillan: A Crucial Infrastructure Component for Building Trusted Effective AI Systems. It is designed to help customers move beyond basic generative AI implementations towards sophisticated and agentic AI and autonomous business processes.
Steve McMillan: Our Enterprise Vector Store, which will integrate with NVIDIA's Nemo Retriever microservices, and enable enterprises to solve multi-dimensional complex problems by combining structured and unstructured data with accelerated compute to optimize RAG applications.
Steve McMillan: which we believe will create a single source of truth for all of a company's AI initiatives.
Steve McMillan: We're enthusiastic about the interest we are seeing and I'll talk about some of the examples of use cases we are working on with our customers. Thank you very much.
Steve McMillan: That's quarter. We plan to introduce innovations designed for enterprises that need more control and flexibility over their AI deployments.
Particularly in today's dynamic, and often uncertain environment. [inaudible]
Steve McMillan: Many of our customers operate in regulated industries with strict requirements for data sovereignty and security [inaudible]
Steve McMillan: and we believe that our forthcoming AI on-prem capabilities will be uniquely positioned to enable independent and secure AI operations without compromising EDW service levels, a critical deaf re-ensheter in today's hybrid cloud landscape.
Steve McMillan: We are continuing to build and execute robust partnerships, the position as well and the open ecosystems we see customers increasingly adopting.
Steve McMillan: N the quarter, our teams were collaborating at customer engagement with AWS, Google Cloud, Microsoft Azure, NVIDIA, and more.
Steve McMillan: I'll cover a few examples of how our teams are helping customers trial and implement their strategies for AI with their foundation of managing trusted data.
Steve McMillan: A Global Pell Coase fraud prevention team leveraged or clear scape analytics and machine learning to detect targeted fraud and it's achieving a 50% increase in fraud detection accuracy.
Steve McMillan: Their model enhances explainability, enabling analysts to make informed decisions with 95% accuracy
Steve McMillan: A large customer in Asia Pack is evolving its responsible gambling models with help from us.
Steve McMillan: Using our model up, the customer monitors and manages is machine learning models. They use queer scape analytics for native analytical models as well as to bring your own model capability for machine learning models. [inaudible]
Steve McMillan: Their most advanced models are deployed and schooled in peridate advantage clouds enabling scalability and lowering costs
Steve McMillan: Leveraging our vector store and our hugging face model, we help the customer analyze text messages to detect trends and sentiments. This integrated approach is designed to help the customer ensure data protection, enhance performance and deliver reliable results.
Steve McMillan: We also held a large grocery retailer demonstrates significant business value by categorizing customer complaints, using vector embeddings and bring your own language model functionality. Thank you very much.
Steve McMillan: The customer was impressed with the Genei integration capabilities of our platform, which streamlined the classification and response process for text-based complaints.
Steve McMillan: thereby enhancing service quality and efficiency, a key aspect with the high-performance processing at scale of our differentiated massive parallel processing capability.
Steve McMillan: Also, a top five US healthcare company significantly expanded its Teradata environment, if it migrated to the cloud and worked in hands resilience against cyber threats and ensure continuity in healthcare services.
Steve McMillan: It is all for implementing a Jenny I solution with us to automate large amounts of audit processes and significantly improve productivity, making the healthcare system work better for everyone.
Steve McMillan: These customer examples are supported with industry reports as well. Charadata was recently named a leader in the Forester ways on data management for analytics platforms.
Steve McMillan: We are pleased to receive this recognition of the strength of our strategic vision and performance in delivering AI-powered enterprise-grade analytics at scale.
Steve McMillan: We believe this report reflects our strong analytic platform capabilities particularly for hybrid cloud deployments where reliability and scalability are essential.
Steve McMillan: With our solid performance in Q1, our ongoing focus on execution and accelerating innovation that brings trusted AI to our customers, we continue to believe that we will return to growth in 2025.
Steve McMillan: We believe that our differentiated ability to support customers, data and analytics needs, whether in the cloud, on-prem or hybrid environments serves as well during these times of uncertainty.
Steve McMillan: As a hand over to Charles, I want to provide an update on our most recent executive appointment.
Charles Motherman: Yesterday we announced our new CFO , John Adderer, who will be starting with us next week.
Charles Motherman: John is currently the CFO at Model N, a provider of revenue management solutions for life sciences and high tech. He's a seasoned financial executive and has successfully led a number of companies through SAS Transitions. I'm looking forward to working with John .
Charles Motherman: I also want to thank Charles for serving as interim CFO during that quarter of transition.
Charles Motherman: I am also pleased to introduce to you today our new chief product officer, Samit Arora, who just joined us.
