Teradata Corporation

during this time, simply press star followed by the number one on your telephone keypad. If you would like to review your question, please press star then two. Thank you. I would like to hand the conference over to your host today, Chad Bennett, Senior Vice President of Investor Relations and Corporate Development. You may begin your conference.

Good afternoon and welcome to Teradata's 2025 Second Quarter Earnings Call. Steve McMillan, Teradata's President and Chief Executive Officer, will lead our call today, followed by John Ederer, Teradata's Chief Financial Officer, who will discuss our financial results and 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, including our most recent Form 10-K and in the Form 10-Q for the quarter ended June 30, 2025. That is expected to be filed with the SEC within the next few days. These forward-looking statements are made as of today, and we undertake no duty or obligation to update them. On today's call, we will be discussing certain non-GAAP financial 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, constant currency comparisons, and 2025 revenue and ARR growth outlook in constant currency. 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.

Thanks, Chad. And hello, everyone. Teradata delivered well in Q2 as we continue to see improved execution across the company. We delivered total ARR of $1.49 billion in Q2, up 2% year over year as reported. This gives us additional confidence in our ability to achieve our full year targets. We are seeing improvements in linearity in both expansions and renewals, resulting from the go-to-market actions that started in the middle of 2024 to improve our sales execution. We experienced better deal execution in Q2, with some deals closing in the quarter that had been expected in Q3. We see customers recognizing the importance of and the value of strong data management capabilities to underpin their AI and Gen-AI initiatives. We meaningfully improved overall retention rates again in Q2, and we expect this to continue for the full year 2025. Thanks to the team's positive efforts in managing ongoing contracts with customers, We were able to extend some contracts into the back half of the year. From a cloud perspective, we delivered ARR of $634 million as we see continued migrations and expansions. The solid 15% constant currency cloud ARR growth is in line with our full year guidance range of 14 to 18%. I'll start the quarterly update with the new executive leadership members we recently brought on. During our last earnings update, we introduced Sumit Arora, our new chief product officer, and I'm pleased to have John Ederer, our new CFO, on the call today. In the quarter, we also announced Scott Rogers as our new chief administrative officer as we streamlined our people and law functions. These veteran executives are here to help our ongoing strategic execution as we position the company to accelerate growth and deliver ongoing durable free cash flow. They have proven track records and have acted with urgency to make important marks on the business in a short period of time as we work to return to growth and drive long-term returns for our investors. Additionally, we realigned our marketing function into our GTM and product organizations. Integrating these functions is designed to gain operational efficiency and increase agility and speed in execution. As we unify our approach to developing our pipeline, and serving our customers. This restructuring supports our growth objectives while removing costs to optimize our operating margin. I'm confident that we've got the right leadership team to address the market's changing priorities and to take advantage of AI as a value driver. The pervasive interest in AI and Gen-AI is leading to growth across the industry and increasingly in a hybrid environment. We see companies incorporating the deployment option that works best for each need, whether cloud, on-prem, or a hybrid approach. We are building on our cloud growth and leveraging our strength in on-prem to provide customers with the hybrid data and analytics environments they need. We believe that customers' investments in high-quality trusted data will pay dividends in high-quality trusted AI outcomes. Our differentiated capabilities are designed to deliver consistent, world-class data and analytics across an open and connected ecosystem. We help customers incorporate what is right for their business, regardless of the deployment option they choose. Egentic AI is the now industry topic, and we introduced a number of innovation advancements that we believe are keeping us ahead of the curve. With our recent Teradata AI Factory announcement, we're bringing AI and machine learning capabilities on-prem. Integrated with NVIDIA's AI enterprise, companies in regulated industries or those that have data sovereignty requirements or want more control over their AI deployments can now have private AI with the security, governance, and cost control of on-prem. Enterprise Vector Store that we announced last quarter is now generally available. It is aimed to cost-effectively combine structured and unstructured data with the speed needed to get value out of complex business challenges. This is a crucial infrastructure component for building trusted and efficient AI systems. It is designed to help customers move beyond basic gen AI implementations towards sophisticated agentic AI use cases like customer complaint analyzer and augmented call center. We also recently announced our open source MCP, Model Context Protocol Server. MCP is the industry standard technology that enables AI agents to interact with backend data platforms to get the context needed to make