Good afternoon. My name is Matt, and I will be your conference operator today. At this time, I would like to welcome everyone to the Teradata Second Quarter 2024 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star followed by the number two. Thank you. I would like to hand the conference over to your host today, Chad Bennett, Senior Vice President of Investor Relations and Corporate Development. You may begin your conference. Good afternoon and welcome to Teradata's 2024 second 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 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 our SEC filings, including our most recent Form 10-K and in the Form 10-Q for the quarter ended June 30th, 2024, that is expected to be filed with the SEC within the next few days. These forward-looking statements are made as of today, and we undertake no duty or obligation to update them. On today's call, we will be discussing certain non-GAAP financial measures, which exclude such items as stock-based compensation expense, other special items described in our earnings release. We will also discuss other non-GAAP items such as free cash flow, constant currency comparisons, and 2024 revenue and ARR growth outlook in constant currency. Unless stated otherwise, all numbers and results discussed in today's call are on a non-GAAP basis. 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. Now I will turn the call over to Steve. Thanks, everyone, for joining us today. As we get started, I'd like to welcome Chad Bennett to the Teradata team. Chad joined us after years of covering software and SaaS companies at Craig-Hallum Capital. We're excited to have Chad adding his expertise to Teradata and keeping you up to date on our company. Our Q2 results demonstrate our ongoing strong performance in cloud, with cloud ARR growth of 32% in constant currency. This reflects the increasing interest in our differentiated hybrid cloud capabilities. Also, when customers choose Teradata in the cloud, they are expanding with us as they see the value. Our cloud net expansion rate remains strong at 123%, and we have doubled the number of eight-figure cloud ARR customers year-over-year. Despite the cloud ARR growth, total ARR declined by 3% year-over-year. Additionally, we generated non-GAAP earnings per share of $0.64 and delivered $39 million of free cash flow. Looking at our results overall, our performance continues to be challenged by the industry microenvironment and longer customer decision cycles. We fully recognize we need to improve our execution. We have undergone a comprehensive review and are taking actions to improve our results, including bringing an increased focus on cost reduction. This has led to a reset of our financial outlook for the rest of this year and into 2025. Let's start with actions in our go-to-market organization. Last quarter, I introduced Rich Petley, our new Chief Revenue Officer. Rich has worked with speed and has brought new management discipline to the global team, building upon the results he generated from EMEA, which meaningfully outperformed the other regions during his tenure. The sales function has been realigned to drive increased effectiveness, leverage best practices that resonate globally, while also creating structural and cost efficiencies. In the pipeline review, we are encouraged about the large deal opportunities for the second half of 2024. Our pipeline of large eight-figure ARR deals has also increased to 3x what it was in Q2 of last year. In our new logo pipeline, we continue to see momentum. In the second half, we anticipate ARR for new logos doubling over the prior year. However, we continue to see longer decision-making cycles, and we believe this is consistent with what others are experiencing in the industry. As I've noted in prior calls, with the strategic nature of our analytics, we are seeing more decision-makers involved in deals and from across multiple business units. This compound decision environment moves Teradata beyond IT and affords us the opportunity to help more departments understand what is possible with our hybrid cloud platform and best-in-class analytics. Yet it does lengthen deal cycles. We expect deal elongation to continue. Just one example, in Q2, we closed the eight-figure transaction that slipped out of Q4 2023. Following our thorough review of the business, with the additional discipline and rigor applied from the realigned go-to-market organization, we have decided to reduce our outlook. A revised outlook reflects the uncertain macro environment, our additional scrutiny of the pipeline, and as well, it accounts for the risks we see with longer deal cycles and less on-prem expansions. As we move ahead, we are addressing vectors that we believe will accelerate growth and deliver increased value for customers. We're taking proactive measures to reduce operating expenses across all aspects of the business. We're focusing on reducing expenses in non-revenue-generating areas, including a reduction in headcount of approximately 9%-10%. We remain committed to protecting earnings and free cash flow, and we will continue to invest in areas where we can accelerate revenue growth. Claire will cover the revised outlook and our financial results in more detail. As we look ahead, we remain confident in our opportunity. With AI and GenAI as catalysts for innovation in all industries, Teradata has been trusted by leading companies for years to provide secure, trusted, and well-governed data. The enterprise of the future will be built on trusted data and trusted AI, ensuring that accountability, transparency, and oversight every business needs to empower faster decision-making, improve their customers' experience, and continuously create value. Our expertise and technology are what the market needs now. We've surveyed a broad range of C-suite executives and AI decision-makers, and an area where they are looking for support is in successfully navigating new AI initiatives. We're confident that our hybrid cloud platform is ideal to help companies align their AI goals to the business strategy and help them lead in their industries with trusted data and trusted AI. In Q2, we advanced our open and connected approach that is designed to allow enterprises to employ modern data strategies and deliver value from trusted AI at scale. Furthering our innovations, we unveiled Teradata