Charles Motherman: Most recently, Sommit was the Chief Development Officer at ThoughtScore. Sommit has extensive experience in leading engineering and product management for AI-driven analytics and a proven track record in building solutions that generate significant revenue.
Speaker Change: I've asked the meat to make a few comments on the opportunity he sees as he joins Teradata. So meat, over to you.
Charles Motherman: Thank you Steve and Phil to be part of the Teradata team.
I see that Teradata has unique strengths. First. [inaudible]
Charles Motherman: Its customer base is something that any business would strive to have. The top banks, airlines, telecommunication companies, healthcare providers, and leaders use Teradata every day to deliver business outcomes and data-driven experiences.
Charles Motherman: There is a lot of valuable data managed within Teradata environments.
Charles Motherman: Second, I see Teradata as the only platform that can work with data as it exists in most large enterprises.
Data is not all clean and located in one system [inaudible]
Charles Motherman: Rather, it spans on-prem and multi-cloud environments for both historical as well as price performance reasons.
Charles Motherman: I believe that Teradata has a unique advantage with its hybrid cloud platform. And third,
Charles Motherman: Just like the cloud levels the playing field a decade ago, AI is leveling the playing field again [inaudible]
There is no trusted AI without trusted data.
Charles Motherman: The Teradata platform is evolving to enable AI workloads that leverage enterprise data to deliver autonomous business processes.
Charles Motherman: For example, Teradata Enterprise Vector Store is an enterprise scale and enterprise grade Vector Store purpose-built for agentic workloads and rack-based implementations.
Charles Motherman: I believe that our ability to work with data across on-prem and cloud environments and deliver AI across all of this data is a competitive and price performance advantage.
Charles Motherman: Together with the team, my goal is to greatly accelerate Teradata's innovation execution.
Charles Motherman: We expect to do this in close partnership with our customers as we evolved from here [inaudible]
Charles Motherman: I believe that Teradata is well positioned to be the business outcomes platform for the data and AI-powered enterprise.
Charles Motherman: I will bring my experience in the technology industry driving efficient and high velocity innovation to help Teradata accelerate.
Charles Motherman: Before joining Teradata, I led product, engineering and design at Thoughtsport, a data analytics company and an industry pioneer in building AI-powered natural language analytics targeted at the business user.
During my time, [inaudible]
Charles Motherman: Thoughtsport, transition the application to a full platform that is now replacing established
Charles Motherman: and was fast to market with an agentic AI analyst solution, thereby becoming one of the earliest in production AI native analytics platform in the industry.
Speaker Change: Prior to Thought Spot, I was at Cisco, and at both companies I focused on building great products, great teams, as well as great businesses with a focus on execution. I look forward to helping Teradata execute and accelerate.
Now, I will pass the call to Charles.
Charles Motherman: Thank you, Sumit, and good afternoon, everyone. In the first quarter, we executed in line with expectations across our key metrics. Total AR, Cloud AR,
Charles Motherman: As we expected in the first quarter, we had a decline in total ARR sequentially due to the first quarter being seasonally our lowest bookings and highest erosion quarter of the year.
Total ARR declined 2% year over year on a constant currency basis. [inaudible]
Charles Motherman: which was a two-point improvement from the end of 2024. We continue to see year-over-year increase in retention rates as our customer success team drives improvements in customer health metrics across our base.
Charles Motherman: Additionally, we expect meaningful year-over-year improvement and retention rates for the remainder of the year. Cloud ARR grew 16% year-over-year in constant currency, representing the midpoint of our 2025 outlook range.
Charles Motherman: Cloud Net Expansion Rate was 115%, which continues to be impacted by lower expansion activity last year.
Charles Motherman: Based on our increased visibility, we continue to believe that we will return to total AR growth in Q4. We are reiterating our outlook for total ARR of flat to 2% and cloud AR growth of 14 to 18% year over year.
Charles Motherman: Let me now share more details on our quarterly financial results, starting with Revenue.
Charles Motherman: First quarter recurring revenue was $358 million down 8% year over year as reported and down 6% year over year in constant currency. The year over year growth rate was negatively impacted by one point from upfront revenue.
Charles Motherman: Recurring revenue as a percentage of total revenue was 86% up from 83% in the prior year period.
Charles Motherman: First quarter total revenue was $418 million down 10% euro a year as reported and 8% in constant currency, which was towards the low end of our expectations of our expectations.
Charles Motherman: In light of the overall macroeconomic uncertainty we are expanding the low end of our total revenue outlook range by one percentage point due to the more discretionary nature of our services business.
