Teradata (TDC) Q2 2024 earnings summary

Executive summary

• Public cloud ARR reached $542M in Q2 2024, up 31% as reported and 32% in constant currency year-over-year, now representing 37% of total ARR.

• Total ARR declined 4% year-over-year to $1.465B, impacted by on-prem erosion and elongated customer decision cycles.

• Q2 non-GAAP diluted EPS was $0.64, up from $0.48 in Q2 2023; GAAP diluted EPS was $0.38, up from $0.17.

• Free cash flow for Q2 2024 was $39M, down from $46M in Q2 2023.

• Announced global restructuring with a 9%-10% workforce reduction to optimize operations and drive efficiencies.

Financial highlights

• Total revenue for Q2 2024 was $436M, down 6% as reported and 3% in constant currency; recurring revenue was $368M, down 1% as reported but up 2% in constant currency.

• Non-GAAP operating margin was 22% in Q2 2024; GAAP operating margin improved to 15.1%, up 800 bps year-over-year.

• Non-GAAP gross margin for recurring revenue was 73%; total non-GAAP gross margin was 62.2%.

• Cash and cash equivalents at June 30, 2024: $301M; net cash (debt) position was $(301)M, with $492M in total debt.

• Repurchased $47M in shares in Q2 2024; committed to returning at least 75% of free cash flow to shareholders.

Outlook and guidance

• FY 2024 public cloud ARR growth projected at 28%-32% year-over-year in constant currency.

• FY 2024 total ARR expected to decline 2%-4% year-over-year in constant currency; total revenue and recurring revenue both expected to be flat to down 2%-4%.

• FY 2024 non-GAAP diluted EPS guidance is $2.20-$2.26; free cash flow guidance is $270M-$290M.

• Q3 2024 non-GAAP diluted EPS expected between $0.54 and $0.58; Q3 2024 GAAP diluted EPS expected between $0.14 and $0.18.

• Q4 2024 expected to be the strongest quarter, delivering 60%+ of annual cloud growth.