TERADATA CORP /DE/

Previous wording

•Total Annual Recurring Revenue ("Total ARR") - annual value at a point in time of all recurring contracts, including subscription, cloud, software upgrade rights, and maintenance. Total ARR does not include managed services and third-party software.

Current wording

•Total Annual Recurring Revenue ("Total ARR") - annual value at a point in time of all recurring contracts, including subscription, cloud, software upgrade rights, and maintenance. Total ARR does not include managed services.

Previous wording

As more fully discussed in later sections of this MD&A, the following were what we view as the more significant financial items for the first quarter of 2025:

Current wording

As more fully discussed in later sections of this MD&A, the following were what we view as the more significant financial items for the second quarter of 2025:

Previous wording

•At the end of the first quarter of 2025, Total ARR was $1.442 billion compared to $1.480 billion at the end of the first quarter of 2024, decreasing 3% as compared to the first quarter of 2024, including a 1% negative impact from foreign currency fluctuations.

Current wording

•At the end of the second quarter of 2025, Total ARR was$1.489 billion compared to $1.465 billion at the end of the second quarter of 2024, increasing 2% as compared to the second quarter of 2024, including a 2% positive impact from foreign currency fluctuations.

Previous wording

•At the end of the first quarter of 2025, Public Cloud ARR was $606 million compared to $525 million at the end of the first quarter of 2024, increasing 15% as compared to the first quarter of 2024, including a 1% negative impact from foreign currency fluctuations.

Current wording

•At the end of the second quarter of 2025, Public Cloud ARR was$634 million compared to $542 million at the end of the second quarter of 2024, increasing 17% as compared to the second quarter of 2024, including a 2% positive impact from foreign currency fluctuations.

Previous wording

•Total revenue was$418 million for the first quarter of 2025, decreasing by$47 million compared to the first quarter of 2024, with recurring revenue down 8%. Perpetual software licenses, hardware and other revenue wasup 25%, and consulting services revenue decreased 28%. Foreign currency fluctuations had a 2%adverse impact on total revenue for the quarter compared to the prior year.

Current wording

•Total revenue was$408 million for the second quarter of 2025, decreasing by $28 million compared to the second quarter of 2024, with recurring revenue down 4%. Perpetual software licenses, hardware and other revenue reduced by 40%, and consulting services revenue decreased 19%. Foreign currency fluctuations had a 1% positive impact on total revenue for the quarter compared to the prior year.

Previous wording

•Gross margin decreased to 59.3% in the first quarter of 2025 from 61.1% in the first quarter of 2024, primarily due to lower consulting services margin rates, which were largely driven by lower overall consulting services revenue compared to the prior year.

Current wording

•Gross margin decreased to 56.4% in the second quarter of 2025 from 60.8% in the second quarter of 2024, primarily due to lower consulting services margin rates, which were largely driven by lower overall consulting services revenue compared to the prior year, and lower recurring revenue margin rates, primarily due to a higher mix of Public Cloud revenues versus on-premises revenue as compared to the prior-year period.

Previous wording

•Operating expenses for the first quarter of 2025 decreased 23% compared to the first quarter of 2024, largely due to lower employee compensation expenses and the impact of restructuring actions taken in the prior year, as well as lower stock-based compensation expense in the first quarter of 2025.

Current wording

•Operating expenses for the second quarter of 2025 increased 4% compared to the second quarter of 2024, largely due to the impact of severance charges in the second quarter of 2025 partially offset by lower employee compensation expenses due to the impact of restructuring actions taken in the prior year.

Previous wording

•Operating income was $66 million in the first quarter of 2025, compared to $48 million in the first quarter of 2024.

Current wording

•Operating income was$24 million in the second quarter of 2025, compared to $66 million in the second quarter of 2024.

Previous wording

•Net income in the first quarter of 2025 was $44 million, compared to $20 million in the first quarter of 2024.

Current wording

•Net income in the second quarter of 2025 was$9 million, compared to $37 million in the second quarter of 2024.

Previous wording

•Cloud Net Expansion Rate for the first quarter of 2025 was 115%, compared to 123% for the first quarter of 2024.

Current wording

•Cloud Net Expansion Rate for the second quarter of 2025 was 112%, compared to 123% for the second quarter of 2024.

