Teradata (TDC) 5 Aug 24 2024 Q2 Earnings call transcript

In Teradata's recent earnings call for Q2 2024, the company reported a cloud ARR growth of 32% in constant currency, with a strong pipeline of large 8-figure deals and a doubling of new logos expected for the second half of 2024. Despite this growth, the company faced challenges due to longer decision-making cycles, leading to a reduction in outlook for the rest of the year and into 2025.

Cloud Growth and Market Opportunities

Teradata's cloud business continues to thrive, with cloud ARR growth of 32% in constant currency. The company has also expanded its reach in the market, with a 3x increase in the number of large 8-figure cloud ARR deals compared to the previous year. Furthermore, Teradata is confident about its future prospects, noting the growing importance of trusted data and trusted AI in the enterprise of the future. The company's survey of C-suite executives and AI decision-makers highlights the need for support in navigating new AI initiatives, which Teradata is well-positioned to provide with its hybrid cloud platform.

Challenges and Response

Despite these positive developments, Teradata faced challenges in Q2, including longer deal cycles and a need to improve execution. The company responded with a comprehensive review and restructuring, including the appointment of Rich Petley as Chief Revenue Officer and a realignment of the sales function. These changes are aimed at driving increased effectiveness and creating structural and cost efficiencies, with the goal of reducing expenses and improving results.

Financial Performance and Outlook

Teradata reported a non-GAAP earnings per share of $0.64 and generated $39 million of free cash flow in Q2. However, the company's total ARR declined by 3% year-over-year, with a revised outlook for 2024 reflecting the uncertain macro environment and longer deal cycles. The company expects to reduce operating expenses by approximately $75 million to $80 million on an annualized run rate basis, while continuing to invest in revenue-generating growth areas.

Innovation and Partnerships

Teradata's commitment to innovation is evident in its recent product launches, including Teradata VantageCloud Lake on Google Cloud and Teradata AI Unlimited on Microsoft Fabric. These initiatives demonstrate the company's focus on providing open and connected solutions that enable enterprises to efficiently scale their AI initiatives and unlock data and results faster. Teradata's partnerships with Anaconda and DataRobot further underscore its commitment to supporting customers in their AI and ML journeys.

Conclusion

Teradata's Q2 earnings call underscores the company's ongoing strength in cloud and its commitment to innovation and customer support. While challenges remain, Teradata's strategic focus on hybrid cloud solutions and its investments in growth areas position it well for future success. The company's continued execution of its strategic initiatives, coupled with its strong market position, bodes well for its prospects in the rapidly evolving data analytics landscape.