Yahoo Finance Teradata Corp (TDC) Q1 2024 Earnings Call Transcript Highlights: Navigating Cloud Growth Amidst ...
Total ARR: $1.48 billion in Q1, down 1% in constant currency.
Cloud ARR: $525 million, up 36% year-over-year in constant currency.
Cloud Net Expansion Rate: 123%.
Non-GAAP Earnings Per Share: $0.57, at the top end of the quarterly range.
Free Cash Flow: Generated $21 million in the quarter.
Recurring Revenue: $388 million, flat as reported, 1% growth year-over-year in constant currency.
Total Revenue: $465 million, down 2% year-over-year as reported, down 1% in constant currency.
Gross Margin: $289 million in the quarter.
Operating Profit: $89 million.
Operating Margin: 19.1%.
Release Date: May 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Cloud ARR grew by 36% year-over-year in constant currency, demonstrating strong growth in the cloud sector.
Cloud net expansion rate remained robust at 123%, indicating significant customer expansion within cloud services.
Successfully closed one of the large deals that had slipped from 2023, showing progress in deal closure and execution.
Introduced AI Unlimited and support for open table formats, enhancing product offerings and potentially attracting new customers.
Maintained a strong pipeline for cloud migration and expansion, supporting future growth expectations.
Negative Points
Total ARR was down 1% in constant currency, showing a slight decline in overall annual recurring revenue.
Experienced elongated customer decision-making cycles, which could impact the speed and volume of future deal closures.
On-prem erosion activities occurred as expected, which might affect short-term revenue even though it aligns with long-term cloud transition strategy.
Sequential growth from migration and expansion activity in Q1 was slightly below expectations, indicating potential challenges in execution.
Guidance for total ARR and revenue growth metrics for 2025 has been pushed out, suggesting slower than expected progress towards long-term financial goals.
Q & A Highlights
Q: Steve, can you expand on the broader deal and demand landscape, especially considering the guidance towards the lower end of your ranges for total ARR and cloud ARR for the full year? A: Stephen McMillan, President, CEO & Director - Teradata Corporation: We're still seeing a very positive demand environment. The elongation in deal cycles mentioned last quarter has been factored into our full-year guide. We remain confident in our cloud outlook supported by a strong pipeline and interest in our cloud platform.
Q: Claire, could you elaborate on the slight underperformance in cloud ARR this quarter and your expectations moving forward? A: Claire Bramley, CFO - Teradata Corporation: The slight decline in cloud ARR was due to currency impacts and lower-than-expected migration and expansion activity. However, we anticipate growth acceleration in subsequent quarters, with Q4 expected to be our biggest growth quarter, maintaining the midpoint of our cloud ARR guide.
Q: What gives you confidence in the pipeline conversion for cloud ARR, considering the current hesitancy or pause in spending? A: Stephen McMillan, President, CEO & Director - Teradata Corporation: Our confidence stems from our strong migration pipeline and the recognition that Teradata offers the best path to the cloud. Our historical performance and the substantial interest in our cloud solutions underpin our positive outlook.
Q: Can you provide insights into the traction of over 100 new logos added to your pipeline? A: Stephen McMillan, President, CEO & Director - Teradata Corporation: The new logos are primarily small initially and grow over time. Our international business has seen great success with partners, which we aim to replicate globally. New offerings like AI Unlimited also attract new users, enhancing our pipeline.
Q: Claire, could you discuss the expected contributions from migration versus expansion in achieving your cloud ARR targets? A: Claire Bramley, CFO - Teradata Corporation: We are not modeling an acceleration in our net expansion rate, which remains strong at 123%. Our cloud ARR growth is expected to come from a combination of robust migration activity and stable expansion rates.
Q: What are the main selling points that led a major financial institution to select VantageCloud in a competitive situation? A: Stephen McMillan, President, CEO & Director - Teradata Corporation: The institution chose VantageCloud for its low cost, low risk, and simplicity in migration. Our differentiated capabilities like ClearScape Analytics and QueryGrid, along with our deep industry knowledge, were key differentiators.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