Previous wording

Total revenue decreased $47 million, or 10%, in the first quarter of 2025, including a 2% negative impact from foreign currency fluctuations. Recurring revenue decreased 8%as compared to the first quarter of 2024 and included a 2% negative impact from foreign currency fluctuations. Recurring revenue for the first quarter of 2025 included strong growth from Public Cloud revenue, which was more than offset by a decrease in revenue from our on-premises business, as well as a smaller benefit from annual upfront software subscription revenue recognized in the current period. Revenue from perpetual software licenses, hardware and other increased $2 million year over year. Consulting services revenue decreased 28% in the first quarter of 2025, including a 2% negative impact from foreign currency fluctuations. The consulting services revenue decrease is an expected result of the lower order booking activity in the second half of 2024.

Current wording

Total revenue decreased $28 million, or 6%, in the second quarter of 2025, including a 1% positive impact from foreign currency fluctuations. Recurring revenue decreased 4%as compared to the second quarter of 2024 with no material impact from foreign currency fluctuations. Recurring revenue for the second quarter of 2025 included growth from Public Cloud revenue, which was more than offset by a decrease in revenue from our on-premises business. Revenue from perpetual software licenses, hardware and other decreased $2 million year over year. Consulting services revenue decreased 19% in the second quarter of 2025, includinga 1% positive impact from foreign currency fluctuations. The consulting services revenuedec rease is an expected result of the lower order booking activity in the second half of 2024 and into 2025.

Previous wording

At the end of the first quarter of 2025, Total ARRdecreased 3% as compared to the first quarter of 2024. At the end of the first quarter of 2025, Public Cloud ARR increased 15% as compared to the first quarter of 2024, including a 1% negative impact from foreign currency fluctuations. Public Cloud ARR growth in the first quarter of 2025 was primarily driven by greater market awareness and customer demand of Teradata VantageCloud, our Public Cloud offering. The decreases in subscription ARR and maintenance and software upgrade rights ARR were primarily driven by customer migrations to Public Cloud ARR, on-premises erosions, elongated deal closing cycles and lower on-premises expansion activity.

Current wording

At the end of the second quarter of 2025, Total ARRincreased 2% as compared to the second quarter of 2024. At the end of the second quarter of 2025, Public Cloud ARR increased 17% as compared to the second quarter of 2024, including a 2% positive impact from foreign currency fluctuations. Public Cloud ARR growth in the second quarter of 2025 was primarily driven by customer demand of Teradata VantageCloud, our Public Cloud offering. The decreases in subscription ARR and maintenance and software upgrade rights ARR were primarily driven by customer migrations to Public Cloud ARR, on-premises erosions, and some elongated deal closing cycles.

Previous wording

In the first quarter of 2025, we experienced the following trends:

Current wording

In the second quarter of 2025, we experienced the following trends:

Previous wording

As a portion of the Company’s operations and revenue occur outside the United States, and in currencies other than the U.S. dollar, the Company is exposed to fluctuations in foreign currency exchange rates. Based on currency rates as of March 31, 2025, Teradata is now estimating a flat-to-0.50% nega tive impact from currency translation on our 2025 full-year total reported revenues.

Current wording

As a portion of the Company’s operations and revenue occur outside the United States, and in currencies other than the United States ("U.S.") dollar, the Company is exposed to fluctuations in foreign currency exchange rates. Based on currency rates as of July 31, 2025, Teradata is now estimating a (0.25)-to-0.25% impact from currency translation on our 2025 full-year total reported revenues.

Previous wording

We expect to see continued elongated deal closing cycles continue and that cloud migration activity with some customer accounts will continue to be implemented on a staged basis over time. We expect expansion and migration activity as the primary contributors for Public Cloud ARR growth in 2025.

Current wording

We expect to see continued elongated deal closing cycles and that cloud migration activity with some customer accounts will continue to be implemented on a staged basis over time. We expect expansion and migration activity as the primary contributors for Public Cloud ARR growth in 2025.

Previous wording

Consulting services gross profit as a percentage of revenue decreased as compared to the prior year primarily due to the decrease in revenue as compared to the prior-year period.

Current wording

Consulting services gross profit as a percentage of revenue decreased as compared to the prior year primarily due to thedecreasein revenue as compared to the prior-year period.

Previous wording

Selling, general and administrative ("SG&A") expense decreased year over year due to continued cost discipline focused on cost reductions across the Company, including as part of our Restructuring, as well as lower stock-based compensation expense. Research and development ("R&D") expense decreased year over year also due to continued cost discipline efforts.