VantageCloud Lake on Google Cloud. Together, we are combining the advanced data and analytics capabilities of VantageCloud Lake with the scalability and flexibility of Google Cloud. This launch is expected to enable enterprises that rely on Google Cloud to efficiently scale their AI initiatives and power new generative AI use cases. One of our first customers for this Lake offering is Oi S.A., a leading Brazilian telephone operator. It will leverage VantageCloud Lake on Google Cloud for revenue assurance. With this release, our powerful data lake solution is now on all three major CSP platforms: Amazon Web Services, Google Cloud, and Microsoft Azure. Teradata will continue to innovate on our open and connected ecosystem by embracing open table formats, with first-party support for Apache Iceberg and Delta Lake, driving new analytic workloads and enabling broader AI access to data. Our open table format support is designed to enable customers to both access and store data in an open and standard way that's easily shared across different analytic engines and tools. This allows us to capture more compute power and provide more comprehensive analytics solutions to our customers, solidifying our position as a leader in data and analytics. In the quarter, we also announced that Teradata AI Unlimited, our first on-demand AI/ML engine in the cloud, is integrated into Microsoft Fabric and OneLake, Fabric's unified multi-cloud data lake. Teradata AI Unlimited in Microsoft Fabric can extend user freedom to innovate with frictionless on-demand access to ClearScape Analytics. It is designed to enable developers, data scientists, and engineers to maximize their performance by providing access to vast amounts of data and unlimited flexibility to explore, create, and experiment. They can seamlessly explore data, conduct experiments, and operationalize AI use cases without risk to mission-critical production environments. For example, a data scientist might use AI Unlimited to experiment with advanced geospatial functions to address route delivery and improve the supply chain. Alternatively, an analyst might explore innovative churn models using AI Unlimited's advanced analysis capabilities, coupled with Fabric-native data and business intelligence tools. Multiple life science companies could even collaborate together on disease research, leveraging gradient-boosting capabilities of AI Unlimited against data sets in Fabric OneLake. The opportunities are exciting, both for our customers and for us. AI Unlimited is now in public preview in both AWS and Microsoft marketplaces. Now I will share a few more examples of wins from the quarter. A U.S.-based multinational healthcare company is expanding its Teradata hybrid ecosystem to include VantageCloud Lake on AWS. This is expected to accelerate the development of healthcare innovation and new services to improve customer health outcomes and healthcare affordability. As this long-standing cloud customer is expanding, it becomes one of our top five cloud accounts. We're also pleased that Teradata is now the official cloud analytics partner of the L.A. Clippers and the Intuit Dome, the Clippers' new home. In this new logo win, the team and arena will leverage VantageCloud Lake with its AI technologies among the suite of services provided. In addition, Joyo Bank in Japan will leverage VantageCloud on Azure as its analytics and data platform for digital transformation, integrating customer and marketing data and using advanced analytics such as AI to maximize its value to customers. As customers select Teradata, we were recognized by Gartner as a Customers' Choice for Cloud DBMS and its Peer Insights Voice of the Customer report. Teradata was one of only five vendors leading the way as a Customers' C hoice. This Voice of the Customer report evaluates companies based on verified users' experiences in implementing and operating cloud solutions. Along with our advances in our technology and with customers, we made strides with partnerships in the quarter. We announced that we are bringing open-source support for trusted AI innovation in partnership with Anaconda. The integration of ClearScape Analytics and Anaconda's Python and R packages is expected to help enterprises deploy large-scale data science, AI/ML, and GenAI use cases. We also recently announced new integration of DataRobot's AI platform with ClearScape Analytics and VantageCloud. This integration provides enterprises the ability to import and operationalize DataRobot's AI models at scale inside our platform. This functionality is available through ClearScape Analytics Bring Your Own Model capability and is designed to enable customers to unlock data and results faster and accelerate AI innovation. Also in the quarter, we expanded our strategic collaboration agreement with AWS to help customers accelerate modernizing their data analytics ecosystems, further support them as they migrate to the cloud, and maximize the value of AI opportunities with improved data-driven insights. As a handoff to Claire, we're taking actions and are committed to executing. We remain confident in delivering solid cloud growth and in maintaining our enduring commitment as a trusted partner to our customers. With trusted data and trusted AI rapidly becoming table stakes, our technology is in a sweet spot of opportunity. Our attention will remain on delivering innovations that keep Teradata at the forefront of data and analytics. We are equally dedicated to maintaining our momentum on strong partnerships that drive value for customers, and we remain steadfast in protecting profitability and free cash flow. Now let's pass the call to Claire. Thank you, Steve, and good afternoon, everyone. In the second quarter, cloud ARR growth remained healthy at 32% year-over-year in constant currency, supported by a cloud net expansion rate of 123%. Q2 cloud ARR grew $19 million sequentially in constant currency, and we closed the eight-figure deal that had slipped from 2023. Total ARR declined year-over-year, driven by previously disclosed large on-prem erosions and lower expansion activity. We believe this will be the last quarter of impact from these erosions, and we continue to view the first half of 2024 as an outlier when compared to our forward-looking retention rates. While our pipeline and large-scale activity remain strong, we continue to experience