Moving to profitability and free cash flow [inaudible]
Charles Motherman: Total growth margin for the quarter was 60.3% down 190 basis points year-over-year, primarily due to services
Charles Motherman: Our services business continues to be impacted by lower bookings in the second half of 2024.
Charles Motherman: We are optimizing our cost structure to enable us to return to a positive services margin in the second half of the year.
Charles Motherman: Operating Margin was 21.8% up 270 basis points year over year. The Operating Margin expansion is largely due to the restructuring actions taken last year.
Charles Motherman: Don Gat-Deluted Earnings for Share was 66 cents, exceeding the top end of our outlook range. The outperformance is primarily from lower spend and FX.
Charles Motherman: In the first quarter, we repurchased approximately $44 million of stock or one 6 million shares and we continue to expect to return at least 50% of our free cash flow to shareholders in the form of share repurchases.
Charles Motherman: With regards to the 2020 outlook, we reaffirm total air or cloudy or free cash flow recurring revenue and non-GAAP EPS for total revenue, we are expanding the range to reflect negative 4% to negative 7% year over year on a constant currency basis.
Charles Motherman: Total <unk> and crowd here or we continue to see the same linearity as we mentioned last quarter and the first half we expect the growth rate of totally or to be below our outlook range and Claudia are to be the low end of our range. We expect both growth rates to accelerate in the second half and returned a total AOR growth in the fall.
Charles Motherman: Quarter.
Charles Motherman: Please refer to our Q1 earnings presentation on our Investor Relations website for a complete list of our 2020 outlook ranges.
Charles Motherman: For the second quarter of 2025.
Charles Motherman: We anticipate recurring revenue to be in the range of negative 5% to negative 7% year over year on a constant currency basis in Q2, we anticipate a 2% headwind driven by upfront recurring revenue.
Charles Motherman: We expect total revenue to be in the range of negative 7% to negative 9% year over year on a constant currency basis.
Charles Motherman: We anticipate marginal negative currency impact year over year, using the end of March rates.
Charles Motherman: We anticipate non-GAAP diluted earnings per share to be in the range of 37 to <unk> 41.
Charles Motherman: We projected non-GAAP tax rate to be approximately 23, 1% and weighted average shares outstanding to be $97 million.
Charles Motherman: <unk> had a solid start to the year, while we recognize the volatility around the current macroeconomic environment. Our pragmatic approach to our 2020 outlook remains intact. The organizational changes. We began last year are starting to take hold driving meaningful improvement in retention rates more consistent execution and our focus on.
Charles Motherman: Innovation, we remain.
Charles Motherman: Committed to returning to total <unk> growth in Q4, producing strong operating margin and free cash flow and returning capital to shareholders.
Charles Motherman: Thank you all for your time today now, let's open the call for questions.
Charles Motherman: At this time I would like to remind everyone. How to ask a question. Please press the star one button on your telephone keypad, if any reason you'd like to remove your question at Star two.
Charles Motherman: But again to join the question queue. Please press star one.
Speaker Change: It has been asked that you limit yourself to a question with a follow up question.
Erik Woodring: Our first question is from Erik Woodring with Morgan Stanley. Your line is now open.
Speaker Change: Great. Thanks, so much guys good afternoon.
Speaker Change: Steve I just wanted to maybe take a step back obviously you guys have talked about cost efficiency programs.
Erik Woodring: I'm wondering what the opportunity is to cut additional costs in this business and really what I'm getting at is the new logo engine is a relatively small part of the business, but you spend nearly twice as much on SG&A as you do on R&D.
Erik Woodring: You have a very very large and very well renowned existing customer base.
Erik Woodring: Can you kind of attack that base and power your new logo engine with lower levels of total absolute opex spend because ultimately what I'm trying to get at is ways other than growing your business business that you could drive free cash flow are higher. So this is my first question and then I have a quick follow up thanks, so much.
Erik Woodring: Yeah.
Erik Woodring: Hey, Eric Thanks for the question Great to hear from you.
Erik Woodring: Yeah.
Erik Woodring: Taking a step back as.
Erik Woodring: He suggested we are absolutely focused on profitable growth.
Erik Woodring: Make the right investments.
Erik Woodring: Across all lines.
Erik Woodring: SG&A lanes in our research and development to ensure that we optimize and grow the business overall.
Erik Woodring: We are returning the business to growth from an IRR perspective in 2025.
Erik Woodring: I would say a positive trajectory for the company as we move forward.
Erik Woodring: A lot of restructuring and our sales team.
Erik Woodring: June of last year, and refocus that team in terms of pivoting towards much more analytics AI use case based solutions in the marketplace and we are starting to see those having traction in terms of basic.
