Teradata Corporation

Good afternoon, my name is Annie and I will be your conference operator today. At this time, I would like to welcome everyone to the Teradata's first quarter 2021 earnings conference call. All lines have been placed on mute to prevent any background noise. After speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. I would like to hand the conference over to your host today, Christopher Lee, Senior Vice President, Industrial Relations and Corporate Development. Thank you. Please go ahead.

Good afternoon and welcome to Teradata's 2021 First Quarter Earnings Call. Steve McMillan, Teradata's President and Chief Executive Officer, will lead our call today, followed by Mark Colhane, Teradata's Chief Financial Officer, who will discuss our financial results. Our discussion today includes forecasts and other information that are considered forward-looking statements. While these statements reflect our current outlook, they are subject to a number of risks and uncertainties that could cause actual results to differ materially. these risk factors are described in today's earnings release and in our sec filings including our most recent 10k and in the form 10q for the quarter ended march 31 2021 that is expected to be filed with the sec tomorrow these forward-looking statements are made as of today and we undertake no duty or obligation to update our forward-looking statements On today's call, we will be discussing certain non-GAAP financial measures which exclude such items as stock-based compensation expense and other special items described in our earnings release. We will also discuss other non-GAAP items such as free cash flow and constant currency revenue comparisons. A reconciliation of non-GAAP to GAAP measures is included in our earnings release which is accessible on the investor relations page of our website at investor.terradata.com. A replay of this conference call will be available later today on our website. And now I will turn the call over to Steve.

Good afternoon, everyone, and thanks for joining us today. Teradata is off to a very good start in fiscal 2021. We had solid growth in revenue and free cash flow, and we exceeded our quarterly outlook on public cloud ARR growth and both GAAP and non-GAAP EPS. We all saw that we issued a release on April 21st pre-announcing our first quarter 2021 results as our quarterly EPS performance was higher than the guidance issued during our fourth quarter 2020 earnings call. We saw significantly higher EPS resulting from strong performance in revenue and gross margin as well as continued solid expense discipline. With our customer base among the world's largest enterprises and with large transactions, we can have non-linear quarters, which is why we encourage you to focus on our full year outlook and results rather than quarterly. During his remarks, Mark will explain in more detail. Now, on to the quarter. Teradata grew in all three geographic regions. Growth was driven by large cloud and subscription deals from customers making meaningful commitments to Dairy Data, adding to or expanding their workloads on Vantage. We also executed higher margin consulting projects and a small but growing contribution from new customers and partners. Our focus on profitable growth is as strong as ever and we generated more profit dollars both year over year and sequentially. we are resolute and dedicated to keep that momentum going and are building upon our solid fundamentals to energize growth. In Q1, we continued to advance our cloud transformation, tightening the aperture on the strategy and growing cloud momentum with customers, prospects, and partners while reinforcing our cultural ethos of inclusion and accountability. we confirmed our market strength and differentiation for Teradata Vantage, our connected multi-cloud data platform for enterprise analytics. Teradata holds a significant position in a large, important and growing market. As enterprises continue their digital transformation, the opportunity in cloud is significant and we are moving with speed and purpose to accelerate our positioning. Teradata's capabilities in delivering outcomes across multi-cloud and hybrid environments, providing flexibility and lowering risk for the world's leading companies is being recognized with customers and the industry. As a connected data platform, Vantage brings an integrated set of capabilities with open extensibility, enabling partnerships with cloud service providers, systems integrators, and independent software vendors. Our heritage is in enterprise analytics with unparalleled scale to cost-effectively address business challenges with governance and security for the largest companies in the world. And our technology differentiation supports these large enterprises and their complex mixed workloads containing strategic and operational, traditional and advanced analytics as we help customers drive business outcomes. Our Q1 results demonstrate that our strategy is the right one, and it is resonating with current and prospective customers. With 176% year-over-year growth in public cloud ARR during the first quarter, Customers are recognizing that our Vantage Cloud platform is a great fit for their needs and delivers business value from enterprise analytics in today's connected multi-cloud world. Vantage offers the deployment flexibility they need. Vantage software is consistent across all environments, whether multi-cloud, public cloud, or on-prem, supporting fast, easy, and low-risk migrations to the cloud. Our flexible cloud pricing options are also strongly resonating with customers. Introduced just two quarters ago, customers like having choice in selecting our more predictable blended pricing or our usage-based pay-as-you-go option. The unmatched power and scale in our vantage platform combined with deployment flexibility and the pricing options we offer are all contributing to our public cloud ARR growth. Let's walk through a