Current wording

Selling, general and administrative ("SG&A") expense increased year over year due to the impact of severance charges in the current year andhigher stock-based compensation expense partially offset by continued cost discipline focused on cost reductions across the Company. Research and development ("R&D") expense increased year over year due to additional investments in Public Cloud and AI-related technology opportunities.

Previous wording

Other expense, net in the first quarter of 2025 and 2024 is comprised primarily of interest expense on long-term debt and finance leases, losses resulting from foreign currency transactions, as well as benefit costs on our pension and postemployment plans, partially offsetby interest income earned on our cash and cash equivalents. Other expense is lower in 2025 primarily due to decreased foreign currency losses of $9 million as compared to the prior period.

Current wording

Other expense, net in the second quarter of 2025 and 2024 is comprised primarily of interest expense on long-term debt and finance leases, losses resulting from foreign currency transactions, as well as benefit costs on our pension and postemployment plans, partially offsetby interest income earned on our cash and cash equivalents. Other expense isflat year over year as decreased inte rest expense and other items were offset by foreign currency losses of $2 million as compared to the prior period.

Previous wording

For the three months ended March 31, 2024, the Company recorded $1 million of net discrete tax benefit, a majority of which related to additional tax expense from stock-based compensation vesting.

Current wording

For both the three months ended June 30, 2025, and June 30, 2024, the Company recorded$1 million of net discrete tax expense, a majority of which related to additional tax expense from stock-based compensation vestings.

Previous wording

Effective on January 1, 2022, the U.S. tax law changed to require that R&D expenses be capitalized and amortized for tax purposes under Internal Revenue Code Section 174. This requirement has an impact on global intangible low-taxed income ("GILTI") tax. We are currently forecasting approximately $2 million of tax expense related to GILTI in our marginal effective tax rate for 2025.

Current wording

Effective on January 1, 2022, the U.S. tax law changed to require that R&D expenses be capitalized and amortized for tax purposes under Internal Revenue Code Section 174. This requirement has an impact on global intangible low-taxed income ("GILTI") tax. We are currently forecasting approximately$2 million of tax expense related to GILTI in our marginal effective tax rate for 2025.

Previous wording

We estimate that the full-year effective tax rate for 2025 will be approximately 28.4%, which takes into consideration, among other things, the forecasted earnings mix by jurisdiction, the estimated impact to GILTI tax (including the requirement to capitalize R&D for tax purposes), and the estimated discrete items to be recognized in 2025. The forecasted tax rate is based on the foreign profits being taxed at an overall effective tax rate of approximately 24%, as compared to the U.S. federal statutory tax rate of 21%.

Current wording

We estimate that the full-year effective tax rate for 2025 will be approximately 27.5%, which takes into consideration, among other things, the forecasted earnings mix by jurisdiction, the estimated impact to GILTI tax (including the requirement to capitalize R&D for tax purposes), and the estimated discrete items to be recognized in 2025. The forecasted tax rate is based on the foreign profits being taxed at an overall effective tax rate of approximately 20%, as compared to the U.S. federal statutory tax rateof 21%.

Previous wording

The increase in perpetual software licenses, hardware and other gross profit as a percentage of revenue was primarily driven by deal mix and the timing of revenue.

Current wording

The increase in perpetual software licenses, hardware and other gross profit as a percentage of revenue was primarily driven by deal mix as compared to the prior year.

Previous wording

For the three months ended March 31, 2025, the Company recorded $1 million of net discrete tax benefit, a majority of which related to tax benefits from uncertain tax position reversals due to the Company's completion of its IRS audit related to its 2020 federal tax return, which was largely offset by incremental tax expense from stock-based compensation vesting. The Company received a final no change audit ruling from the Congressional Joint Committee on Tax in early February of 2025.

Current wording

For the six months ended June 30, 2025, the Company had no material net discrete tax adjustment as the discrete tax benefit recognized in the first quarter of 2025 related to the reversal of uncertain tax positions due to the Company's completion of the IRS audit of its 2020 tax return, which was offset by incremental tax expense from stock-based compensation vesting.

Previous wording

Cash provided by operating activities was$8 million, which decreased by$19 million in the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The decrease in cash provided by operating activities was primarily dueto working capital dynamics and the volume and timing of billings. Teradata used approximately $5 million of cash in the first three months of 2025 for reorganizing and transforming its operations and go-to-market functions to align to its strategy, as compared to $13 million in the first three months of 2024. Teradata expects that approximately $30 to $35 million in cash will be used during 2025 in connection with the implementation of the Restructuring discussed in Note 13 of Notes to Condensed Consolidated Financial Statements (Unaudited).