Erik Woodring: We're clearly going to continue to optimize our investment envelope as we move forward.
Erik Woodring: We drive that profitable growth strategy.
Erik Woodring: Yeah.
Speaker Change: Okay I appreciate that thank you Steve and then just quick follow up was just on the <unk> EPS Guide, we're looking at a pretty significant sequential decline.
Speaker Change: Can you just maybe help us understand or better understand some of the moving pieces as to why we are getting there obviously, a very strong first quarter did you pull forward profitability so to speak or just help us understand why the shape of the curve in the first half looks the way it does on the EPS side. Thanks, so much.
Yes, thanks for the question.
Speaker Change: Sure.
Talking about 66 cents for the 40 <unk> that's correct.
Speaker Change: Correct.
Speaker Change: Okay, yes so.
Speaker Change: We've got a couple of factors are playing into this lower volume being lower corporate spend.
Speaker Change: We've got higher cloud impacted.
Speaker Change: Our second quarter as well as lower CFC.
Speaker Change: That offset partially by lower head count and <unk>.
Speaker Change: Other corporate staff.
Speaker Change: Activities.
Speaker Change: Okay.
Speaker Change: Alright, thanks, so much guys. Good luck.
Speaker Change: Our next question is from each one Wong with Citi. Your line is now open.
Speaker Change: Alright, thanks for taking the question congrats.
Speaker Change: Hi, Ray and John from yesterday.
Speaker Change: <unk> <unk> again, so I remember the excitement <unk> four years ago, when youll have clarity around the opportunity I guess back to I know a lot of excitement as well.
The three four years looking back in that segment.
Speaker Change: Kim can you tell me what are some of the biggest lessons learned going into this year and next year we.
Speaker Change: Still meet in joining co now and what would you be doing differently just given some of the equity issue in the past year.
Speaker Change: I would like to start there please.
Speaker Change: Yeah. Thanks for the question look I think we are Andrew <unk>.
Speaker Change: Thanks for the clarity.
Speaker Change: Please go in Europe.
Speaker Change: Okay.
Speaker Change: Back on the last four years, we've been going on that are directly journey to transition and reinvent the company and I started off with tariffs.
Speaker Change: Zero, which is very much of a pivoting the company towards.
Speaker Change: And the target of two dose Youll face, we double down on that growth clearly, taking the company to over $600 million.
And at the same time developing innovations.
Speaker Change: Our analytics capabilities AI capabilities in AML capability, putting.
Speaker Change: Database to enable organizations to operate at tremendous scale in this new world.
Speaker Change: Analytics and AI.
Speaker Change: I think we're entering into that space, which is <unk> three zero.
Speaker Change: Estimates are.
Speaker Change: Demand for them as a whole said.
Speaker Change: I would comment that Eric Jim Trevathan derive from the use of advanced analytics, AI and ml solutions and we have re geared.
Speaker Change: So the entire company to start to address those opportunities in the marketplace.
Speaker Change: And you can see from our <unk>.
Speaker Change: Inhibition of nice things like our enterprise Vectra store, where we believe that Harris Teeter has a truly differentiated capability that will enable us to drive.
Speaker Change: In Q4.
Speaker Change: For clarity there in terms of analytics.
Speaker Change: And <unk>.
Speaker Change: Taking advantage of the AI opportunity in the marketplace.
Speaker Change: Hi.
Speaker Change: It's been a continuous painless transition and transformation for the company and we believe that we're well placed nothing to me coming on board is a testimony to that.
Speaker Change: Seamless to drive that innovation engine forward into the future.
Speaker Change: Yes, looking forward to see that play out I guess the other one the product you mentioned the hybrid is definitely picking up steam on longer term, how do you view the impact of the cloud and then what could we see kind of longer term trajectory do you expect to see.
Speaker Change: And lie on the Clat line, how would that suggest that when you kind of paint.
Speaker Change: Hey, Peter about going into next year. Thanks.
Speaker Change: Yes. Thank you.
Speaker Change: We're going to return the company to.
Speaker Change: So that total level in 2025 as powered by the real interest that we see I talked to customers every single day and some of the largest organizations in the world and they really like our hybrid platform.
Speaker Change: They like to be able to absorb data gravity like being met.
Speaker Change: Technology perspective, we'd like to engage so that he's already.
Speaker Change: Or from an on Prem perspective, we're also seeing real interest in AI on premise solutions and we've got a new capability coming out of the third quarter.
Speaker Change: Yes that market space.
Speaker Change: As we look forward, we continue to see good growth in off price business the midpoint of both for cloud business for this year.
Speaker Change: 16 point, so good growth in cloud and we see that or not.