elongated deal cycles driven by higher levels of strategic engagement with our customers. We are seeing expansion activity being pushed out, which leads to an even more pronounced back-end weighting in 2024. To reflect a more prudent stance on timing of large-scale closures and conversion of our pipeline, we are lowering the outlook. As Steve mentioned, we are taking proactive measures to reduce non-revenue-generating costs and improve go-to-market productivity and efficiency. I will quantify these measures later in my remarks. Let me now share more details on our quarterly financial results, starting with revenue. Second quarter recurring revenue was $368 million, down 1% year-over-year as reported and 2% growth year-over-year in constant currency. We saw strong growth in cloud revenue and a small positive impact from upfront revenue, offset by the anticipated on-prem erosions and currency. Net upfront revenue was a positive $5 million. Recurring revenue as a percentage of total revenue was 84%, up from 80% from the prior year period. Second quarter total revenue was $436 million, down 6% year-over-year as reported and down 3% in constant currency. The year-over-year change is primarily due to lower perpetual and consulting revenues. Moving to profitability and free cash flow. We continue to be pleased with our profitability. Total gross margin was 62.2%, up 160 basis points year-over-year, driven by a strong expansion in cloud gross margins and lower perpetual and consulting revenues. Operating margin was 22%, up 640 basis points year-over-year. Non-GAAP diluted earnings per share was $0.64, exceeding the top end of our guidance range. In addition to gross margin strength, we benefited in the quarter from lower operating expenses due to reduced headcount and variable compensation. We generated $39 million of free cash flow in the quarter, which is an $18 million increase sequentially. The year-over-year decline is driven by the linearity of ARR. In the second quarter, we repurchased approximately $47 million, or 1.2 million shares. We remain committed to returning at least 75% of free cash flow to shareholders in the form of share repurchases. Before turning to the outlook, let me cover the cost reduction actions that we are implementing over the next 6-12 months. In total, we anticipate reducing operating expenses by approximately $75-$80 million on an annualized run rate basis. While some of the savings will drop to the bottom line, we also plan to invest a portion of this amount back into revenue-generating growth areas. The total cash impact from associated severance payments is anticipated to be $45-$50 million, of which approximately $30-$35 million is expected to be paid in 2024. We estimate $15-$20 million of Non-GAAP operating profit benefit in 2024 from these cost reductions. Moving to our full year 2024 outlook. As a reminder, our outlook ranges are in constant currency for the ARR and revenue metrics. Our revised full year 2024 outlook is as follows. Total ARR to decline 2%-4%. Cloud ARR growth of 28%-32%. Total revenue to decline 2%-4%. Recurring revenue to be flat to down 2%. Free cash flow of $270 million-$290 million. Non-GAAP earnings per share of $2.20-$2.26. A breakdown of the 700 basis point change to total ARR is as follows. Approximately 100 basis points from churn or erosion activity. Approximately 350 basis points largely from lower expected on-prem expansions. Approximately 250 basis points impact due to deal timing. Regarding the free cash flow revision, the primary drivers are lower billing due to ARR reduction, second-half severance payments, which are partially offset by lower operating expenses. Additional full year outlook assumptions include for currency using the end of June currency rates, we anticipate year-over-year headwinds of approximately 210 basis points on revenue, 125 basis points on total ARR, and 170 basis points on cloud ARR. Weighted average shares outstanding of approximately 98.4 million. Other expense of approximately $50 million. We project a non-GAAP tax rate of approximately 24.5%. Regarding our outlook for the third quarter of 2024, we anticipate non-GAAP diluted earnings per share to be in the range of $0.54-$0.58. We project the non-GAAP tax rate to be approximately 23% and the weighted average shares outstanding of 97.8 million. We expect total ARR to be flat sequentially in Q3. We anticipate sequential acceleration of cloud ARR dollar growth in Q3. We expect the fourth quarter to be the strongest quarter of the year and deliver 60% or more of the annual cloud growth, supported by the strength of our large deal pipeline, which is three times larger than this time last year. With regards to 2025, while we remain confident in the opportunity we have in front of us, given the changes to our 2024 cloud ARR outlook, our 2025 target of $1 billion will push into 2026. We continue to anticipate our cloud ARR growth rate in 2025 will be similar to 2024. The proactive measures we have taken should result in low to mid-single digit year-over-year growth in total ARR, operating margin in the low 20% range, and free cash flow of approximately $320-$370 million. In closing, we continue to see strong growth in our cloud business, both in migrations and expansions. The adjustments to our outlook reflect deals taking longer to close and a more prudent stance on the conversion of our pipeline, which remains strong, and no change in our competitive position. Thank you very much for your time today. Let's please open the call for questions.' At this time, I would like to remind everyone, in order to ask a question, press star and the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. In the interest of giving everyone an opportunity, we appreciate that you limit yourself to one question and one follow-up. First question comes from the line of Eric Woodring with Morgan Stanley. Your line is now open. Great, guys. Thank you so much for taking my question. Steve, maybe I'll start with you. I know your cloud ARR growth forecasts are within that you model 120% net expansion rate. You're obviously outperforming that at, call it, 123%-124% the last handful of quarters. But you are falling short on cloud ARR, which means either net migrations, expansions at the point of migrations, or new logos are underperforming. So last quarter, you did talk about strong on-prem