TERADATA CORP DE

Compensation Discussion and Analysis

Section 3: CORE COMPENSATION PROGRAM

Our executive compensation program is designed to incentivize our executive officers to pursue and execute on our priorities and promote profitable growth. The core elements of our executive officers’ compensation consist of base salary, an annual incentive, and a long-term incentive. Our annual incentive and 60% of our long-term incentive is tied to performance and closely linked to our cloud-first and profitable growth strategies and continued value creation for our shareholders.

Summary of 2023 Compensation Decisions

Base Salary

We provide a base salary to retain and attract key executive talent and to align our compensation with market practices. Base salaries are reviewed and established by the Committee on a competitive basis each year commensurate with executives with similar experience levels and capabilities in the marketplace. In particular, the Committee takes into consideration the following factors in setting or reviewing base salaries for our executive officers: current base salary; positioning relative to competitive market data; scope and complexity of the position; experience; tenure; historical and current levels of function, division and individual performance; future potential; and internal pay comparisons.

The base salary levels for each named executive officer remained unchanged from 2022 levels as they were already reflective of the market 50th percentile and were considered at an appropriate level based on other factors noted above.

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Compensation Discussion and Analysis

Annual Cash Incentive Awards

Our named executive officers participated in our 2023 annual cash incentive program under the 2023 Management Plan.

At the end of the fiscal year, during its regular meeting held in October or November, the Committee reviews proposed performance measures for the following year's annual incentive plan. Then, at the beginning of each fiscal year, during its regular meeting held in January or February, the Committee approves a target award expressed as a percentage of base salary for each executive officer and specific performance measures, weightings, goals and performance adjustment events, if any. For each performance measure, a threshold, target and maximum level of performance is defined, which have corresponding payout percentages. Following the end of the fiscal year, at the Committee's regular meeting held in January or February, management presents a summary of, and the Committee certifies, actual performance as compared to the pre-established goals together with a corresponding payout percentage, which is expressed as a percent of target performance.

When determining the target award for each executive officer, the Committee reviews the market 50th percentile for target total cash compensation (sum of base salary and target annual cash incentive) for the position in which such executive officer serves. Our objective is that when we achieve target levels of performance for each measure, resulting total cash compensation paid to our executive officers is within a reasonable range of the market 50th percentile. Actual total cash compensation will generally exceed the market 50th percentile if actual performance for each measure exceeds the pre-established target annual financial business goals and will generally be less than the market 50th percentile if actual performance for each measure is below the pre-established target annual financial business goals. In addition to considering the market data, the Committee also considers experience, tenure, scope and complexity of the executive officer’s position, individual contributions and performance, as well as internal pay equity. Actual awards can range from 0% (if threshold levels of performance are not met) to 200% of the target award (if maximum levels of performance are met for all of the performance measures) and the resulting competitiveness of total cash compensation will also vary accordingly.

The 2023 target annual incentive opportunity for Ms. Bramley was increased from 85% to 100% to align her total target cash compensation opportunity closer to the 50th percentile and recognize her for the increasing complexity and scope of her role. The 2023 target annual incentive opportunity for each of the other named executive officers remained unchanged from 2022 levels as those targets where appropriate for the scope of their roles and also is within a reasonable range of the 50th percentile.

In designing the 2023 Management Plan, our independent compensation consultant performed a comparative review of our annual incentive compensation program. As part of that review, the independent compensation consultant advised the Committee that Teradata’s annual incentive compensation practices were aligned with its executive compensation peer companies, particularly with regard to the types and number of performance measures used, the payout levels as a percent of the target level of achievement set for each of the threshold and maximum levels of achievement, and the payout percentage for each of the threshold, target and maximum levels of achievement.

Total payouts under the 2023 Management Plan are based primarily on our achievement of three key financial measures: total ARR growth, public cloud ARR growth, and non-GAAP operating margin.

Compensation Discussion and Analysis

(1)Non-GAAP Operating Margin is a non-GAAP financial measure. Please refer to Appendix B of this proxy statement for definitions and reconciliations to the GAAP financial measures.

The following chart sets forth the total ARR growth, public cloud ARR growth, and non-GAAP operating margin targets under the 2023 Management Plan, our performance for such targets, and the achievement payout level by target and in total. The overall financial achievement results in a 95% payout, which was less than the 97% payout achieved in 2022. The 2023 targets for each metric were set above 2022 target levels and above 2022 actual results.