Speaker Change: Hybrid opportunity continues to be a good opportunity for us to execute against.
Speaker Change: Thanks.
Howard Ma: Our next question is from Howard MA with Guggenheim. Your line is now open.
Speaker Change: Great. Thanks for taking the question one for Steve.
Speaker Change: Steve So when we think back to the period of cloud optimization in the back half of calendar 2022, and throughout 2023, I think most would agree that tear data benefited from more customers expanding on Prem and then subsequently.
Speaker Change: Refer to the period as a 2.0 fans.
Speaker Change: As your vantage cloud product mature you saw a pretty nice expansion on that.
Speaker Change: The question is given the current macro uncertainty are there any parallels that you can draw compared to that period in time and what are your customers, indicating to you in terms of their intention to expand.
Speaker Change: Things like you guys mentioned that.
Speaker Change: A new vector store capability are those things, giving you more visibility into expansion.
Speaker Change: It's on Prem or in the cloud and.
Speaker Change: And then perhaps in the past or maybe not necessarily.
Howard Ma: Yeah. Thanks for the question Howard I mean, clearly, it's a very dynamic environment as they are but at our core.
Howard Ma: Poor from a technology perspective.
Howard Ma: We have line of sight into the cadence that we've actually both of them are totally are all perspective, but also from a commodity.
Howard Ma: Perspective, what we're seeing is our customers because.
Howard Ma: Just like get back from the client optimization, Dave to your point I used to say to deter you need a platform optimizes itself every millisecond, which makes us very sticky and treat our customers.
Howard Ma: We deliver the most critical workloads in a world of tremendous enterprise scale, if demand for that type of technology is continuing and say to our customer base and we're using that to leverage and drive growth opportunities in terms of managing that data for our organization and putting it into new analytical.
Howard Ma: <unk>.
Howard Ma: Use cases, which are customers' needs to respond to these dynamic environments that they're in.
Teen: Teen pointed out we did experience some macro impact from a discretionary spend perspective in our consulting and services business.
Teen: Something in services business for us, it's very much of a tailwind in terms of how we do services against.
Teen: Technology deals that we've done in the past as we look forward as we start to increase.
Teen: Contribution from our total ER, our perspective, and our technology business starts to regain into growth territory, we expect our consulting and services specialists to reaccelerate.
Teen: Half of the year so despite the macro uncertainty. Please go ahead.
Teen: Key latest baked into our results for FY, 'twenty, five and I'm looking forward to executing against that.
Teen: Got it thank you Stephen on the back of your response.
Follow up for Charles and then it's.
Speaker Change: It's just around the retention rates and if you could put some numbers around the improvement whether you know whether they've been up year over year or sequentially.
Speaker Change: The idea at the prepared remarks that you gave implies.
Speaker Change: Imply that retention rates shouldn't should improve sequentially.
Speaker Change: Throughout this year.
Speaker Change: <unk> of this year. Thank you.
Speaker Change: Yes. Thanks for the question Yeah, our viewpoint is unchanged from our earlier guidance this year and we've actually seen an improvement in 2025.
Speaker Change: If we look at how.
Speaker Change: We performed in the second half of 'twenty four that'll also was improving and our customer.
Speaker Change: Success team has done a phenomenal job of improving those rates and we see continued improvement for the balance of the year.
Speaker Change: Yeah.
Speaker Change: Our next question is from <unk> <unk> with Evercore ISI. Your line is now open.
Speaker Change: Hi, Thanks for taking the question.
Speaker Change: Steve I was just wondering whether you could talk through.
Speaker Change: Some of the main points that give you confidence in maintaining the total IRR in public cloud are our guide.
And the acceleration in the back half of the year, just given more cautious commentary across the board by many other peers in software it. Thank you.
Speaker Change: Yeah. Thanks for the questions here.
Speaker Change: Overall, not much has changed from our internal expectations from a linearity perspective.
Speaker Change: From the beginning of the year to now we're still seeing good growth in terms of the drivers that we were expecting.
Speaker Change: We have factored into our outlook.
Speaker Change: Space migrations.
Speaker Change: We saw there.
Speaker Change: And when we set guidance at the start video SaaS very pragmatic statement.
Speaker Change: In terms of the overall through the year as I said previously we do halfway to face into that execution for the year.
Speaker Change: From a totally all perspective, and the clarity of our perspective and as we said earlier.
Speaker Change: Earlier.
Speaker Change: This year, we've actually taken out some of the very large deals eight figure deals since I'm sorry.
Speaker Change: And the execution profile from that so we believe that the cadence that we invented it.
Speaker Change: It's solely in terms of the full year.
Speaker Change: Alright, thank you so much.
