• Cloud ARR: $609 million in 2024, with a growth of 18% year-over-year in Q4.
• Total ARR: $1.474 billion in 2024, declined 4% year-over-year in Q4.
• Cloud Net Expansion Rate: 117% in Q4 2024.
• Free Cash Flow: $277 million for fiscal year 2024, representing a 16% margin.
• Share Repurchases: 78% of free cash flow returned to investors in 2024.
• Q4 Recurring Revenue: $351 million, down 6% year-over-year.
• Q4 Total Revenue: $409 million, down 11% year-over-year.
• Full Year Recurring Revenue: $1.479 billion, a decrease of 1% as reported.
• Full Year Total Revenue: $1.750 billion, down 5% as reported.
• Q4 Gross Margin: 60.9%, down 100 basis points year-over-year.
• Q4 Operating Margin: 17.6%, down 190 basis points year-over-year.
• Non-GAAP EPS: $0.53 in Q4, exceeding guidance.
• 2025 Cloud ARR Growth Outlook: 14% to 18%.
• 2025 Total ARR Growth Outlook: Flat to 2%.
• 2025 Free Cash Flow Outlook: $250 million to $280 million.
• 2025 Non-GAAP EPS Outlook: $2.15 to $2.25.

• Warning! GuruFocus has detected 1 Warning Sign with TDC.

Release Date: February 11, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Teradata Corp (NYSE:TDC) delivered $609 million in Cloud ARR and $1.474 billion in total ARR, advancing their hybrid cloud platform strategy.
• The company has formed new partnerships with NVIDIA and strengthened relationships with major cloud service providers, enhancing their AI capabilities.
• Teradata Corp (NYSE:TDC) expects a meaningful improvement in retention rates for both total and on-prem ARR in 2025.
• The company has introduced innovations such as the enterprise vector store and integration with Amazon Bedrock, expanding their AI and analytics offerings.
• Teradata Corp (NYSE:TDC) returned 78% of free cash flow to investors through share repurchases, demonstrating strong capital return practices.

Negative Points

• Total ARR declined by 4% year-over-year in constant currency, indicating challenges in maintaining growth.
• The company anticipates a decline in total recurring revenue and total revenue for 2025, with consulting revenue expected to decrease in the high single-digit range.
• Cloud ARR growth is projected to be lower than some expectations, with a guidance range of 14% to 18% for 2025.
• The company faces a $20 million headwind on 2025 operating income due to currency exchange rate movements.
• Teradata Corp (NYSE:TDC) expects a negative impact on free cash flow due to FX headwinds and the total ARR exit rate in 2024.

Q & A Highlights

Q: Steve, can you comment on how your customers are thinking about cloud migrations, especially given the lower-than-expected growth from hyperscalers? A: Stephen McMillan, CEO: We observed a deal elongation process in Q4 2024, with customers balancing their on-prem and cloud footprints. This presents an opportunity for our hybrid technology capabilities. We have around 30 gen AI POCs in place, and customers are exploring the best ways to take these into production, balancing between cloud and on-prem execution.

Q: Claire, what factors give you confidence in the ARR guidance, considering the stable yet slightly decelerating Cloud ARR growth? A: Claire Bramley, CFO: We set the 2025 guidance by learning from 2024 trends, limiting reliance on large deals, and improving retention rates across on-prem and total ARR. Changes in our go-to-market organization have also provided better visibility into our pipeline and erosion.

Q: Can you provide more details on the mix of the pipeline that gives you confidence in growth for 2025? A: Claire Bramley, CFO: We anticipate a 50-50 mix between expansion and migration, with more migrations early in the year and expansions later. New logos will be a small contributor to growth. Innovations from 2024 will start to benefit us as we progress through 2025.

Q: Steve, does Teradata need more decisive action to accelerate its turnaround and capitalize on the AI spending environment? A: Stephen McMillan, CEO: Over the last four years, we've pivoted to a cloud-first focus, laying the foundation for our turnaround. We are now addressing the AI and gen AI opportunities with partnerships and integrations with NVIDIA, AWS, Google, and Microsoft. Our sales capability is being transformed to capture new TAM and utilize our AI offerings.

Q: Claire, can you explain why EPS and free cash flow are expected to decline slightly in 2025 despite cost-cutting efforts? A: Claire Bramley, CFO: The decline is primarily due to FX impacts and lower revenue from negative ARR in 2024. Cost actions are helping offset these headwinds, but we are reinvesting savings into growth to ensure a return to ARR growth in 2025.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.