Teradata(TDC) - 2025 Q1 - Quarterly Report

PART I—FINANCIAL INFORMATION Item 1. Financial Statements This section presents Teradata Corporation's unaudited condensed consolidated financial statements for Q1 2025 and 2024, including income, balance sheets, and cash flows Condensed Consolidated Statements of Income Teradata's Q1 2025 total revenue decreased to $418 million, but net income more than doubled to $44 million due to reduced operating expenses Q1 2025 vs Q1 2024 Income Statement Highlights (in millions, except per share data) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $418 | $465 | -10.1% | | Total Recurring Revenue | $358 | $388 | -7.7% | | Gross Profit | $248 | $284 | -12.7% | | Total Operating Expenses | $182 | $236 | -22.9% | | Income from Operations | $66 | $48 | +37.5% | | Net Income | $44 | $20 | +120.0% | | Diluted EPS | $0.45 | $0.20 | +125.0% | Condensed Consolidated Balance Sheets As of March 31, 2025, Teradata's total assets increased to $1,752 million, liabilities to $1,594 million, and cash decreased to $368 million Balance Sheet Summary (in millions) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $368 | $420 | | Total current assets | $791 | $749 | | Total assets | $1,752 | $1,704 | | Total current liabilities | $946 | $930 | | Long-term debt | $449 | $455 | | Total liabilities | $1,594 | $1,571 | | Total stockholders' equity | $158 | $133 | Condensed Consolidated Statements of Cash Flows Q1 2025 net cash from operations decreased to $8 million, with $68 million used in financing, resulting in a $52 million cash decrease Cash Flow Summary for Three Months Ended March 31 (in millions) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $8 | $27 | | Net cash used in investing activities | $(1) | $(8) | | Net cash used in financing activities | $(68) | $(150) | | Decrease in cash, cash equivalents and restricted cash | $(52) | $(148) | - Financing activities in Q1 2025 included $44 million for repurchases of common stock, compared to $124 million in Q1 2024[14] Notes to Condensed Consolidated Financial Statements This section details financial statement disclosures, including revenue by geography, SAP litigation, and business segment reorganization Revenue by Geography for Three Months Ended March 31 (in millions) | Region | 2025 | 2024 | | :--- | :--- | :--- | | United States | $214 | $248 | | International | $204 | $217 | | Total Revenue | $418 | $465 | - As of March 31, 2025, the company had $1,979 million in remaining unsatisfied performance obligations, with $1,128 million expected to be recognized as revenue in the next year[25] - The company realigned its business into two operating segments: Product Sales and Consulting Services, effective August 5, 2024[61] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q1 2025 financial results, highlighting a 3% decrease in Total ARR to $1,442 million, a 15% increase in Public Cloud ARR, and a 37.5% rise in operating income Key Performance Metrics as of March 31 | Metric | 2025 | 2024 | Change (Reported) | | :--- | :--- | :--- | :--- | | Total ARR | $1,442 million | $1,480 million | -3% | | Public Cloud ARR | $606 million | $525 million | +15% | | Cloud Net Expansion Rate | 115% | 123% | -8 p.p. | - Management attributes the decrease in total revenue to a decline in on-premises business and consulting services, partially offset by strong growth in Public Cloud revenue[76] - Operating expenses decreased by 23% year-over-year, primarily due to cost discipline, prior restructuring actions, and lower stock-based compensation[75][83] - The company is experiencing market trends of elongated deal closing cycles and delayed customer spending due to the uncertain macroeconomic environment[78] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes occurred in market risk factors, such as foreign currency exchange and interest rate risks, from those disclosed in the 2024 Annual Report - There have been no material changes to the market risk factors previously disclosed in the 2024 Annual Report[109] Item 4. Controls and Procedures Management concluded disclosure controls were effective as of March 31, 2025, with a new global cloud ERP system implemented to enhance internal controls - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2025[111] - A new global cloud ERP system was implemented in phases through Q1 2025 to modernize financial processes and enhance internal controls[112] PART II—OTHER INFORMATION Item 1. Legal Proceedings This section details legal proceedings, including ongoing litigation with SAP SE, a putative securities class action, and a shareholder derivative lawsuit - The company is involved in a lawsuit against SAP SE, alleging misappropriation of trade secrets and anticompetitive practices, with a recent Ninth Circuit ruling in Teradata's favor[44] - A putative securities class action lawsuit was filed concerning the company's business and 2023 financial outlook, which the company intends to vigorously defend[45] - A shareholder derivative lawsuit was filed based on similar allegations as the securities class action, with potential financial loss currently not reasonably estimable[46] Item 1A. Risk Factors No material changes occurred in the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K - There have been no material changes to the risk factors previously disclosed in the 2024 Annual Report[116] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In Q1 2025, Teradata repurchased 1.56 million shares for $43.6 million, with $313.4 million remaining for future repurchases Share Repurchases for Q1 2025 | Month | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 2025 | 634,872 | $31.50 | | February 2025 | 514,547 | $27.39 | | March 2025 | 413,828 | $23.09 | | First Quarter Total | 1,563,247 | $27.92 | - As of March 31, 2025, $313.4 million remained authorized for future repurchases under the open market program[118] Item 5. Other Information This section discloses the adoption of Rule 10b5-1 trading plans by Director Timothy C. K. Chou and Chief Legal Officer Margaret A. Treese in Q1 2025 - Director Timothy C. K. Chou adopted a Rule 10b5-1 trading plan on February 21, 2025, to sell up to 6,216 shares[121] - Chief Legal Officer Margaret A. Treese adopted a Rule 10b5-1 trading plan on February 28, 2025, to sell up to 37,104 shares[121] Item 6. Exhibits This section lists exhibits filed with Form 10-Q, including governance documents, compensatory agreements, executive offer letters, and SOX certifications - Exhibits filed include new forms of performance-based restricted share unit agreements and offer letters for executives Charles Smotherman and Mike Hutchinson[123] - Certifications from the CEO and CFO pursuant to Sarbanes-Oxley Act Sections 302 and 906 are included as exhibits[123]