Prepared Remarks(opens in new window)

Teradata Fiscal Q3 2021 - Earnings Remarks

November 4, 2021

Chris Lee, SVP of Investor Relations, Teradata

Good afternoon, and welcome to Teradata's 2021 third-quarter earnings call.

Steve McMillan, Teradata's President and Chief Executive Officer will lead our call today, followed by Claire Bramley, Teradata's Chief Financial Officer, who will discuss our financial results and our 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 September 30, 2021 that is expected to be filed with the

SEC tomorrow or in the next few days.

These forward-looking statements are made as of today, and we undertake no duty or obligation to update our forward-looking statements.

On today's call, we will be discussing certain non-GAAP financial measures which exclude such items as 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 and constant currency revenue comparisons.

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.teradata.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 …

1

Steve McMillan, President and CEO, Teradata

Thanks Chris. Good afternoon, everyone. Thank you for joining us today. At our Investor Day, we provided some fresh insights into our strategic direction, differentiated product and value proposition, and our financial model. We have continued our transformation journey, executing our strategy as a cloud- first, profitable growth company.

In Q3, we met expectations for revenue once again. Importantly, our recurring revenue, as a percentage of total revenue, increased approximately five percentage points versus last year and is now approaching 80%. This is meaningful because recurring revenue provides for predictable and durable streams of cash flow. In addition, both GAAP and Non-GAAP EPS were above expectations. Claire will address our financial metrics and outlook in more detail.

In the third quarter, our public cloud ARR was $148 million. This was a substantial 83% growth rate over Q3 of 2020. We had a handful of large deals slip out of the last day of Q3 into the fourth quarter, related to customer timing.

We have already completed transactions that more than cover the seven million dollars that we expected in Q3. We have closed most and are confident we will close all of these transactions in the fourth quarter.

We continue to build upon our execution engine which delivered more cloud deals in Q3 than in any other quarter. Looking ahead to the fourth quarter, our pipeline is robust…and we are working on bigger cloud deals.

Looking at Q3 in more depth, we had numerous proof points that our strategy is solid, we are executing, and are making progress within our target market of leading enterprise accounts.

• Q3 was our highest quarter yet for new cloud customers. We added 10s of new large enterprise accounts across all of our regions. We are determined to keep up the pace in winning new logos - in the cloud and on-prem. Our dedicated new logo sales teams are coming on board, ramping up, and are already starting to win.
• We are guiding the world's largest companies … often with extreme scale and complexity in their data environments … to smoothly migrate to the cloud. These global enterprises depend on their mission critical Teradata platform every single day to help them extract the greatest value from their enterprise analytics.
• As many of our large enterprise customers are transitioning to the cloud for the first time, managing through these types of transactions can take some time - requiring planning and coordination with multiple stakeholders across numerous functions. And migrating to the cloud requires careful consideration of the interconnectivity of all aspects of the customer's on prem analytic ecosystem.
• Customers are recognizing that Teradata, with our connected multi-cloud data platform for enterprise analytics, is the best solution to overcome these challenges and they are increasingly migrating to the cloud with Teradata Vantage. In the quarter, healthcare, transportation, and government led the pack in terms of our target verticals.

Just one recent example of a seamless migration to the cloud is American Airlines. A Teradata on-prem customer for more than 14 years, American just migrated its massive Teradata EDW to Teradata on Azure. Our collective team of employees from Teradata and American executed very efficiently for a

2

highly successful migration. The airline's Teradata platform provides virtually every department access to analytic and reporting capability, and supports thousands of users for many business initiatives, including Revenue Management, Network Planning, Technical Operations, Cargo, and Marketing. The migration is part of the airline's strategy to provide greater agility, speed to market and frictionless scalability to its business community. We have been told that its business users are extremely pleased with the speed and performance of the Vantage platform in Azure.

Cloud growth remains front and center for us. The move to cloud is a clear direction and often a mandate for many organizations … it's an issue of when, not if.

We are pleased that each of our regions saw growth in cloud customers in the quarter. Additionally, we are seeing that once customers start in the cloud, they grow with Teradata. Our quarterly trend of healthy net expansion rates in the cloud continues to be greater than 130%, as customers add more use cases, more data and workloads, and more users to their Teradata multi-cloud data platform.

Here's a handful of examples where we are competing and winning in the market.

• The ANZ Banking Group, is migrating its Teradata enterprise data platform to Vantage on Google Cloud. This multi-national financial services company has been a Teradata customer for more than two decades. Its Teradata platform is core to its critical business applications, supporting more than 2,000 users for many different business initiatives, including regulatory reporting, customer analytics, product profitability and responsible lending. The migration is part of the bank's broader cloud mandate. Here, we are partnering with a leading global SI on the customer's migration to the cloud.
• A leading global oilfield services company is deploying Vantage on Azure to support sensor data management and advanced analytics. This new Teradata customer is committed to continual innovation using technology to improve safety, productivity, and quality of life in the oil and gas industry. This transaction is one of the large deals from Q3 that fell just over line and closed on day 1 of Q4.
• BNSF, one of the largest freight transportation companies in North America, is migrating its Teradata data platform to Vantage on Azure Cloud as part of a long-term plan to have the majority of its analytic ecosystem in the cloud. Here, we won against cloud-native competition, and Teradata will provide analytics and reporting for finance, operations, and marketing. Teradata consulting will be leading the migration effort with support from our partner, Microsoft. As part of this effort, Teradata will be integrated into a hybrid analytic environment with both IBM mainframe and Microsoft Azure components.
• Another airline, one of the world's largest and most admired, is migrating its long-standing Teradata environment to Vantage on AWS as a service. The company's modernization efforts include increasing analytics for HR, Finance, Loyalty and Customer Care, and will leverage both Teradata and AWS services, as well as solutions from advanced analytics vendors. The ability to leverage NOS Read/Write capabilities to utilize AWS S3 data and make it available for richer analytics was an important factor in migrating Vantage to the AWS cloud. The customer considered cloud-native competition before selecting Vantage on AWS. Accenture was a supportive partner during the evaluation and leading the migration process.
• Unidia, a leading tech equipment manufacturer based in Korea is a new cloud customer, choosing Vantage on Azure as its cloud data and analytics platform. The Vantage on Azure environment will be used for development work, POCs with customers, demos and applications testing.

