Welcome to the 2013 fourth quarter earnings call. My name is Vanessa, and I'll be your operator for today's call. [Operator Instructions] I will now turn the call over to Mr. Gregg Swearingen. You may begin, sir.

Good morning, and thanks for joining us for our 2013 fourth quarter earnings call. Mike Koehler, Teradata's CEO, will begin today by summarizing Teradata's results. Steve Scheppmann, Teradata's CFO, will then provide more details regarding our financial performance, as well as our guidance for 2014. 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 vary materially. These risk factors are described in Teradata's 10-K and other filings with the SEC. On today's call, we will also be discussing certain non-GAAP financial information, which excludes such items as stock-based compensation expense and other special items, as well as other non-GAAP items such as free cash flow and constant currency revenue comparisons. A reconciliation of our non-GAAP results to our reported GAAP results and other information concerning these measures is included in our earnings release and on the Investor page of Teradata's website, which can be found at teradata.com. A replay of this conference call will also be available later today on our website. Teradata assumes no obligation to update or revise the information included in today's conference call, whether as a result of new information or future results. I'll now turn the call over to Mike.

Thanks, Gregg, and good morning, everyone. Teradata made progress in many areas of our business in the fourth quarter. Total revenue of $769 million was up 5% in constant currency. Non-GAAP operating income of $205 million was up 16%, and non-GAAP earnings per share of $0.88 grew 11% over prior year. Non-GAAP operating margin of 26.7% was the highest ever recorded for our fourth quarter. Product revenue of $372 million was up 4% in constant currency and non-GAAP product gross margin of 68.5% was the fourth highest ever achieved for any quarter. Maintenance revenue grew 14% in constant currency in the fourth quarter and 10% for the full year. Our maintenance revenue tends to benefit when customers choose to sweat their existing data warehouses and add capacity to them rather than replacing them with newer technology that comes with lower maintenance costs. For the full year, revenue finished at close to $2.7 billion and grew 2% in constant currency, with non-GAAP earnings per share finishing at $2.76. We had another good year of adding new data warehouse customers, surpassing 2012 levels in total wins and Global 3000 new customer wins. The largest contributor to the slowing of our revenue growth in 2013 was the decline in revenue from our top 50 customers in the Americas. All of these customers continued to invest in their Teradata data warehouses in 2013, but collectively at a level that was below 2012, but higher than it was in 2011. Outside of the top 50, the Americas grew revenue in the mid-teens. The strong revenue growth outside of the top 50 is a reflection on the quantity and quality of new customers wins we have been adding and also the investments we have been making to add territories and to increase the breadth and the…

Thanks, Mike, and good morning. Even though we got off to a very slow start in 2013, it was good to see our year-over-year product revenue comparisons improve each quarter during 2013 to the point we are back to product revenue growth in Q4. Fourth quarter product revenue at $372 million was up 3% from the fourth quarter of 2012, up 4% in constant currency. For the full year, product revenue was down 5%, down 4% in constant currency. In the quarter, services revenue of $397 million was up 5% from the fourth quarter of 2012, up 6% in constant currency. For the full year, services revenue was up 7%, up 8% in constant currency. Within the services revenue, in the quarter, Consulting Services revenue was $225 million, flat against Q4 2012, up 1% in constant currency. And maintenance services revenue was $172 million, which was up 12% from the fourth quarter of 2012, up 14% in constant currency. For the full year, Consulting Services was up 5%, up 7% in constant currency, and maintenance revenue was up 9%, up 10% in constant currency. At this time, I'll provide some color on the contribution by our industry verticals to our 2013 data warehouse, big data and consulting services revenue. As a reminder, these comments do not include maintenance or applications revenue. Financial services contributed 31% of revenue, up from 30% in 2012. Communications was 19% of revenue, down from 21% in 2012. Retail contributed 14% of revenue, down from 16% in 2012. Manufacturing generated 13% of revenue, up from 12% in 2012. Health care contributed 8% of revenue, up from 7% in the prior year. Government was 6% of revenue, the same as in 2012. Travel and transportation drove approximately 6% of revenue in both 2013 and 2012. Energy and…

[Operator Instructions] And we have our first question from Raimo Lenschow with Barclays.