to cloud migrations. But can you maybe just help us understand across each of those three kind of categories what's happening under the hood? What's the biggest headwind as we think about outside of net expansion, where you might be falling short on cloud ARR, and how deal elongation is impacting those three categories? And then I have a follow-up, please. Thank you. Yeah, thanks for the question, Eric. Yeah, you're absolutely right. On cloud ARR, on a sequential basis, we did grow by $90 million in constant currency in Q2. But we did see some of those deals push into second half, and that was clearly below our expectations. We're not losing deals in the pipeline. The pipeline has remained strong, but we are seeing that change in customer buying behavior, where they are holding off on making that decision to migrate to the cloud. So in terms of our migration pipeline, we are seeing some of those deals push out, and deal elongation continues. And I think our observation would be that it exacerbated during second quarter, and that is leading us to be more prudent, as we said, our overall cloud ARR guidance for the year. From an expansion perspective, as you said, we're doing really well. Our cohort of customers that we had 12 months ago expanded at 123%. As we look at the business, we think about having at least a 120% expansion rate as we move forward. New logos. I mentioned new logos in the earnings call last quarter in terms of the strength of the new logo pipeline. We won new logos both on-prem and in the cloud in second quarter, which, there were some really great wins in there. I mentioned some in the prepared remarks. As we look to the second half of the year, we believe that our new logo in second half will be about double the new logo activity that we had in second half last year. As we look at it, we are seeing that deal elongation is putting a pressure on our cloud ARR, and that's why we have altered our full year guidance accordingly. Okay. Thank you for that detail, Steve. Maybe clarify, if I follow up with you, obviously, it's been a very volatile year. Macro is very challenging and uneven. I'm just curious, as you think about not only guiding to 2024, but providing some of the commentary you provided in 2025, after some of the performance this year, which was unforeseen 3, 6, 9 months ago, what gives you the confidence to give us some of those metrics for 2025 and really give those metrics with confidence, understanding that you can't really you can't undershoot those? Where does that confidence stem from, again, given a lot of the volatility in performance, deal elongation, etc.? Thanks so much. Thanks, Eric. Yeah. So let me start with 2024. So what gives us confidence in our current outlook is we've thoroughly reviewed all of the large deals, one by one, and heavily discounted our closed assumptions against those deals. For the non-large deals, the rest of the deal pipeline, we are using the low end of our historical conversion rate on that deal pipeline. We're attaching senior leadership and executive sponsorship on all of our large deals. There's a number of things that we've done in 2024. As Steve said, we do see that change in customer behavior as we've gone through Q2. We've factored that into the outlook. Because we are using heavily discounted closed assumptions and low end of our conversion deal pipeline assumptions, that's what gives us the confidence in our 2024. As we look out to 2025, some of the things that we have as a tailwind as we move into 2025, clearly the cloud business is still growing strongly. Even with our new outlook, the midpoint of our guide is a 30% cloud ARR growth in the year. As we continue to grow cloud and we continue to maintain the approximate 120% net expansion rate, that mixed benefit helps us as we move into 2025. The other headwind that we have going into 2025 is the improvement in our retention rate. We have seen a lower retention rate in the first half of 2024 due to the large on-prem erosions that we saw. We're seeing that improve as we go through the year. As we exit H2 of 2024, we're anticipating that retention rate to continue to improve in 2025. That's another headwind. Then finally, as we mentioned in our prepared remarks, we are taking a number of cost reduction activities. We anticipate to reinvest some of those cost savings back into reinvestment to help accelerate growth in certain areas. Thank you for your question. The next question is from the line of Tyler Radke with Citi. Your line is now open. Yeah. Hey, Steve. Hey, Claire. Thanks for taking the question. So we've been talking about the tough macro environment for Teradata for a few quarters now. And I guess with this latest push out of some of the targets, I'm curious, what is different now about the deal elongation conversations that you're having now versus three to six months ago? And how much is sort of the conversation involving kind of future architecture shifts as it relates to Iceberg tables? If you could just comment on that piece. Obviously, that's been very topical in the space too whether that's holding up decisions here at all. Thank you. Yeah. Thanks, Tyler, for the question. Yeah, we definitely are seeing that exacerbated change in customer buying behavior as they're scrubbing budgets and making sure that they're making the right decision from a spend perspective. Again, we're not seeing a really big change in terms of the competitive environment that we're working in. We're not seeing major losses in terms of our opportunities. In fact, one of the things we said in our prepared remarks was we've got a really strong pipeline of eight-figure deals. It's three times the size of what we had in Q2 of last year. But those big deals, as you can imagine, inside these large corporations are coming under a lot of scrutiny from an execution perspective. And so I think that those are combining together to impact that from a closed perspective. Thanks for asking the question around open table formats. We've been doing a lot of work to embrace open table formats. Our open and connected data platform supports multiple OTFs. We do not believe that the war has been fought or won from an open table format. And our strategy from a Teradata technology perspective is to support multiple OTFs on native objects to enable our customers to have the most flexible and dynamic solution from