3

Our purpose - transforming how businesses work and people live through the power of data - has never been more relevant and we are successfully supporting customers in building and driving meaningful business value in their analytic environments, whether multi- cloud, cloud only, on prem, or a hybrid combination of any or all.

To keep Teradata's differentiated market-leading position, we continuously develop and evolve our technology, and Q3 was no different. In the quarter, we advanced our innovations on multiple fronts.

• We released a significant enhancement to Vantage, adding 30 new in-database functions that enable customers to use partner tools of their choice to leverage the power of in-database analytics delivering performance at enterprise scale.
• We introduced Vantage Streams in the cloud, providing near real-time data leveraging native object stores -- AWS S3, Azure Blob, and Google Cloud Storage -- to help accelerate new business outcomes. Customers can now stream IoT data, stock data, weather or web site click stream data to deliver new analytic use cases. This is exactly what is needed by our target market. In a recent research study by independent research firm, Vanson Bourne, 87% of IT decision makers felt that they must leverage these emerging technologies to remain competitive.
• We also delivered an update to our "Bring Your Own Model" capabilities that allows customers to bring their own analytic models built with third-party tools and languages into Vantage to run enterprise analytics at scale.
• And, in keeping with our focus on customer and market drivers, we brought enhancements to our Communications data model with full support of 5G network activity, including Intelligent Network Optimization.

We are furthering the transformation in our Go-to-Market organization to execute with greater agility and help us accelerate the move to the cloud … and build an increasingly strong partner ecosystem as well. These actions are designed to drive results for Teradata and an exceptional customer experience.

We know that when our customers succeed, we succeed. We are investing to drive faster cloud execution to help our customers maximize the value of their data and get optimal results from their Teradata environment in the cloud.

• We are deploying senior cloud specialist sellers and cloud specialist architect teams in each region to progress and execute more quickly to close cloud deals.
• We are doubling down on building mutually beneficial partnerships to drive scale and strengthen capabilities … and have added senior cloud expertise to our global partner organization.

Strong partnerships create a flywheel effect in accelerating successes in the cloud and in data analytics. Here's a few new partnerships that will help propel us forward.

Today, we announced a Strategic Collaboration Agreement with AWS. We are both committed to increase product integrations and development with AWS cloud services, and launch joint programs to help customers migrate, modernize, and de-risk their cloud adoption journey with Vantage on AWS. With this exciting announcement, we are working together to make it simple to use Vantage on AWS across the broad array of AWS services, at enterprise scale. We are very excited about this strategic

4

collaboration that will make it even easier for customers to get the most value from their enterprise analytics at scale in the cloud, helping us both accelerate growth.

In the important and growing AI arena, we recently announced a strategic partnership with H2O AI, and the integration of H2O AI's Hybrid Cloud platform with Vantage. This integration enables our joint customers to quickly and easily build and deploy AI solutions that inform new insights from machine learning …and drive more meaningful business outcomes.

We are also pleased to be deepening our partnership with Accenture. Together, we are building a Global Vantage Cloud Data Migration Factory to enable joint customers to easily migrate to Teradata Vantage in the cloud. The powerful combination of Accenture's recognized global capabilities and our unparalleled ability to harness data at scale will help drive smooth transitions to the cloud for our joint customers.

I am seeing the team operate with a stronger sense of urgency, accountability, and enthusiasm, and I am pleased that we are progressing in our go to market organization and across the company. We are resolute in executing our growth strategy.

Looking ahead …

Q4 is traditionally our largest quarter for ARR growth. We have a robust pipeline for the quarter, and we are seeing trends of more cloud deals and larger cloud deals - some in the seven and eight-digit range. Given these dynamics, you can be certain that the entire team will be focused and dedicated to closely managing the business - especially with the planning and coordination associated with closing some of these large transactions.

We believe our cloud business will be approximately $200M by the end of the year. We have paths to grow more than 100% year on year; however, given the timing we experienced in Q3, we believe it is prudent to lower our Cloud ARR growth outlook from 100% year over year to approximately 90% year over year. We remain pleased with this very strong annualized growth rate in our cloud business … a substantial cloud business that is based on a competitive product and differentiated position in a large and growing market.

At our Investor Day in September, I stated that Teradata is a profitable growth company in a large and growing market with the

• right technology…
• right strategy, and
• the right people.

That remains true today -- and we remain incredibly dedicated to adding new customers, growing and expanding existing ones, and providing an outstanding customer experience with our connected multi- cloud data platform for enterprise analytics. Our focus is clearly on executing to keep winning and delivering shareholder value. This confidence is reflected in the new $1 billion repurchase authorization that we announced today and our strong commitment to returning capital to shareholders via share repurchase.

Now, I'll pass the call over to Claire for additional insights.

5