smart decisions. In developing agentic AI initiatives, the challenge is not just about building smarter models, it's about giving those models access to the right context. With this technology, we expect to enable our customers' AI agents to connect to the Teradata systems and leverage ClearScape analytics to both report on and build predictions around business processes and operations, ultimately significantly increasing the usage of the Vantage platform. This is designed to be enabled through trusted enterprise data, cost-effectively, and at any scale. This combination can empower organizations to move beyond isolated AI experiments and deploy intelligent context-aware agents that drive real business outcomes and value. We also introduced LLM Ops, enabling enterprises to accelerate how they deploy, manage, and monitor language models. LLM Ops is a capability in Teradata Model Ops 8.1. It is designed to support rapid deployment of NVIDIA inference microservices and enable users to select from over 80 models and deploy them directly into GPU environments. We believe that this technology supports rapid deployment of Gen-AI applications, including RAG pipelines, and is designed to accelerate time to market for AI ML initiatives. We have expanded support for Teradata OTF with access to Iceberg and Delta Lake tables across AWS, Azure, and Google Cloud. This enables Vantage Cloud Enterprise customers to begin OTF testing and application development as they build future-ready enterprises. Of course, we deliver these innovations in support of one goal, helping our customers achieve massive value from the data and analytics, which in turn helps us continue to grow. I'll walk through a few examples. We're helping one of the largest banks in the world and a long-standing customer to build an anti-money laundering analytics capability for its financial crimes division. Here, our customer-focused innovation base helped co-develop this analytics platform to the customer's needs. This is an example of how we are leveraging AI and ClearScape Analytics to enhance sales to our base. A multinational bank in APJ is using GenAI with Teradata to improve its customer experience. In this AI for CX use, we are processing 50,000 interactive text conversations a week on complex data. That helps rapidly identify friction points with customers to improve customer satisfaction and unlock significant value for the bank. We're helping a large European logistics company deliver on its strategic initiative to drive digital transformation across its broad set of operations by integrating relevant data to accelerate and innovate its business. A US financial services company established a new on-prem vantage ecosystem in their new private cloud data center to modernize current platforms with growth from increased workloads driven by operationalizing AI with Teradata Clearscape Analytics. And finally, a Middle Eastern financial institution added Teradata, replacing a longstanding competitor to improve its customers' experience. We're also gearing up for our annual customer event, Possible, the Trusted AI and Data Conference. We'll have a robust suite of speakers from many fantastic customers, as well as leading partner companies and industry experts. We will be hosting this event in LA on October 6th through the 8th. There are many more details on our website. We remain focused on accelerating innovation and value for our customers across an open and connected ecosystem as they implement AI initiatives. We do this with a global network of industry-leading partners, and Q2 was a great quarter of partner collaborations. In May, we announced a new data integration with ServiceNow's workflow data fabric. This integration is designed to connect understand and activate customer data on the ServiceNow AI platform to fuel AI agents, autonomous workflows, and analytics at scale. Teradata also participated in the Salesforce announcement, expanding its AI agent ecosystem, Agent Exchange. Agents built in AgentForce can easily discover and connect to our MCP server through Agent Exchange. This is designed to provide the enterprise context that powers trusted decisioning. For instance, an agent could request the next best recommendation based on customer history, sentiment, and or behavior in order to deliver a relevant offer to our customers in real time. In Q2, we also announced a new partnership with Fivetran to transform data pipelines for rapid AI insights. Together, we expect to simplify data integration for our customers by automating data movement from hundreds of sources across the enterprise into Teradata. With this integration, Teradata and Fivetran can empower customers to leverage all of their data for complex AI workloads and drive trusted AI at scale, reducing engineering overhead so teams can focus on insights, not pipelines. We will continue to invest in innovations and partnerships that make it easy for our customers to build and achieve value from their agentic AI solutions with Teradata. As I turn the call to John, I'll summarize Q2 as a quarter of progress on many fronts. As we have restructured the company and executed, we've built a solid foundation for longer term durable free cash flow growth for the company. our deep data and analytics capabilities position as well to address the secular drivers in technology resulting from AI. After solid execution in the first half of the year, we have increased confidence and we are reiterating our outlook for ARR and free cash flow metrics for the year. As we look ahead, we see the opportunity for greater operating leverage and free cash flow growth from our ongoing work to optimize our expense envelope. And now, I'll pass the call to John.