a data and analytics platform perspective. We're applying the same kind of technology approach to large language models, AI models, and GenAI models, where our customers can bring their own models into the Teradata ecosystem so that they can use the data that they trust inside the enterprise to get trusted outputs. And we all know that trusted AI is one of the biggest themes in the industry today. We believe that we're super well placed in terms of winning that business from an open and connected data and analytics platform. Great. Thanks for the color. And then maybe a follow-up for Claire, just on the restructuring here. Pretty significant, I think, about 10% of the workforce. If I just take 10% of your operating expenses, that gets you to about $70 million of savings. I guess, is that the right way to think about the savings from this? And is that sort of the right way to bridge the difference between this year's free cash flow guide and next year's? Just help us understand the moving pieces there on the cash flow as it relates to restructuring. Thank you. Yeah, of course, Tyler. So absolutely. Our total annualized run rate saving expected from the headcount reductions is $75-$80 million, of which $15-$20 million is expected in 2024. As I mentioned, some of this is going to happen over the next 6 to 12 months. So not all of these actions will take place in 2024. So I would assume of that $75-$80 million of annualized run rate savings, prior to reinvestment, 75% of that will flow into fiscal 2025. With regards to the cash impact, we are anticipating a $30-$35 million cash impact from severance payments in fiscal 2024. In total, we're anticipating cash payments of $45-$50 million, which means approximately $15-$20 million will be cash paid in fiscal 2025. Thank you for your question. Next question is from the line of Howard Ma with Guggenheim. Your line is now open. Thanks. Maybe to dovetail off of Tyler's question on restructuring, so one for Steve, and then I have a follow-up for Claire. So Steve, what is the impact of the restructuring efforts on account coverage? And just given the more pronounced back-end waiting, what gives you the confidence that you've taken the appropriate measures to close the deals that you need to close in Q4 to achieve guidance? Yeah, thanks for the question. From a go-to-market perspective, our new Chief Revenue Officer has taken the time to review the overall organization. We actually took the opportunity to reduce a layer of management. And I think that has enabled us all to be closer to the customer. We've also streamlined that global go-to-market organization, taken out our regional structure, and having a more industry and geographical basis around that. We've taken the opportunity as well to promote some top talent into those key leadership positions in the company. Rich's new team is a set of proven leaders inside Teradata who have got a great track record of delivering on their commitments. We continue to see that traction and momentum in our largest customers. I mentioned the eight-figure deals in the pipeline. Those deals are more difficult to close, but we've got the right team and the right talent focused on that. In terms of the restructuring activity, all of that restructure from a go-to-market perspective and putting that new structure in place has been executed already. The deal ownership is incredibly clear from an execution perspective. As we look at further restructuring inside the company, we're going to focus on our non-revenue-generating areas, but while maintaining a balance to make sure that we are continuing to invest in the growth areas of the business. Okay. Thank you, Steve. And for Claire, it sounds like there may have been additional unexpected large customer churn in Q2. Is that factored into the you called out the 100 basis points as part of the guidance reduction, or could there be more large customer churn similar to what happened in Q1 to come for the balance of the year? Thank you. Yeah, we didn't see any unexpected churn in Q2. We were still seeing the final impact of those large on-prem erosions that we talked about back at the end of 2023. So some of the impact there hit in Q2 as expected. To your point, we have updated our churn assumptions for the full year and are expecting an additional 100 basis points of churn in fiscal 2024. That actually is a customer that we had highlighted as a risk customer, a couple of customers, high risk, and the timing of that activity has been accelerated into 2024. So no surprises in Q2, but we have, as you mentioned, updated our full year assumptions by 100 basis points. Thank you for your question. Next question is from the line of Chirag Ved with Evercore ISI. Your line is now open. Hi. Thank you for taking the question. So just on the erosion front, what are some of the steps that you're taking to mitigate potential future erosion and incentivize existing customers to leverage VantageCloud as opposed to potentially migrating? Credits, incentives, partner support, how are you thinking about this opportunity? Are you seeing incremental success in customer retention quarter over quarter? Thank you. Thanks, Chirag. Thanks for the question. Yeah, you're absolutely right. We've got a whole host of activities undergoing in terms of our customer success motion. Just taking a little step back, we did know and have known that 2024 was going to be an outlier from an erosion perspective in terms of us having more on-prem erosion than other years. And we are expecting that, as Claire said earlier, to normalize as we move back into 2025 to a more normalized erosion rate. Just reflecting back, if you think about the erosion pattern that we have from a Teradata perspective, it's usually customers that have made the decision to migrate off Teradata many years ago, so 4+ years ago when we did not have the cloud offering that we have in place today. The key strategy for us in terms of ensuring that we are remaining relevant inside our customer base is to execute our cloud-first strategy. That's to get our cloud platform deployed inside of these customers. We've had some great success at that. Our cloud business getting up to being 37% of our total ARR at the end of Q2 is a significant indication that many, many of our customers are committing to us and committing to their future from a Teradata perspective. Over