Speaker Change: We have a question from Matthew Hedberg with RBC. Your line is now open.
Speaker Change: Hey, guys. This is Mike Richards on for Matt.
Speaker Change: Maybe just piggybacking off that question there.
Speaker Change: Currently we came in a year with a pragmatic guidance and you seem conservative.
Ex this new macro uncertainty that unfolded in the past 90 days with Liberation day would it be unreasonable to think that guidance could have been raised on this spring and so like we should look at the maintained guidance.
Speaker Change: As a conservative approach.
Just given how you set it up coming into the year.
Speaker Change: Yeah, I think we've issued.
Speaker Change: So as I said pragmatic basis for the year.
Speaker Change: <unk>.
Speaker Change: And that's the environment, we don't want to get out over our skis clearly yes.
Speaker Change: Fashion statements, which we are.
Speaker Change: Confident that we have latest stage of execution.
Speaker Change: And we've already seen those patterns in terms of execution, we've seen our TTM team that we put in place in June of last year start to execute consistently against the opportunity pipeline. That's in front of them, we've seen that meaningful improvement in our retention rates through the back half of last year and that continued into fourth.
Speaker Change: And we are glad to see that continue and continue to improve into the second floor.
Speaker Change: It can have a year so that gives us confidence in terms of holding the guidance, where we are and delivering on the promise that we made at the start of the year.
Speaker Change: Great. Thanks, and then just a quick follow up could you remind us of your fed exposure and then any trends you've seen there over the past order.
Speaker Change: Specifically pertaining to Dodge in any.
Speaker Change: They are buying ahead or pausing you might see in that vertical thanks again guys.
Speaker Change: Yes. Thanks for the question, we haven't helped me governance governance business globally.
Speaker Change: But the majority of that business is international state and local and very minimal exposure from the federal spend at this point.
Speaker Change: Our next question is from Derrick Wood with TD Cowen. Your line is now open.
Speaker Change: Go ahead, Tim This is Jerry Jones.
Speaker Change: For Derrick wood on the prior go to market changes last quarter. You noted reps have settle into the new segment team now that we're another quarter down the road could you just give us an update on some of the benefits you're seeing.
Speaker Change: <unk>.
Speaker Change: Yeah for sure I think what.
Speaker Change: What we're seeing is a real pivot towards analytics.
Speaker Change: AI use case business in FY <unk>.
Speaker Change: The pipeline that the sales team are now generating theres a lot of interest in terms of infusion.
Speaker Change: And using the Cherokee to a platform and an AI ecosystem. So we're super excited about.
Speaker Change: The puc's that we've been doing with our customers.
First of all to drive usage and of the exam.
Speaker Change: Second platform, and then where we come into our own it's actually helping customers.
Speaker Change: <unk>.
Speaker Change: Those workloads into production.
Speaker Change: We've taken some price latest solutions.
Speaker Change: Our customers are deploying I know, but let me say the development and testing of those solutions and other funded native.
Speaker Change: Environments, they actually deploy the model themselves and the charity that environment and in some cases.
Speaker Change: Therefore at over twice the speed and often towards half the cost in terms of execution.
Speaker Change: Those are the kind of.
Improvements in wood.
Speaker Change: The market model taken those kind of messages to our customers and we believe it makes teradata relevant and helped us drive growth into the future.
Speaker Change: That's awesome good to hear.
Speaker Change: Then as a follow up on that how should we be thinking about the impact from these AI related products on revenue this year.
Speaker Change: Understand it's early and presumably would be pretty small, but any color on that would be great. Thank you.
Speaker Change: Yeah, It certainly early but an exciting space for us.
Speaker Change: We see our pipeline growing in interest and energy growing them I guess.
Speaker Change: We have a very very sticky business and sanitary data, which insulates us from the many impacts of the macro economy environment because of the catastrophe nature of the contract.
Speaker Change: Our customers utilize these AI use cases, it drives the usage of the Tera platform and ultimately.
Speaker Change: Require our customers to increase the capacity.
Speaker Change: The revenue impact from these new capabilities.
Speaker Change: Capabilities are likely pushed out into next year.
Speaker Change: And that combined with returning to overall <unk> growth in 2025.
Speaker Change: Bright future for us as we execute over the next couple of years.
Speaker Change: Yeah.
Speaker Change: We have a question from Wendy Mohan with Bank of America. Your line is now open.
Speaker Change: Yeah. Thank you I just wanted to get back to the full year guidance, you know didn't no meaningful direct impact from tariffs.
Speaker Change: You clearly have large customers in retail for example, and there seems to be a lot of uncertainty around our auto vertical like that where tariffs.