representative sample of our Vantage Cloud wins. The team is running cloud business in all regions and with all of the leading cloud service providers, a tangible demonstration of the strength in their strategy and multi-cloud data platform. A worldwide clothing retailer is migrating its on-prem environment to Vantage on Azure. Our customer utilizes Vantage for sales and inventory analytics and reporting. The moved advantage on Azure allows for incremental and flexible growth needed to support more users and additional customer data, driving enhanced insights into buying behavior that will result in more targeted offers. Teradata's blended pricing model enables this customer to cost-effectively move away from the confines of on-prem architecture and easily scale compute and storage as needed. This customer also considered Snowflake and Azure Synapse Analytics, but ultimately chose to migrate with Teradata and take advantage of the capabilities in Vantage as a service, including support for Native Object Store, new languages like Python and R, new tools like Jupyter and RStudio, and advanced analytics in machine learning and graph engines as well. SiriusXM, the leading audio entertainment company in North America with more than 150 million listeners, is migrating to Vantage on AWS as it modernizes its data and analytics ecosystem. SiriusXM is committed to continual innovation using technology to understand listeners and drive more personalized communications. Vantage on AWS will serve as a mission-critical to the customer's hybrid, best-of-breed analytics ecosystem, supporting increasing users, more sophisticated analytics, and an ever-growing amount of data. Key to this decision to migrate to the cloud is the ability with Vantage to utilize low-cost data storage offered with native object store. SiriusXM considered other cloud-native solutions, but Determinative wanted a multi-cloud environment, and Teradata offered the flexibility and support to deploy across multiple public cloud platforms. An American-based global health services company is migrating to Vantage on AWS for analytics and data science. Working with Accenture, Teradata won this deal over competition from Snowflake and Amazon Redshift. The Vantage on AWS environment will serve as the foundation for the customer to create a data superset that will enable innovation to improve patient health and lower healthcare costs to drive win-win growth. One of Europe's leading mail and package delivery companies is migrating its on-prem environment to Vantage on Google Cloud. Vantage serves as a platform for critical analytics use cases that support the company's strategic initiatives to drive an increase in its domestic parcel business. We partnered with Accenture and executed a successful proof of concept against cloud-native offerings. Together, our teams were able to demonstrate to the customer the flexibility and scalability of Vantage on Google Cloud. One of the world's largest auto manufacturers, headquartered in Asia Pacific, has a strategic plan to enable data analytics at scale. This global manufacturer has added to its Vantage platform on AWS to accommodate the increased volume of IoT data and additional queries coming from business users. Insights from connected car data will drive product innovations and operational improvements in research and development. With this expansion, the environment has become one of our largest cloud customers in APJ. As we accelerate our cloud momentum, we are adding strong cloud leadership to the team. We recently appointed Barry Russell as General Manager of Cloud and SEP of Business Development. Barry brings outstanding credentials in driving cloud transformations and has successfully navigated through change initiatives similar to ours. Barry is working across all the organizations in the company, unifying our efforts on our cloud growth strategies to scale our cloud business. He's also building out our partnerships and driving stronger collaboration with leading cloud service providers. Along with the growth we see in public cloud, we also continue to have strong on-prem and private cloud business. Hybrid capabilities are extremely important to our customers as they move along their digital transformation journey. We see customers making meaningful long-term commitments to Teradata and investing in their on-prem and private cloud environments as they continue along the transition continuum to public cloud. These significant investments come as a result of receiving tangible and ongoing business value from Teradata and mutually beneficial business relationships. For example, one of the top five wireless carriers in the U.S. expanded its Teradata environment to support the integration of a number of new business units. This customer is running over 7 million analytical queries and upwards of 20 million total queries per day to support 80 business applications critical to running its operations. The customer needed the scale and complex workload management that we uniquely provide to support its high growth. In our go-to-market transformation, we have added very capable and experienced leaders to augment our cloud-first sales momentum and drive consistent value-based customer success. These senior-level appointments include sales leaders in both the EMEA and Americas regions, a worldwide GTM strategy and operations head, and a new global leader of alliances, each bringing a great deal of cloud experience to rapidly move us forward. We're also going wide and deep in adding cloud sale experience to our selling teams. Our total GTM headcount, or selling capacity, is growing sequentially. We are seeing our cloud pipeline up a very strong double-digit percentage in our core key verticals as we have been addressing perceptions, increasing prospecting, and reinforcing strong customer relationships based on delivering lasting value. Our GTM leadership has also kept its attention on tuning our consulting