(1)No payout can be earned for total ARR growth or public cloud ARR growth unless the Company achieved the threshold level of non-GAAP operating margin. In addition, in order to fund each of total ARR growth and public cloud ARR growth over target at a faster rate up to the maximum payout level, non-GAAP operating margin must meet the target achievement (the “Acceleration”). If the non-GAAP operating margin target is not met, then total ARR growth and public cloud ARR growth over target is calculated at a linear rate until the maximum payout is achieved. Since the non-GAAP operating margin target was achieved, each of total ARR growth and public cloud ARR growth qualified for the Acceleration, based on the individual measure achievement over target.

(2)Non-GAAP Operating Margin is a non-GAAP financial measure. Please refer to Appendix B of this proxy statement for definitions and reconciliations to the GAAP financial measures.

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Compensation Discussion and Analysis

(3)When establishing the performance objectives under the 2023 Management Plan, the Committee approved adjustments to actual performance for non-GAAP operating margin, such that actual results would be increased or decreased, as applicable, by the product of the impact of foreign exchange rates on revenue from pre-established plan rate levels. The adjustment for foreign currency is reflected in the reconciliation to the GAAP financial measure in Appendix B.

Payouts of Annual Incentive Compensation

Each named executive officer was eligible to receive a payout under our 2023 Management Plan. Based on Company performance relative to the financial measures described above, the overall payout achieved was equal to 95% of his or her target annual incentive opportunity.

In addition, our 2023 Management Plan design provides the Committee an individual performance modifier that can adjust the company performance factor positively or negatively up to 25%. The plan design provides this feature to align our pay for performance culture and reward extraordinary contributions that may be made by individuals during the year. In evaluating performance and whether to use this permitted adjustment, the Committee considers contributions that are above and beyond what could have been planned or anticipated when the financial plan was established, in addition to where our named executive officers may have fallen short in their contributions during the year. Consistent with our pay for performance commitment, because we did not achieve the target levels of total ARR growth or total public cloud growth, no individual specific adjustments were made for 2023. As a result, each named executive officer received a payout of 95% of his or her target annual incentive opportunity.

The 2023 Management Plan payment amounts are set forth in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table of this proxy statement. For more information on the 2023 Management Plan for our named executive officers, please refer to the “Grants of Plan-Based Awards” section of this proxy statement.

Long-Term Incentives (Equity Awards)

The total direct compensation levels for our named executive officers are heavily weighted to long-term incentive opportunities, which vest over a period of three years. This structure is intended to align executives’ interests with those of our stockholders, enhance our retention incentives and focus our executives on delivering sustainable performance over the longer-term. The design of this program has stabilized over the past several years to reflect the core performance metrics and incentive structure the Committee believes is necessary to drive our long-term success through the transition to a subscription-based business model and our focus on our cloud-first strategy. We maintain our commitment to pay for performance by allocating 60% of the long-term incentive opportunity to the 2023 – 2025 LTIP and 40% to the Service RSUs. The following chart includes a high-level summary of the elements of the performance-based and serviced-based RSU equity vehicles and performance criteria, as applicable, for our long-term incentive program since 2022.

Compensation Discussion and Analysis

Long-Term Equity Program Evolution

Annual Grants – 2023 – 2025 Performance-Based and Service-Based RSU Grants

In designing the long-term incentive plan, our independent compensation consultant performed a benchmark review of our long-term incentive compensation program. As part of that review, the independent compensation consultant advised the Committee that Teradata’s long-term incentive compensation practices were aligned with the peer companies, particularly with regard to the types and number of performance measures used, the payout levels as a percent of the target level of achievement set for each of the threshold and maximum levels of achievement, and the payout percentage for each of the threshold, target and maximum levels of achievement, equity mix, and performance period. In addition, in determining the size of the long-term incentive grants, we consider market data, the scope and complexity of the executive’s position, experience, tenure, internal pay comparisons, function, division, and individual performance and historical targeted grant levels. In 2023 at its first meeting of the 2023 fiscal year, the Committee made long-term incentive grants that consisted of a grant of 2023 – 2025 performance-based RSUs (“2023 – 2025 LTIP”) and 3-year service-based RSUs (“Service RSUs”) to our named executive officers. The target opportunity for the aggregate of the 2023 – 2025 LTIP and Service RSUs for each named executive officer was as follows:

The 2023 target long-term incentive opportunity for Ms. Bramley was increased by $1,000,000 to align her target total direct compensation opportunity closer to the market 50th percentile and to recognize her for the increasing complexity and scope of her role. The 2023 target long-term incentive opportunity for each of the other named executive officers

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Compensation Discussion and Analysis

remained unchanged from 2022 levels as such targets where approximate for the size and scope of their roles and was within a reasonable range of the 50th percentile.