Speaker Change: Tariffs are having meaningful impact.
Speaker Change: Could you just help us think through why maybe.
Speaker Change: That doesn't slow down the path of.
Speaker Change: Increased uncertainty, where maybe the customers have to do some belt tightening is there enough slack across.
Speaker Change: Although verticals, maybe where you're seeing increased activity could you just share some color around maybe different verticals and more you're seeing today and what.
Speaker Change: How you expect the full year the progress thank you.
Speaker Change: Hi, Thank you very much for the question.
Speaker Change: Yes, I think Thats just goes back to the very sticky nature of current data.
We worked with the biggest organizations in the world.
Speaker Change: Execute their most critical business processes, they literally run their business on target.
And therefore, it's very difficult to tunnel that Teradata environment. If you don't want to close your books.
Speaker Change: No I would not highly dependent on a consumption model for our revenues.
Speaker Change: <unk> revenue is generated.
Speaker Change: Capacity.
Speaker Change: And therefore that gets us really great legacy and having those contracts are going to grow.
Speaker Change: Raul.
Speaker Change: To the next quarters of the year.
Speaker Change: I think what we are seeing as working with organizations to help them understand that dynamic environment.
Speaker Change: Working with them and the customer experience.
Speaker Change: This is helping them.
Speaker Change: Forward forecast on demand planning to have the right responses in this dynamic environment also helping them from a supply chain perspective, so that they can ultimately manage the supply chain and it.
Speaker Change: Meet the data they arent there and the turret systems to actually make these decisions to optimize their operations everyday so from a tariff perspective, we have real line of sight into the guidance that we've got Kevin and from a macro perspective in terms of our technology sales, we're confident in the guidance that we've provided.
Steve McMillan: Okay, Thanks, Steve and I frankly, just follow up.
Speaker Change: Can you just give us any update if there was one around what youre seeing from some of your boomerang customers. Thank you.
Steve McMillan: Yes, I mentioned I.
Steve McMillan: I mentioned, a couple of use cases, and the prepared remarks, where we.
Steve McMillan: Certainly.
Steve McMillan: Customers in the areas of environments, which would traditionally go to our competition.
Steve McMillan: <unk>, especially in the analytics space in the AI space.
Steve McMillan: What I would say as well is that we're definitely seeing customers interested in the new chairman data capabilities. Both from an on Prem perspective, so looking to consolidate their on Prem technologies, but also from a cloud perspective, we're seeing customers who want to optimize their cloud spend.
Realizing that some of these cloud native solutions enterprise deals can be prohibitively expensive and they are utilizing Cherokee to control their costs as they look at the types of platforms that they want to run and deploy.
Steve McMillan: And then overall I think our hybrid capability is very highly differentiated.
Steve McMillan: With more than 50.
Steve McMillan: 50% of the customers that we have.
Steve McMillan: The cloud also working with us from an on Prem perspective.
Steve McMillan: We see that hybrid platform being very interesting for our customers and makes it even more sticky as well.
Steve McMillan: We're one of the few providers.
Steve McMillan: Has that capability.
Speaker Change: Our next question is from Raimo <unk> with Barclays. Your line is now open.
Speaker Change: Hi, This is Michelle on for Raimo, Thanks for taking our questions first for Steve.
Speaker Change: We were at the surface now analyst day. This week and it was interesting to see you in some of the other leaders in the data analytics space up on the on the big screen talking about your role in AI agent space.
Speaker Change: Can you talk you mentioned a little bit on the call, but would love to hear you know from your perspective, how do you see the role of data warehouses data lake providers like yourself in that ecosystem and then.
Speaker Change: And as we think about I mean, maybe this is a little bit of a shift to more on the transactional side or on the operational side as opposed to analytical and so would love to hear your thoughts on how that will play out.
Speaker Change: Yeah. Thanks for the question Yeah, we're delighted with the partnership with Samsung being featured with them at their most recent knowledge conference.
Speaker Change: I think it really points out it would be hard satisfied to see that our data network.
Speaker Change: So really exciting opportunity for us and it really plays testimony to how we have evolved our platform.
Speaker Change: Over the last three or four years. So we can utilize structured and unstructured data and then we can operate and utilize data at tremendous scale and say the customer environment to provide real time insights.
Speaker Change: We are working with our customers on our close technical signal as a service, where we sat through a massive amounts of data using our massively parallel systems and capabilities and our uniquely differentiated ways to get real time insights out of that data and then working with a partner like service.
Speaker Change: Service now, we can actually trigger workflows and the service that environment to proactively address the.
Speaker Change: Assessments that are coming out.
