Teradata Corporation

Hello, everyone. My name is Drew, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Teradata fourth quarter and full year 2022 earnings call. All lines have been placed on mute to prevent any background noise. After the 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 now like to hand the conference over to your host today, Christopher Lee, Senior Vice President of Investor Relations and Corporate Development. You may begin your conference.

Good morning, and welcome to Teradata's fourth quarter and full year 2022 earnings call. Steve McMillan, Teradata's President and Chief Executive Officer, will lead our call today, followed by Claire Bramley, Teradata's Chief Financial Officer, who will discuss our financial results and our outlook. 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. Please note that Teradata intends to file the Form 10-K for the year ended December 31st, 2022, later this month. 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. Unless stated otherwise, all numbers and results discussed on today's call are on a non-GAAP basis. 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 morning, everyone. Thanks for joining us, and thanks, Chris, for the introduction. Teradata delivered a robust fourth quarter, capping off a strong year. We are very pleased that we had all of our key metrics for the full year, especially considering the macroeconomic challenges from ceasing our operations in Russia. Demonstrating our momentum as a cloud leader, the fourth quarter was our largest cloud quarter ever, as the team delivered public cloud ARR of $357 million, a year-on-year increase of 81% in constant currency, nearly 45% larger than Q4 of last year. This incredible growth was propelled by customer demand for a differentiated platform resulting in new incremental workloads that drove healthy migrations and expansions. Our total ARR also finished the year very strong, up 2% year-over-year in constant currency. We generated $108 million of sequential growth in the fourth quarter, driven by outstanding cloud activity. In addition, our on-prem subscription business remained steady, even in light of healthy migrations to the cloud. It's great to see that the team's performance in cloud is fueling overall total ARR growth. Looking at our tremendous progress across the board, our results showcase the positive impact of our strategic transformation. Just over two short years ago, we declared that Teradata would be cloud first, and the entire team stepped up and executed with determination and consistency. Once we set our sights on our cloud-first future, we have delivered more than a six-fold growth in cloud. Just remarkable results, with growth well ahead of the market. Our strategic pivot was right, and I am very proud that these results illustrate our successful transition to a market-recognized leader in cloud data and analytics. The customers we serve are among the world's most demanding and complex enterprises. and we regularly hear from them that they need the best data and analytics capabilities possible, capabilities that Teradata absolutely provides to help them extend their edge in their market. We meet customers where they are now with the technology that they need now, with their best-in-class lake, lake house, or data warehouse, whether in the cloud, on-prem, or a hybrid model. Our dedication to customer success and the strength of our technology gives customers full confidence that Teradata will keep bringing the analytics and data capabilities they will need in the future. We are seeing migrations remain high as customers transition workloads to the cloud, and we are also pleased to see that when customers start with Teradata in the cloud, they expand with Teradata. Our net expansion rate in cloud remains solid at 117% in the quarter, Our momentum accelerated in the fourth quarter as our sellers added new customers in the cloud and new logos. We brought in nearly 20% more new logos last year than in 2021. Our new accounts come from across all geographies and multiple industries. I'd like to share just a few examples. Kindrel is modernizing its data platform and building out capabilities in the cloud to acquire and curate data while delivering key insights to his business. It selected Teradata on Azure as a key component of that strategy, leveraging our company's go-to-market alliance and with its internal chief data office team being client zero. Leveraging Teradata for its internal use positions Kindle in an excellent position to address the challenges businesses face. A major Japanese consumer electronics manufacturer chose Teradata on AWS to help it provide analytics on IoT data derived from the products. A large Australian government agency has procured Teradata on Azure as the basis of its strategic data platform, underpinning the department's enterprise information initiatives. This program will uplift its entire enterprise data management and analytics practices to better enable information sharing and collaboration within the department, across the government, and with Australia's strategic international partners. This new customer was one with KPMG and was a competitive win against a number of other vendors. These wins are a testament to the people of Teradata Our culture of being market-driven, agile in execution, and accountable to each other truly helps us win. As we have transformed the company, it has been amazing to see everyone lean in and embrace the future. You've heard us say that we do what we say we will do. This has been our mantra throughout our transformation as all facets of the company acted with urgency and commitment in our successful pivot to the cloud. Our fantastic engineering organization completely re-architected our analytics and data platform to cloud native, and we launched Teradata Vantage Cloud Light and ClearScape Analytics at the end of Q3. We are quite pleased with the incredibly positive market response to the launch of these powerful capabilities. Our pipeline is building, and we have customers already leveraging our powerful new light product to get meaningful business values. When we win, we increasingly win with partners, and we continue to strengthen our partner-first approach. In 2022, we made major strides building out our partner motion, significantly advancing our capabilities, training thousands of partner employees, and building a leading partner-centric organization from the ground up. Our robust cloud growth is intrinsically tied to the deep partnerships our teams have built with the leading cloud service providers, systems integrators, ISPs, and resellers. In fact, 75% of our largest cloud deals were won in partnership with key systems integrator partners and cloud service providers. Looking ahead, we remain committed to partnering as a key element in our growth. We will continue to invest in building deep partnerships and accelerating market momentum in this area. Capping off our fantastic year was the very positive news that Teradata received continued recognition from Gartner in two important reports that denote cloud leadership. We were named a cloud leader in the 2022 Gartner Magic Quadrant for cloud database management systems. This makes an impressive 20 years in a row of being named a leader in data analytics. We had another consecutive year of winning streak as we again garnered the highest scores in all four use cases and got more critical capabilities for Cloud DBMS for analytical use cases report. Teradata scored number one in data lake, number one in traditional data warehouse, number one in logical data warehouse, and number one in streaming analytics. This is the second year in a row that Teradata has made a full sweep leading in each of these use cases. We're proud of this recognition that validates our strength as a leader among leaders in cloud analytics and data. Being a market leader also comes with the duty to act as a responsible corporate citizen, an obligation we hold paramount. In 2022, we made great strides in our ESG program, processes, and governance. It's very rewarding to be including key reports such as Just Capital's 2023 ranking of America's most just companies and Newsweek's list of America's most responsible companies. Our commitment to ESG is deep and broad. In recognition as one of the leading sustainability-driven companies, we were named in Dow Jones' Sustainability North American Index for the 13th year in a row, and we were included in its World Index for the eighth time. You'll be hearing more about our unwavering commitment to ESG throughout the year, and I'm confident that you will like what you hear. As I turn the call over to Claire, who will share more about our financial performance, I want to emphasize that we made tremendous progress in 2022, and we have great confidence in our future. Our entire team is preparing to take another significant step forward in 2023. We remain steadfastly focused on generating profitability, and we look to extend our strong track record of delivering on our earnings per share targets. Our 2023 non-GAAP diluted earnings per share output is almost $2 per share at the midpoint. This is more than a 20% increase year over year. We forecast accelerating growth in both 2023 cloud and total ARR, and we remain on track to meet our goal of $1 billion plus of cloud ARR in 2025. We firmly believe our strategic transformation is right for Teradata, and the proof is in our results. Our technology is differentiated in the market, our people remain dedicated to customer success, and we will continue our strong sales execution and good cost discipline. firmly stand on our commitment to profitable growth and delivering durable free cash flow. Let's now turn the call over to Claire.