the last couple of years, we've grown a very successful customer success management function with some great leadership around the company to ensure that we understand what's going on inside our customers, that we have proactive safe plans in place, that we are continuously demonstrating the value of the new technology developments that we're deploying. In some cases, that would also include some commercial motivation for our customers to move to the cloud with us. We see, however, that our cloud business is being super successful. Most of our customers, when they move to the cloud with us, also grow with us. And that's a great testimony to taking the customer from that on-prem base into the cloud. So a number of different actions in place around the organization. And we're confident in terms of the customer base that we have and the visibility that we've got into that base as we move forward. Maybe just one more quick one on my end. Have you seen any changes in the competitive environment, or has it remained pretty consistent over the course of the last few quarters? Yeah, we've seen the competitive environment to be fairly consistent. We were super delighted from a Teradata perspective now that we've got our new VantageCloud Lake launched on the Google platform. That's going to enable us to start addressing with our most modern technologies. All of our customers that utilize the GCP platform is their cloud provider. Also, from a new product release, our Teradata AI Unlimited product integrated into Microsoft Fabric enables us to partner at a very close level with Microsoft in terms of their most advanced technologies and their new technology announcements. So at the macro level, we don't see any major changes in the competitive environment, but certainly from a Teradata perspective, we're putting new technologies out there which enable us to compete more and more effectively as we move forward. Thank you for your question. Next question is from the line of Nehal Chokshi with Northland Capital Markets. Your line is now open. All right. Thank you. Two questions for Claire. First question, calendar 2024 free cash flow. Looks like about $40 million of the $80 million free cash flow reduction is due to reduced billing. And that would equate to about a 2% reduction in your billing expectations. Is that correct? Yes, that's right. And now you need to take, to your point, a lower billing assumption from lower ARR and revenue in the year. Also, remember, we are guided to the low end. So the reduction is from $340 million down to a midpoint of $280 million. So one of the main drivers is lower ARR and revenue, which impacts both 2024 and 2025. The other impact, obviously, is that higher cash payments that we're making on severance, partially offset by cost reduction. Okay. Then you're also providing some initial thoughts on calendar 2025 on the free cash flow, and you're projecting it to increase $65 million year-over-year. So $40 million is due to no additional restructuring payments, presumably. Then the other $25 million would be basically from the projected overall ARR and billings growth that you're projecting? Yeah. So actually, there will be $15-$20 million expected of severance payments in 2025. So we do see a benefit from lower severance payments, but those severance payments of $45-$50 million are split, with $30-$35 being in fiscal 2024 and $15-$20 in 2025. So we see a benefit, but we do still have some severance payments being paid in 2025. To your point, we are anticipating to also see a benefit from cost reductions, and we also anticipate improvements in ARR gross billings, which is what you mentioned. Okay. Thank you. Thank you for your question. Next question is from the line of Matt Hedberg with RBC. Your line is now open. Great. Thanks for taking my questions. Steve, one for you. Can you talk about the linearity in the quarter? I'm curious. Did things deteriorate as the quarter went on, or was it kind of consistent throughout Q2? Yeah, Matt. Thanks for the question. We tend, as many enterprise software companies are, to be kind of back-end loaded towards the end of a particular quarter. And so as we look at execution, a lot of our linearity always skews to the back end of the quarter. So it doesn't give us a lot of visibility as we go through the quarter of what's actually happening. We clearly were getting messages from our customer base about the decisions that we're making around the spend patterns, and we saw that impact in terms of our overall results from a Q2 perspective. Got it. Okay. Thank you. And then Claire, on the 9%-10% reduction in the headcount, I think in the prepared remarks, you said you're reducing, I think, expenses across all areas of the business. I think you noted also a focus maybe on some non-revenue generating areas. I guess maybe a little bit more detail on where some of these reductions are coming in. And then secondarily, it sounds like you're planning to reinvest some of that savings. I guess, is there a way to think about net of the reductions and the rehiring, what the total targeted headcount would be on a net basis? Yeah. So to your point, we've made some changes and done a reorganization in the go-to-market team, as Steve said. So, taking out additional layers of management, focusing more on geographic and industry verticals rather than the regional setup we had previously. So there have been a number of changes in the go-to-market organization. We have tried to prioritize non-revenue-generating activities, but we are looking across the board to ensure that we have prioritized our investments across everywhere, so including products, including marketing, go-to-market, and non-revenue-generating. But obviously, we are trying to maximize the savings in the non-revenue-generating areas. When it comes to reinvestments, we are still finalizing our plans with regards to the exact number of reinvestments because this will be over the next 6-12 months. So we'll give further details on that as we give a guide on 2025 at the end of the year. But what we do anticipate is will be where we see areas that can help us accelerate our growth in 2025 and beyond. We do see the opportunity to be able to reinvest some of those savings that we're taking out over the next 6-12 months. Got it. Thank you. Thank you for your question. Next question is from the line of Patrick