Teradata Corp at Morgan Stanley Technology, Media & Telecom Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Erik Woodring - Morgan Stanley - Analyst : So yes, maybe let's start with exactly what I said, which is maybe helping to elaborate on where Teradata is on its journey to kind of reinvent itself. When I started covering this company a decade ago, it was effectively a fully on-prem hardware business. Prior to your arrival, there was kind of a big push to go cloud-native. Now the message is hybrid. So maybe just help us better understand where you are in this kind of evolution and transformation of the company.

Question: Erik Woodring - Morgan Stanley - Analyst : So there's a lot underlying that I'm going to kind of follow it up with two high-level questions before we get into the specifics. The first one is just on the market. When you talk about a data platform, there's a lot that underlies what Teradata does. There's data warehousing, data lakes, Lake houses, business analytics, et cetera. Can you maybe just give us a high-level overview about how you think about those markets right now? And then maybe we'll dig into the Teradata side of what you do?

Question: Erik Woodring - Morgan Stanley - Analyst : And that's maybe a good transition to the kind of question about Teradata specific, which is can you maybe walk us through the core offerings, and I know that's maybe a bit siloed question, but that kind of core offering is most popular in the market for you today and really what the new capabilities are that you're bringing to market that kind of ensures that you remained strongly competitively positioned?

Question: Erik Woodring - Morgan Stanley - Analyst : Okay, that's perfect. And I want to kind of continue on the theme of competitive advantage, something you've hammered home and that we have, as a firm, have hammered home is the concept of hybrid cloud, multi-cloud, you're going to have both in your enterprise. That gives you a competitive advantage over what would be cloud-native customers, so to speak. But what other competitive advantages do you believe Teradata has today? What's the competitive moat that you guys have in this market?

Question: Erik Woodring - Morgan Stanley - Analyst : Something you mentioned, which dovetails into my next question, was just this partnership with NVIDIA. Can you maybe just expand so it comes out in 2Q, what exactly is this partnership that you've kind of introduced or yet to launch? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 04, 2025 / 5:15PM, TDC.N - Teradata Corp at Morgan Stanley Technology, Media & Telecom Conference

Question: Erik Woodring - Morgan Stanley - Analyst : I think it's a great start. Let's now kind of delve into the business. So 2025, there are a number of kind of headwinds that you faced. There was unexpected on-prem erosion, some deal slippage, some large deals that took longer to close. Can you help give us an update just kind of where some of those headwinds stand today and almost a reassurance to the market that, this isn't about competitive losses. Some of these are related to unique factors that you can kind of claw back, so to speak.

Question: Erik Woodring - Morgan Stanley - Analyst : So maybe let's dovetail into that. There's a lot of moving pieces kind of underneath the Teradata business. There's on-prem expansions, there's on-prem migrations to the cloud, there's cloud expansions, there's new logos. Let's just start high level kind of talking us through these different moving pieces and how you think each one of them, maybe, impact '25 performance. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 04, 2025 / 5:15PM, TDC.N - Teradata Corp at Morgan Stanley Technology, Media & Telecom Conference

Question: Erik Woodring - Morgan Stanley - Analyst : It's almost as if you know the question list, so maybe let's talk about new logos. No, I know this is a smaller part of your business. It is a key focus area for you guys. I think the realization is it will take longer for those new logos to kind of spin up to become material but there is also a period of time where this uncertain macro environment made it harder to kind of close and onboard due to logo. So just where do we stand with some of these new logos that might be smaller and maybe historically taken more of a cloud-first approach.

