Steve McMillan: Yes, we continue to win new logos in the quarter, and it was really great to see our demand generation activities but over 100 new logos added into the pipeline in the last few months? We’re not seeing any change in shape to those new logos. They tend to be small to start with and they grow over time. If we dig into that a little bit, we’ve seen some great traction in our international business via partners. And we think there’s a lot of lessons that we can learn there in terms of bringing that to global sales motions and using partner relationships in the Americas as an example to drive more new logos as we move forward. I think that the new logo pipeline with offers like AI Unlimited, which we referred to on the prepared remarks, gives us an ability to interact with a new set of buying and a new set of users for the Teradata platform.
I think being integrated, being one of the only ISPs with a query engine being natively integrated into the Microsoft Fabric offering is going to be really exciting in terms of generating new logos. From a materiality perspective, though, our business from a cloud perspective in 2024 is still going to be driven by expansions and migration activity.
Operator: Thank you. The next question is from the line of Howard Ma with Guggenheim. Your line is now open.
Howard Ma: Great, thanks. Hi, Claire. I want to ask you about your guidance, which implies that you need to add about $200 million of cloud ARR in about three quarters. And as you and Steve just mentioned, that’s mostly in the second-half and in Q4. And so, I was hoping you could comment in terms of expansion versus migration. So, on the expansion side, are you expecting an acceleration in expansion rates maybe, or maybe any pricing benefits as contracts renew? And then, on the migration side, should we essentially assume that subscription ARR will then be flat at best this year and then become a material contributor to cloud growth, perhaps starting next year?
Claire Bramley: Yes, thanks for the question, Howard. So, just to confirm, we’re not modeling an acceleration in our net expansion rate. We saw a good net expansion rate again this quarter of 123%. We continue to model approximately 120% as we model out to get to the midpoint of our 2024 guide and also as we model out to get to the $1 billion in 2025. The rest we then would expect to come from migration and as we mentioned in our prepared remarks, we are seeing a really strong pipeline and even increasing pipeline of the number of large existing enterprise customers that want to migrate with us to the cloud. So, that’s why we feel comfortable about those assumptions. We’re not anticipating an acceleration. To your point with regards to a subscription — with regards to subscriptions, once you’ve taken to account obviously the impact of migration from subscription to the cloud.
We still anticipate expansions to be positive. So, we still expect growth in the low single digits with regards to subscription. So, why don’t you taken out the impact of migration?
Howard Ma: Okay. Thanks for that, color. And I just have a quick follow-up either for you or for Steve. I wanted to ask about the strategic collaboration agreement with AWS, are there any changes in terms of the economic terms of that agreement worth calling out that would impact either revenue or gross margins? Thank you.
Steve McMillan: Yes, thanks, Howard. Yes, we’re really happy with our relationship with AWS. It continues to go from strength to strength and it’s built really upon that growing cloud business in the AWS environment. One of the things that we have always discussed is that as we continue to scale up and scale out our cloud business, it will give us the opportunity to have better strategic relationships and strategic agreements with the hyper scalers and this AWS agreement is one of those. And we see it as another element in terms of how we continue to expand our cloud margins going forward.
Operator: Thank you. The next question is from the line of Nehal Chokshi with Northland Capital Markets. Your line is now open.
Nehal Chokshi: Yes, thank you. I do have two questions. First one is that, Claire, can you give a little bit more detail on why migration expansion activity was slightly below expectations?
Claire Bramley: Yes, certainly. So, again, as I mentioned, we weren’t expecting a significant in growth in Q1. It was slightly below our expectations by a few million dollars, and that was kind of split equally between migrations and expansions. As you can see, we do continue to see a strong net expansion rate, so that doesn’t cause us any concern and it’s not anything that we believe is going to be an issue as we accelerate our growth throughout the year. So, just a few deals here and there that potentially we were expecting potentially to close in Q1, but no issues from an overall outlook standpoint, and no changes with regards to competitive environment or anything, so, just kind of the usual puts and takes as we would see in the quarter, driving a few million dollars lower in Q1 compared to expectations.
Nehal Chokshi: Okay. Thank you for that clarification. And then, sticking with you, Claire, you mentioned multiple levers give you confidence in continuing to drive free cash flow growth into calendar ’25. You listed four levers. Which of those four levers do you have greatest confidence in actually being the biggest driver, that being the top-line growth, gross margin expansion, operating expense optimization, or working capital improvements?
Claire Bramley: Yes, no, actually, we kind of expect, in terms of my confidence, I’m confident across all of those drivers. To your point, I mentioned four, two of them linked to how we can improve our operating margins. And so, as I mentioned, with regards to 2025, I have very good confidence to get to increase our operating margins and be in the low 20% range. And that is driven by cloud margin expansion, as we continue to see as we increase our scale and size within cloud. We continue to see that margin expansion. So, that gives me good confidence with that. We have great track record with regards to optimizing OPEX, especially as we grow. The top line growth is going to be driven by the continued growth we see in the cloud, which gives me confidence in that.
And then, with regards to working capital dynamics, we have a very strong cash conversion cycle. I still see it’s a small opportunity with regards to improving, for example, our DSOs. They’re kind of in the low 60 days range. I think we can still get a few days improvement over time in our DSOs as well. So, I would say the biggest drivers do come from the operating margin expansions and top line growth, but also have great confidence across all of those drivers.
Operator: Thank you. The next question is from Raimo Lenschow with Barclays. Your line is now open.