Walravens with Citizens JMP. Your line is now open. Oh, great. Thank you. I guess what I would start with is, do you see that Fortune 500 companies, in general, as they're determining their data strategy, are anchoring that on selecting a primary or single data warehouse vendor? Hi, Pat. Thanks very much for the question. Look, I think as we look at the market, we certainly see there's lots of room for lots of different players in the marketplace. From our perspective, we know that we are the best path to the cloud for the world's largest organizations that are executing complex mixed workloads at scale. And we can deliver that solution to them in the most cost-effective, most cost-efficient way. And then as we're looking at the new capabilities that we're bringing out in terms of having the platform support, not just an enterprise data warehouse and being able to compete in the enterprise data warehouse perspective, but also being able to compete in the deployments like lake or lakehouse and also compete from an in- database analytics for high-performance analytics, which really plays well into AI and GenAI solutions. I think many customers, many of our customers, are looking at multiple solutions across that entire solution set. It's our objective in Teradata to provide the best possible engine to address each one of those workloads and patterns that we see inside our customers. Okay. I mean, everyone on this call and you guys as well have heard that example of the bank in Asia- Pac that decided to go Databricks and listed to everyone else that they're replacing in the process. You were one of several other vendors, other data warehouse vendors. So I'm just wondering, how common is that, Steve? Is that something that most large organizations are deciding to do, pick one and replace the others, or is it not that common? I would say that vendor lock-in is never a good thing for any customer. But what we look at from a Teradata perspective is we know what our customers are doing. We've got a great conversation with them. In some cases, if they're running a very old version of the Teradata ecosystem on-premise and they've made decisions before we had the advanced cloud technologies available that we now have, then they tend to make decisions to move away from Teradata. What we see in the marketplace now is that we have a key place in our customers' ecosystems to address some of their most mission-critical workloads, especially at enterprise scale. And our massively parallel computing architecture that's been with us, that's been the core of our systems for years, is absolutely fantastic at running AI and GenAI workloads in a parallel structure. So we are really well placed to compete for the right workloads inside our customers. And I think most customers are going to start looking at what are the best engines to address their workload requirements as they move into the future. What do they need from a storage perspective? Do they need high-performance block storage, or can they run the workload in a lower-cost open table format on Native Object Store? Our objective inside Teradata is to be able to address all of those patterns. Okay. Great. Thank you for the perspective. Thank you for your question. Next question is from the line of Wamsi Mohan with Bank of America. Your line is now open. Yes. Thank you so much. So Claire, on the restructuring benefit of $15 million-$20 million net benefit in 2024 in EBIT, is there incremental EBIT benefit that flows into 2025? Yes. Wamsi, so to your point, we are anticipating a total annualized run rate of $75 million-$80 million. So assuming prior to reinvestment, about 75% of that to hit fiscal 2025. So we will see an incremental benefit. As we mentioned, we are looking at where do we want to reinvest, looking at opportunities that will ultimately drive long-term growth. So there should be benefit in fiscal 2025, but we're still finalizing the modeling of how much to reinvest based on, obviously, our high governance of return on investment approach. So Claire, I guess the question is really that, is there going to be an organic EBIT increase going into next year? Because if you are looking at sort of your preliminary thoughts on 2025 with low single-digit top line and 20% EBIT margin, it's about 50 basis points of margin expansion. Is that contemplating a net level of investment that supersedes some of this cost savings, or is the organic EBIT actually declining? And how would you bridge that with cash flow then if organic EBIT is declining for the north of $50 million improvement year on year? Yeah. So good question, Wamsi. Thank you. So as we look out in terms of our low 20% range and when we look at it from a dollar standpoint, because we are continuing to be able to expand our cloud gross margin and we are taking these proactive measures from a cost reduction, we do anticipate to grow in dollars year- over- year from 2024 into 2025. And that's factored into your point in terms of our fiscal 2025 cash flow assumptions, where we'll see top line growth and growth in billings, plus benefit from the EBIT offset by and also an improvement, sorry, from lo wer severance. So that's what's driving the year-over-year benefit from the cash impact. So we have factored some of that in, but we anticipate that's how we get to that low 20% operating margin and anticipate to see dollar growth as we move into 2025. Okay. Okay. Thanks for that, Claire. Thank you. Thank you for your question. Next question is from the line of Derrick Wood with TD Cowen. Your line is now open. Great. Thanks. I guess for Steve or Claire, just in terms of the reduction in the ARR outlook, can you couch how much of this is coming from what you're seeing in your pipeline and sales cycles today versus how much of this is from anticipated disruption from the restructuring? Just wondering whether you're anticipating much disruption from go-to-market motions due to the reorg. No. Thanks for the question, Derrick. We don't anticipate any disruption in terms of go-to-market execution. As you said, we've got a great pipeline of eight-figure deals. It's got some of our best sales folks on it. The leadership team that we've put into the go-to-market organization, I have absolute faith in. They've taken up that drumbeat without missing a beat. What we do, though, see, as I pointed to, is that continuing elongation of