In 2023, we continued our commitment to pay for performance by allocating 60% of the long-term incentive opportunity to the 2023 – 2025 LTIP and 40% to the Service RSUs. This allocation between performance-based and time-based awards is consistent with market data provided by our independent compensation consultant and feedback received from stockholders as part of our engagement program. The 2023 – 2025 LTIP will be earned based on the extent to which Teradata achieves three financial goals during the 3-year performance period ending December 31, 2025, which were designed to drive the Company toward profitable cloud growth as a technology leader in the analytics and software-as-a-service industry. The Service RSUs vest in equal annual installments over three years and are designed to provide a meaningful retention incentive for our executives in line with competitive market practices.

The Committee established threshold, target and maximum goals for each performance measure for the 2023 – 2025 LTIP at the beginning of our 2023 fiscal year. The specific performance goals for the three-year award period are maintained by us as proprietary and confidential. The Committee believes that disclosure of these specific performance goals would represent competitive harm to us as such corporate goals and results are not publicly disclosed and are competitively sensitive. The Committee believes the attainment of target performance levels, while uncertain, could be reasonably anticipated. Threshold goals represent the minimum level of performance necessary for there to be a payout for that performance measure and the Committee believes the threshold goals are rigorous, but likely to be achieved. Maximum goals represent the performances at which payouts are 200% of the target award. Even if actual results exceed the maximum goals, the payouts are capped at 200% of the target award. Maximum goals represent levels of performance at which the Committee determined a payout of 200% of target would be appropriate. The Committee believes that the maximum goals established are more aggressive goals. Consistent with the disclosure in this proxy statement, we expect to provide the goals and performance attained for the 2023 – 2025 LTIP in the proxy statement for our 2026 Annual Meeting.

In addition to approving performance measures, goals and weightings, the Committee also established specific corporate adjustment events for determining payouts under the 2023 – 2025 LTIP. The adjustment events include certain acquisitions, divestitures, and foreign currency fluctuations.

Payout of Performance-Based RSUs for the 2021 – 2023 Performance Period (“2021 – 2023 LTIP”)

As part of our 2021 – 2023 LTIP, we granted performance-based RSUs to our named executive officers.

•60% of the award was subject to achievement of specified annual levels of our cloud percentage of total ARR, the targets of which were set on an annual basis and the payout of which was based on the average cumulative performance relative to the annual targets over the 3-year period. In addition, to keep executives also focused on delivering overall profitable performance results (and to avoid providing a potential windfall if our cloud percentage increases at the expense of declining overall ARR), payout would not be earned unless we also achieved certain threshold levels of both non-GAAP operating margin as a percentage of revenue and total ARR for the corresponding year.

Compensation Discussion and Analysis

•40% of the award was based on free cash flow as a percent of the Company’s total reported revenue over the 3-year period.

The performance goals and targets for the 2021 – 2023 LTIP, along with actual results for each year, are as follows:

(1) Free Cash Flow as a Percentage of Revenue, based on the Company’s “Free Cash Flow” as a percent of the Company’s total reported Revenue as of the end of the performance period. Free Cash Flow is defined as cash provided/used by operating activities less capital expenditures for property and equipment, and additions to capitalized software as reported in the Company’s earnings release for the full-year ended December 31, 2023. Free Cash Flow is a non-GAAP financial measure. Please refer to Appendix B of this proxy statement for definitions and reconciliations to the GAAP financial measures.

(2) Threshold amounts, or gates, of both non-GAAP operating margin and total ARR were set at the same time the cloud percentage of total ARR goals were set for the corresponding year. These thresholds are required to be met before any payout will be awarded under the cloud percentage of total ARR metric for the corresponding year. If both of the non-GAAP operating margin and total ARR gates were not met, then there was no payout under the cloud percentage of total ARR for that year.

Based on the actual results for the 2021 – 2023 performance period relative to the goals outlined above, the weighted average payout percentage for each of the named executive officers was 95%.

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