Question: Erik Woodring - Morgan Stanley - Analyst : So the next question to me is almost like the key question of everything, which is a persistent bear thesis is, sure, you'll have success migrating on-premise workloads to the cloud. But what happens to the rest of that on-premise business? Is that a melting ice cube? Or at least that's the thesis. Help us understand why that's not the case. And obviously, if we normalize for migrations to the cloud, it sounds like what you're saying is this on-premises business can actually grow, which would refute that bare case. So let's just dig into that, if you could, please? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 04, 2025 / 5:15PM, TDC.N - Teradata Corp at Morgan Stanley Technology, Media & Telecom Conference

Question: Erik Woodring - Morgan Stanley - Analyst : And so, it feels like a complete you're kind of refuting that in real time, which is maybe when the world thought everything was cloud-only, cloud native, cloud everything. But that's not the world today.

Question: Erik Woodring - Morgan Stanley - Analyst : You mentioned two questions ago, some customers that, I guess, I call them kind of boomerang customers, they were ones with Teradata. They wind off the platform. Now they've come back. Why are they coming back? How common is that? Is that becoming increasingly more common? Can you just add some context to that?

Question: Erik Woodring - Morgan Stanley - Analyst : Perfect. I'm going to quickly touch on consulting just to how to get the question out of the way, which is 15% of your business still is consulting. The results there have been more inconsistent, maybe my question is, why still have this business? What does it enable? What do you need to do to kind of get it to stabilize?

Question: Erik Woodring - Morgan Stanley - Analyst : Perfect. I want to go back to maybe what some of the earlier conversations, you have launched kind of a lot of new offerings and products. So Enterprise Vector Store. A few years ago, it was VantageCloud Lake. The second half of last year, AI unlimited. Can you talk about the relative areas of kind of success that you've had with these handful of offerings? I'm kind of taking three technologies, but bringing them together into one. Just where is the relative strength coming in? And how does that relative strength inform you where the next leg of innovations comes from?

Question: Erik Woodring - Morgan Stanley - Analyst : Okay, exciting. And I want to talk about cloud ARR because it obviously has been a massive growth engine for you guys. You're guiding to 14% to 18% constant currency growth this year. But I want to hear from you guys, is more kind of confident in the back half of the year and actually, the change for this business to accelerate through the year. So one, where does the confidence come from? And two, would you say maybe you have more, I guess, improved visibility into this business than maybe you had a year ago? What gets you excited about that second half?

Question: Erik Woodring - Morgan Stanley - Analyst : That's perfect. Let's talk about the cost side of things. This is a CFO question, but I'm going to ask you, the CEO, which is there has been a renewed focus over the last six-plus months on kind of cost efficiencies. What actions have you taken? What's kind of the financial impact that we should expect and timing of that financial impact?

Question: Erik Woodring - Morgan Stanley - Analyst : And maybe to that point, your like if I think about capital allocation, you're committed to returning more than 50% of free cash flow to shareholders. That is a little bit lower than the target last year, but I do hear you talking about kind of areas of reinvestment to kind of continue the growth engine. Help us understand the capital allocation priorities and kind of the intensity of that reinvestment this year? Is it different than past years?

Question: Erik Woodring - Morgan Stanley - Analyst : Okay, perfect. I'm going to look kind of beyond 2025 because I realize 2025, there's still a lot of moving pieces in the quest to get back to growth. You have ARR growth. If we look back, there was once a time where Teradata had guided to over $450 million of kind of annual run rate free cash flow. Is there a path to that type of cash generation in this business? And is there any way that you can help us think about like if you had the Magic eight ball kind of timing for that potential because if you look at the stock price compare it to what the free cash flow potential of this business could be, there could be a material difference in how we might think about things.

Question: Erik Woodring - Morgan Stanley - Analyst : And maybe that's a good way to end with my last question, and maybe it's repetitive, but I want to make sure it's hammered home, which is help us all understand as we sit here with Teradata, starting 2025, what's the most underappreciated about the story? A lot of moving pieces, a really exciting end market. But what should we all get excited about? And maybe what is the market not understanding or underappreciating? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 04, 2025 / 5:15PM, TDC.N - Teradata Corp at Morgan Stanley Technology, Media & Telecom Conference

Question: Erik Woodring - Morgan Stanley - Analyst : Perfect. That's a great way to end. Awesome. Thank you so much.