the deal cycle. We have seen that exacerbated in Q2 in terms of customer decision-making cycles, especially for these really large deals. Got it. Understood. And in your prepared remarks, you mentioned you're seeing less on-prem expansions. I think you had been kind of running in a framework of flat to slightly positive growth in on-prem, excluding migrations. I guess, how does this framework change in light of your updated guidance and just what you're seeing on expansion activity? Yeah. I'll just take the first part of that question and let Claire comment in terms of what we're seeing as customers are examining their budget, and they're also thinking about that shift to the cloud. They are delaying on-prem expansion. There's no point in expanding the on-prem footprint and then moving it to the cloud and then expanding in the cloud. So as those cloud migrations are being considered and some of them are shifting to the right, that does have an impact on our total ARR, both in terms of the expansions we typically see at the point of migration from on-prem to the cloud, but also customers are pushing out those on-prem expansions as they consider their future strategy in terms of moving to the cloud with us. And I'll just re-echo the point that we talked about before. We're not seeing these opportunities lost to competition. We're seeing the commitment to the Teradata technology and technology set. This is a deal elongation and slippage of these deals into subsequent quarters. Yeah. And I'll just jump in. To your point, because of the reduction in on-prem expansions, we now would not anticipate to grow to be flat or slightly up, excluding migrations. We'd actually expect that to decline. But we do believe that that's an opportunity, as Steve mentioned, over time as we move these large accounts to the cloud, and then we tend to see larger expansions with us once they migrate to the cloud. Okay. Thank you. Thank you for your question. Next question is from the line of Raimo Lenschow with Barclays. Your line is now open. Hey. Thanks for squeezing me in. Steve, the pipeline that you talked about, like the double new logo pipeline for the second half versus the second half of 2023, and then the three types of pipeline of the eight-figure deals, especially on the new logo side, where are they coming in? Obviously, they clearly must be kind of participating more in the market again. What are the people looking for? What's the size or what's the typical profile of the customer? Thank you. Yeah. Thanks, Raimo. I think we're seeing a very balanced view in terms of we're seeing new logos across all of the geographies and across all industries. So most of the new logos are buying a use case. I mentioned Joyo Bank in Japan as an example, who are using VantageCloud Lake for revenue assurance. So it's really interesting because we've got that whole history of industry experience and, say, Teradata and how the biggest enterprises in the world use data and advanced analytics for business value. We can actually take those use cases on our new technology and take those to new customers. The other thing I would point out, Raimo, is the strength of our hybrid platform. So we're seeing new logos both from an on-prem perspective and in the cloud. So it's very balanced across different deployment models, different use cases, different industries, and different geographies. And I think that gives us a breadth of operation to actually execute and generate that new logo success, which we think in second half is going to be double what we did in second half last year from a new logo results perspective. Perfect. Thank you for coming forward today. Thank you. Thank you for your question. Next question is from the line of Austin Dietz with UBS. Your line is now open. Hey, Steve. Nice to connect. I'd love to get your views on where the data analytics industry is headed over the next few years. From your response earlier to Tyler's question, changing architectures don't appear to be impacting deal cycles yet. But there seems to be just real adoption around open table formats like Iceberg and shifting towards a more open architecture in the industry. So yeah, I guess, how do you see the data analytics market evolving over the next few years? How do you think open table formats change the competitive landscape in the data analytics market? Does it become about query performance on Iceberg tables at some point? We'd just love your thoughts on where the data analytics industry is headed over the next few years. Yeah. Thanks for the question. I think we covered some of those points. So I think from an open table format, I don't think the battle is complete there. So our approach is to have an open and connected ecosystem that supports multiple open table formats. And as those technologies advance, we enable our customers to take advantage of those open table formats that are here today, but also the new ones that are coming out in the future. I think that as we look forward, our customers are going to want to deploy workloads on the most appropriate storage tier. That might be in the cloud on an elastic block, high-performance storage for super complex, super mission-critical real-time solutions and use less performance storage for workloads which are less mission-critical. The battles will be, to your point, in the query engine. Who's got the best query engine? It's great from our perspective to see we released Teradata AI Unlimited. It's got all of our analytic capabilities built right into the database. We've got a high-performance query engine that we deploy in VantageCloud Lake that enables us to address lots of different use cases. So that open and connected approach to make sure that our customers can take advantage of the most advanced analytic capabilities, be it GenAI or AI and analytic models, is something that we're absolutely focused on. Thank you for your question. Okay. Thank you. There are no further questions at this time. I'll now turn the call back over to Steve McMillan for his final remarks. Thank you, everybody, for joining us today. As we end the call, I'd like to emphasize that we are confident that we've got a fantastic market opportunity in front of us. We've got a great technology, and we've got the team to win. We've got our plans in place for execution, and we are absolutely committed to moving forward success.