Speaker Change: AI solution and analytics solution that we've put in place.
Speaker Change: <unk> and.
Speaker Change: Operation So from a target perspective, we see the real opportunity to make again.
Speaker Change: It's a place for it but I really implementable solution for our customers at enterprise scale.
Speaker Change: Understood. Thanks, and a quick follow up another one on the retention front.
Speaker Change: Can you kind of help us understand how big and how you'd think about improvements of retention on a shifting customer perspective around Terry data and some of the things we're doing on the cloud and then.
Speaker Change: More on maybe the execution side, where the customer success team.
Speaker Change: Closer to the customer.
Speaker Change: Improving execution.
Speaker Change: Yes, we can say, we're seeing meaningful improvements in our retention rates. We always knew that 2024 is going to be an outlier from a retention rate perspective.
Speaker Change: The improvement.
Speaker Change: Take rates that we saw in 2000 at the end of 'twenty 'twenty four there are continuing on into 2025, and we expect to continue for the rest of the year are really driven by a confluence of different factors I think one is a new appreciation for our carry due to innovation in the technology stack that we can drive I think the second thing is the <unk>.
Speaker Change: <unk> values at Cherry picking the letter.
Speaker Change: All of them at scale and how we can do that from a very efficient and effective perspective.
Speaker Change: Then I think the third thing is something that we're looking to meet to drive even more of the innovation in the platform that we've delivered recently.
Speaker Change: And data analytics capabilities and what it does to I think that we compete with Veda breaks for new workloads or bringing AI ml models and having an open approach, bringing language models, either small language portals or life about language models and to the teradata environment at level of innovation.
Speaker Change: Theres really capturing customer interest is enabling us to deliver what we call elevation data of customers, which are deploying brand new use cases I want to carry the day as a result.
Speaker Change: To break things came in the market for us.
We have a question from Pat Walraven with citizens. Your line is now open.
Speaker Change: Yeah.
Pat Walraven: Oh, great. Thank you very much so Steve I really like your.
Speaker Change: You hire of John it or.
Pat Walraven: I covered it I think three companies in the past.
Speaker Change: So can I ask you know what was it about that candidate that.
Speaker Change: Cause him to rise to the top of the list, but what is it that you were looking for that you saw in <unk>.
Speaker Change: His background and skill set.
Speaker Change: Hey, guys. Thank you very much for the question that we really like John to we're really looking forward to having him on board. He is really starts with us next Monday.
Speaker Change: It's been a public CFO in the past and that's.
Speaker Change: This is gonna be a third since rates experienced from a software perspective, a great <unk> in terms of managing transitions.
Speaker Change: Really successfully navigated a number of organizations as you know the transition towards a SaaS based model.
Speaker Change: Kpis are to drive that but he's also got a terrific operational capability in terms of driving the operational results for an organization both on the top line and the bottom line. So we're very much looking forward to having drawn on the team.
Speaker Change: Yes.
Speaker Change: When we set out at the search and per day.
Speaker Change: If we wanted to for the search.
George: Really George.
George: This outstanding candidate and he put it would be a great fit for us from a cultural perspective, I'm really looking forward as having him on the team.
George: Great and then if I could just add up all up what's an example of sort of one or two things that you would like them to tackle all of the.
George: At the beginning.
George: Oh, sorry, Patrick Blake broke up a little bit there or could you ask that question again.
George: Yes, sorry, I forgot that.
George: I mean, what is an example of something that you'd like them to tackle in the beginning of this.
Speaker Change: Time with Jeremy.
Speaker Change: Yeah, I think Kevin.
Speaker Change: Spent some time against feet under the table and as.
Speaker Change: As we saturate that coal, especially some really pragmatic guidance for the year.
Speaker Change: However.
Speaker Change: There are always areas in which we can improve and I think bringing in leaders like for me at Joy gives them the opportunity to critically evaluate how we're executing and how we're performing and take Cherokee brand that external experience to us in terms of how we can operate more effectively more efficiently.
Speaker Change: How we can drive the top line and we can manage the business in a much more controlled way and consistent way and really deliver on that strategy of profitable growth.
There are no further questions at this time I will now turn the call back over to Steve Macmillan for his final remarks.
Speaker Change: Thank you very much operator, and thanks, everyone for joining us today as we said covered in this call are focused on to manage the execution continues and we know that our teams are working with customers all around the world to help them deliver trusted AI solutions we've.
Speaker Change: We've been very we're very optimistic yeah, we're being pragmatic in terms of how we're gateway and we look forward to updating you next quarter. Thank you very much.
Speaker Change: That concludes today's conference call you May now disconnect your line.
Speaker Change: Okay.