Current wording

Cash provided by operating activities was$51 million, which decreased by $19 million in the six months ended June 30, 2025 compared to the six months ended June 30, 2024. Thedecreasein cash provided by operating activities was primarily dueto working capital dynamics and the volume and timing of billings. Teradata used approximately $11 million of cash in the first six months of 2025 for severance payments, as compared to $18 million in the first six months of 2024. Teradata expects that approximately $30 to $35 million in cash will be used during 2025 in connection with the implementation of the Restructuring discussed in Note 13 of Notes to Condensed Consolidated Financial Statements (Unaudited).

Previous wording

Financing activities and certain other investing activities, are not included in our calculation of free cash flow. As disclosed in Note 5 of Notes to Condensed Consolidated Financial Statements (Unaudited), during the three months ended March 31, 2024, we entered into a Blue Chip Swap transaction in order to remit cash from our Argentine operations that resulted in a pre-tax loss on investment of $2 million that was reported as an investing activity for cash flow purposes. There were no other material other investing activities for the three months ended March 31, 2025.

Current wording

Financing activities and certain other investing activities, are not included in our calculation of free cash flow. As disclosed in Note 5 of Notes to Condensed Consolidated Financial Statements (Unaudited), during the six months ended June 30, 2024, we entered into Blue Chip Swap transactions in order to remit cash from our Argentine operations that resulted in a pre-tax loss on investment of $3 million that was reported as an investing activity for cash flow purposes. There were no other material other investing activities for the six months ended June 30, 2025.

Previous wording

Teradata’s financing activities for the three months ended March 31, 2025 and 2024 primarily consisted of cash outflows for share repurchases and payments on our finance leases. At March 31, 2025, we had no outstanding borrowings on our $400 million Revolving Facility (as defined below).

Current wording

Teradata’s financing activities for the six months ended June 30, 2025 and 2024 primarily consisted of cash outflows for share repurchases and payments on our finance leases. At June 30, 2025, we had no outstanding borrowings on our $400 million Revolving Facility (as defined below).

Previous wording

•Our open market share repurchase program provides for the repurchase of Teradata stock periodically on an ongoing basis in open market transactions, through 10b5-1 programs, through accelerated share repurchase programs, in privately negotiated transactions, or through the use of derivative instruments, in accordance with applicable securities rules regarding issuer repurchases. The open market share repurchase program will expire on December 31, 2025. On November 1, 2021, our Board of Directors authorized an additional $1 billion for share repurchases under the open market share repurchase program. There is a total authority of $313 million remaining under the open market share repurchase program as of March 31, 2025.

Current wording

•Our open market share repurchase program provides for the repurchase of Teradata stock periodically on an ongoing basis in open market transactions, through 10b5-1 programs, through accelerated share repurchase programs, in privately negotiated transactions, or through the use of derivative instruments, in accordance with applicable securities rules regarding issuer repurchases. The open market share repurchase program will expire on December 31, 2025. On November 1, 2021, our Board of Directors authorized an additional $1 billion for share repurchases under the open market share repurchase program. There is a total authority of $285 million remaining under the open market share repurchase program as of June 30, 2025.

Previous wording

In the aggregate under the dilution offset share repurchase program and the open market share repurchase program, we repurchased approximately 1.6 million shares of common stock at an average price per share of$27.92 in the three months ended March 31, 2025.

Current wording

In the aggregate under the dilution offset share repurchase program and the open market share repurchase program, we repurchased approximately 2.9 million shares of common stock at an average price per share of$25.12 in the six months ended June 30, 2025.

Previous wording

Other financing activities, including net share settlement for the payroll tax liability of section 16 officers (as discussed in Item 2. Unregistered Sales of Equity Securities and Use of Proceeds), offset by proceeds from the ESPP and the exercise of stock options, net of tax was a net outflow of $2 million for the three months ended March 31, 2025 and a net outflow of $6 million for the three months ended March 31, 2024. The ESPP proceeds are included in other financing activities, net in the Condensed Consolidated Statements of Cash Flows (Unaudited).

Current wording

Other financing activities, including net share settlement for the payroll tax liability of section 16 officers (as discussed in Item 2. Unregistered Sales of Equity Securities and Use of Proceeds), offset by proceeds from the ESPP and the exercise of stock options, net of tax was a net outflow of $2 million for the six months ended June 30, 2025 and a net outflow of$6 million for the six months ended June 30, 2024. The ESPP proceeds are included in other financing activities, net in the Condensed Consolidated Statements of Cash Flows (Unaudited).