organization to contribute very specifically to our efforts in increasing cloud ARR. We are building partnerships that will extend our reach in our GTM efforts. In all regions, we are growing collaboration with cloud service providers and are creating joint go-to-market initiatives. We are seeing increasing momentum with global systems integrators guiding customers in their digital transformation journeys and helping them migrate Teradata on-prem environments to Teradata in the cloud. And in emerging markets such as in APJ, we're increasingly working with distributors to help us scale more rapidly. In the quarter, we furthered our open partnering approach and announced alliances in core industry verticals that have needs for cloud-based data analytics. Let me mention a couple. We jointly announced new offerings for GE Aviation that we believe will help airlines improve passenger experience and revenue growth. This partnership illustrates how integrating multiple data types helps organizations enable greater analytics ability. We recently announced a partnership with Ancuit AI. Together, we will deploy the latest AI innovation to help retailers and consumer packaged goods companies optimize decision-making for demand planning, assortment, allocation, and pricing. We also joined the open manufacturing platform, where we will be working with other leading manufacturers to drive innovation in industrial IoT and manufacturing and automotive industry 4.0 solutions through cloud-based data analytics. Along with stronger partnerships, our technology innovation engine is going strong. A large airline modernized its data architecture by leveraging object stores as it journeyed to the cloud. With Vantage's native object store feature, it accelerated business insights by seamlessly joining data between the Vantage cloud data warehouse and semi-structured data on object stores on demand. Along with AWS, Google Cloud, and Azure, we've verified compatibility with seven private cloud S3-compatible object storage technologies. Our support for cloud-native integrations was furthered as we enable our customers to securely collaborate with their consumers and partners, sharing and leveraging data across organizations to augment their analytics. With Vantage, users can now publish data to and subscribe data from cloud-native data marketplaces like AWS Data Exchange and Azure Data Share. Demonstrating the strength of our technology-garnered industry recognition in the quarter, Teradata was again named a leader. This time, Forrester named us a market leader in cloud data warehouse. In this ranking, we are solidly positioned as a leader along with three major cloud service provider platforms. This endorsement validates that Teradata is a top choice for those that need a multi-cloud data warehouse platform for their enterprise analytics. The strength of our company is in our people, and to build a continuously strong and vibrant organization, our focus on diversity, equity, and inclusion, or DE&I, is woven into all that we do. We know that we are a stronger organization when we embrace DE&I that enables transparency, belonging, and opportunity, all contributing to business practices that drive consistent, profitable growth. Last year, we committed to and met our goal of ensuring a diverse slate of candidates for all director and above positions, and we remain committed to working to eliminate unconscious bias throughout our hiring processes. Within our senior leadership ranks in the last two quarters, 60% of our appointments were diverse, including 40% female. DE&I is an ongoing prioritised focus for us and we are dedicated to actively and systemically ensuring we are driving a culture that values inclusion and supports diversity and equity of all forms. Also, in the environmental, social and governance arena, we are pleased to again be named one of the 2021 World's Most Ethical Companies by Ethisphere. Operating with integrity at our core has always been our ethos, and we remain committed to doing business the right way. We are honoured to be recognised for the 12th consecutive year with this meaningful designation. Throughout our transformation, we are reimagining Peridata into a more modern and relevant technology company. As we grow, we are designing a more modern future of work environment with greater flexibility for our people and greater agility for the company with more hybrid work arrangements. And as the world looks ahead to emerge from the veil of the COVID-19 pandemic, we're beginning a carefully phased reopening of our offices worldwide. Unsurprisingly, we're using data and analytics to guide us to return an allocation only when safe for our employees, in line with all local government and health advice. In every situation, we put our employees' health and well-being first. Our teams demonstrated great resilience throughout the past year, collaborating across changing work environments and remaining accountable to our customers and to each other. This resilience set us up to thrive despite the challenges of the pandemic. A year ago tomorrow, I was honored to be named as Teradata's next CEO and my passion for this company and what we do has grown immensely. I am very proud to work with this talented team of professionals who are committed to the power of data to transform how businesses work and people live and are obsessed with the success of our customers. I'm even more proud of this team's unequivocal pivot to the cloud. Our results, customer validation, and industry recognition are testimony to the focus and dedication to drive lasting business value for our customers and shareholders. As I hand the call to Mark to discuss the financial performance in more detail, our Q1 results were another step in our strategy to win in the cloud and achieve annual profitable growth. we affirm a fiscal 2021 annual ARR and revenue outlook and raise a fiscal 2021 outlook for EPS and free cash flow. Over to you, Mark.