Two questions from my side. First, can you talk a little bit about trends in the geographies in more detail, especially -- remember in Q3, Asia was particularly weak for you. And so I just try to get a better handle on what's going on and some of the reasons that you didn't kind of mention too much on the call. And then the other thing is, Steve, maybe talk a little bit about the OpEx number. I mean, historically, we've seen kind of probably more kind of a $30 million gap [ph] down from Q4 to Q1. Given the growth rates we've seen this year, why do we see that much high investment level this year?

Thanks, Raimo, this is Mike. A little more commentary on the geographies and in particular, around international. APJ had a very strong Q4. I would characterize it more as lumpiness. They had a decline in the third quarter. And I really think that's a region where you want to take a look at it on a full year basis. And on a full year basis, APJ did grow 3% in constant currency. And when you take a look at the macro environment in APJ, it was really driven more -- the lower revenue growth this year was driven more around Japan, although Japan also did come back in the fourth quarter. So I think on the APJ side, I would characterize it more as lumpiness and the full year was up 3% in constant currency. And we've made some improvement in Japan where most of the decline was this year. In other parts like China, we had a drop in Q3, not a big one, but then China bounced back in Q4. And if you look at China for the full year, China had good growth but not at the rate it was in 2012. But here, we would say, once again, it's more lumpiness related after a very, very high growth in 2012 than other types of issues there. I think if you look at Europe and Middle East, Africa, that part of international, we did have macros impacting us in Eastern Europe. But once again, there I would characterize the bigger impact of lumpiness where we had extremely strong growth in Russia back in 2012 and a slowing in that growth rate. And then the Middle East, Africa portion, I would characterize also more heavily weighted towards lumpiness in the year as opposed to macro impacts.

Raimo, with respect to your second question, yes, you're correct, we generally have a $30 million step-down, Q4 to Q1. What we're seeing for most of the company -- a lot of the company is on a variable incentive compensation structure, sales through the -- throughout the company. And typically, that is higher in Q4. We didn't meet our numbers. And if you take a number approximately -- I said that in the prepared remarks that we'd go down less than $10 million. So if you take that net difference of $20 million, approximately 60% of that in relation to the variable comp step-down that we will not experience in Q4 of '13 going to Q1 of '14. So mostly tied to that variable incentive compensation for employees throughout the company.

Our next question comes from Wamsi Mohan with Bank of America Merrill Lynch.

Mike, can you talk a little bit about how your pipeline looks this year, maybe compare and contrast to -- relative to last year at this point from a large deal perspective. Are you seeing any evidence that larger deals that were pushed out in the third quarter will close here in the first half of 2014? And I have a follow-up.

The larger deals are up as we go into the first quarter, Wamsi. But I would characterize it as not being up dramatically or much higher. It is up. As a data point, in the fourth quarter, we actually had a pretty good decline in large deals. And the revenue growth outside of the large deals, more than $5 million, was actually very, very strong. So I think when we look at what we're seeing right now, I'm not counting on a big boost from an increase in large CapEx transactions or larger than $5 million and looking more for the continued trend of our growth outside of the large CapEx transactions.

Okay. And my follow-up, you mentioned both the quantifiable and sort of unquantifiable component impact of revenue from Hadoop. Conceptually, what are you including in that nonquantifiable part, and are you expecting the larger net negative impact to 2014 growth from Hadoop in aggregate?

The quantifiable piece, we're looking strictly at measurable things like revenue or offloads, what type of revenue impact that had. And for the most part, the customers have Hadoop in production. Like we said on the last call, the activity is around ETL and moving some of the ETL workload off of their Teradata EDWs, which we're in agreement with and which we said on the last call. So the quantifiable impact of customers doing that was relatively small. Now if you look at things going forward and the impact on Hadoop, I'll refer back again to what we said on the last call, and that is basically, we did a thorough analysis of our larger customers. And basically, what we saw is they averaged 20% to 40% of their workloads being done -- being used for ETL. And of the 20% to 40% of those workloads being done with ETL, we think that 20% is a good candidate to be done with Hadoop. So going forward, we will see more workload being moved as it relates to ETL, and we see that as the biggest impact. That all said, the growth of -- and the utilization of the Teradata EDWs, we expect it to outpace that area of ETL workload moving off.

