Teradata (TDC) 4 Nov 24 2024 Q3 Earnings call transcript

In Teradata's third quarter earnings call for 2024, the company presented a mixed bag of results, showcasing both challenges and opportunities as it navigates the complex landscape of cloud transformation and strategic innovation. The call, led by Steve McMillan, President and Chief Executive Officer, and Claire Bramley, Chief Financial Officer, provided insights into the company's financial performance, strategic initiatives, and future outlook.

Financial Performance and Outlook

Teradata reported a solid financial performance in the third quarter, with cloud ARR growing by 26% year-over-year, driven by a strong cloud net expansion rate of 120%. The company also demonstrated improved profitability, with non-GAAP earnings per share of $0.69 and free cash flow of $69 million, compared to $0.42 and $36 million in Q3 of 2023, respectively.

Despite these positive results, Teradata faced a shift in its large transformational deals, with customers planning to migrate workloads to the cloud in a more staged process. This change resulted in a reduction to the company's cloud ARR, leading to a revised outlook for 18% to 22% growth for the full year.

Strategic Initiatives and Innovation

Teradata's strategic initiatives and innovation were a focal point of the call, with the company emphasizing its commitment to a cloud-first strategy while maintaining its hybrid capabilities. The recent integration of NVIDIA's AI accelerated computing platform with the Vantage platform and the introduction of BYO LLM capability were highlighted as significant steps in strengthening Teradata's open and connected ecosystem approach.

The company also announced the appointment of Louis Landry as the new Chief Technology Officer, bringing expertise in advanced engineering and emerging technologies to accelerate innovation at Teradata.

Market Position and Competitive Landscape

Teradata's position in the market and competitive landscape were discussed in detail, with the company expressing confidence in its ability to compete against both traditional and emerging players. The company highlighted its unique value proposition, particularly in the hybrid cloud space, and shared success stories of winning back customers from competitors like Snowflake and Databricks.

Challenges and Opportunities Ahead

The earnings call also touched upon the challenges and opportunities facing Teradata in the near and medium term. These included the ongoing go-to-market restructuring, the impact of macroeconomic trends on customer spending, and the evolving competitive landscape in the data analytics ecosystem.

Investor and Analyst Questions

The call concluded with a Q&A session, where key shareholders and investors asked questions about the company's strategic direction, financial performance, and outlook. The responses provided valuable insights into Teradata's thought process and strategic priorities, indicating a focus on maintaining profitability, improving execution, and accelerating growth.

Conclusion

Teradata's third quarter earnings call painted a picture of a company navigating a complex and dynamic business environment. While facing challenges in its large transformational deals, Teradata remains committed to its cloud-first strategy and continues to innovate in the hybrid cloud space. The company's financial performance and strategic initiatives, along with its competitive positioning, suggest a strong foundation for future growth. However, the ongoing go-to-market restructuring and evolving competitive landscape will be key factors to watch in the coming quarters.