Previous wording

Our total cash and cash equivalents held outside the United States in various foreign subsidiaries was$330 million as of March 31, 2025 and$350 million as of December 31, 2024. The remaining balance held in the United States ("U.S.") was $38 million as of March 31, 2025 and$70 million as of December 31, 2024. The Company expects that a majority of its foreign earnings will be repatriated to the U.S. Effective January 1, 2018, the U.S. moved to a territorial system of international taxation, and as such will generally not subject future foreign earnings to U.S. taxation upon repatriation in future years.

Current wording

Our total cash and cash equivalents held outside the United States in various foreign subsidiaries was$326 million as of June 30, 2025 and$350 million as of December 31, 2024. The remaining balance held in the U.S. was $43 million as of June 30, 2025 and$70 million as of December 31, 2024. The Company expects that a majority of its foreign earnings will be repatriated to the U.S. Effective January 1, 2018, the U.S. moved to a territorial system of international taxation, and as such will generally not subject future foreign earnings to U.S. taxation upon repatriation in future years.

Previous wording

Long-term Debt. On June 28, 2022, we entered into a Credit Agreement that provides for (i) a five-year unsecured term loan in an aggregate principal amount of $500 million (the "Term Loan"), and (ii) a five-year unsecured revolving credit facility in an aggregate principal amount of up to $400 million, including a $50 million sublimit for the issuance of standby letters of credit and a $50 million sublimit for swingline loans (the "Revolving Facility" and, collectively with the Term Loan, the "Credit Facility"). Our long-term debt is discussed in Note 10 of Notes to Condensed Consolidated Financial Statements (Unaudited). In addition, as disclosed in Note 7 of Notes to Condensed Consolidated Financial Statements (Unaudited), Teradata entered into an interest rate swap to hedge approximately 90% (or$433 million as of March 31, 2025) of the floating interest rate of the outstanding principal of the $500 million Term Loan and a cross currency swap to hedge a portion of Euro currency exposure of its net investment in certain foreign subsidiaries. As of March 31, 2025, the Company hadno borrowings outstanding under the Revolving Facility, leaving$400 million in borrowing capacity available under the Revolving Facility and the Term Loan principal outstanding was$475 million.

Current wording

Long-term Debt. On June 28, 2022, we entered into a Credit Agreement that provides for (i) a five-year unsecured term loan in an aggregate principal amount of $500 million (the "Term Loan"), and (ii) a five-year unsecured revolving credit facility in an aggregate principal amount of up to $400 million, including a $50 million sublimit for the issuance of standby letters of credit and a $50 million sublimit for swingline loans (the "Revolving Facility" and, collectively with the Term Loan, the "Credit Facility"). Our long-term debt is discussed in Note 10 of Notes to Condensed Consolidated Financial Statements (Unaudited). In addition, as disclosed in Note 7 of Notes to Condensed Consolidated Financial Statements (Unaudited), Teradata entered into an interest rate swap to hedge approximately 90% (or$428 million as of June 30, 2025) of the floating interest rate of the outstanding principal of the $500 million Term Loan and a cross currency swap to hedge a portion of Euro currency exposure of its net investment in certain foreign subsidiaries. As of June 30, 2025, the Company hadno borrowings outstanding under the Revolving Facility, leaving$400 million in borrowing capacity available under the Revolving Facility and the Term Loan principal outstanding was$469 million.

Previous wording

In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require significant management judgment in its application. There are also areas in which management’s judgment in selecting among available alternatives would not produce a materially different result. The significant accounting policies and estimates that we believe are the most critical to aid in fully understanding and evaluating our reported financial results are discussed in the 2024 Annual Report. Teradata’s senior management has reviewed these critical accounting policies and related disclosures and determined that there were no significant changes in our critical accounting policies in the three months ended March 31, 2025.

Current wording

In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require significant management judgment in its application. There are also areas in which management’s judgment in selecting among available alternatives would not produce a materially different result. The significant accounting policies and estimates that we believe are the most critical to aid in fully understanding and evaluating our reported financial results are discussed in the 2024 Annual Report. Teradata’s senior management has reviewed these critical accounting policies and related disclosures and determined that there were no significant changes in our critical accounting policies in the six months ended June 30, 2025.