[Operator Instructions] Our next question comes from Phil Winslow of Crédit Suisse. Philip Winslow - Crédit Suisse AG, Research Division: I just have a question related to the -- your maintenance line. Obviously, that was an area of strength relative to the -- it's outside expectations this quarter, and you commented about some -- just sort of unique aspects that are affecting that line. When you think about your 2014 guidance and particularly kind of Q1 then over the course of the year, how do you think about sort of product versus that services growth? And what are the factors affecting kind of the differential in growth between the 2?

The dynamics of our maintenance revenue growth are -- when we run into situations where customers are sweating their assets, basically, what's happening is they're adding capacity to the existing EDWs. So if you will, there's only pluses and not minuses. When we get into environments where large CapEx spending starts going up again, then we'll see more floor sweeps. And when you do a floor sweep, you refresh older equipment with newer equipment and it has a lower maintenance rate and that is a subtraction. So given the environment we're in, the trend we see for the maintenance when we look at 2014 is we see something in the high-single digits type of growth.

And our next question is from Matt Summerville with KeyBanc.

How do you characterize the penetration rate you're seeing with Aster in your existing customer base? And then how much of your revenue would you say in 2013 is associated with either big data analytics or Integrated -- and Integrated Marketing Management?

The Aster penetration, Matt -- I mean, we're only at the beginning. So where we were 2 years ago, we're starting with, I would say less than 10, right? So we've had a very rapid adoption in our user base. We also have won new customers without Teradata with Aster, new account acquisitions that weren't Teradata users, and that's gone up as well. I think if I could give a sense of what type of revenue we're talking about, when you look at 2014 and you look at all in, on everything we're doing around big data analytics, and you also include our 1000 Series Extreme Data Appliance, which has been doing work with big data, such as sensor and clickstream and other types of new big data elements outside of a business enterprise data warehouse type of environment, we'll be well over $100 million in revenue in 2014. So that would include our Hadoop-related revenue, our Aster-related revenue, our 1000 appliance going into the big data space, as well as all of our services that, in 2014, will be well over $100 million in revenue. When you look at the IMM revenue, it will be approaching not close to $300 million, somewhere over $250 million -- in between $250 million to $300 million by the end of 2014.

Our next question comes from Greg Dunham with Goldman Sachs.

You mentioned you had a -- well, I guess, first off is if I look at the DSOs and kind of the cash collections, it sounds like the linearity in the quarter was a little more back-end loaded. Was that relatively broad-based or is that different by geo?

No, Greg, relatively broad-based on it -- and nothing unusual that we experienced in the quarter. And with respect to what we're seeing through January, Q1 2013 was a record free cash flow quarter, approximately $216 million, I expect us to replicate -- being close to replicate that strong Q1 free cash flow in January, starting off very similar in 2014.

And our next question comes from Jesse Hulsing with Pacific Crest.

Mike, you mentioned that you think you could grow double digits in the long run and the data warehousing can grow in the high-single digits, but you still have some near-term headwinds carrying over from 2013. My question is, what alleviates those headwinds as we work through '14 and moving forward? Is there something that you think can shift your mix, or you see something improving as far as potential spending environment or the like?

Jesse, there's a couple of things we're doing. One of them is we're trying to get broader in the market. So that relates to -- we've broadened our offers in we take to market, as well as we've broadened our market coverage and we're injecting new ways in which to acquire Teradata, such as Data Warehouse as a Service and all of our applications. The headwinds that we're seeing -- and in our top 50 major customers, I still think there's -- we're dealing with a little bit of a sorting out and some confusion as to what the capabilities of Hadoop are. And the action there is for us to get as many customers as we can on the Unified Data Architecture. The Unified Data Architecture is, in a way, to alleviate confusion shorter term over the next 12, 24 months, so customers can have a logical architecture that has different components of an analytical ecosystem with logical workloads, which includes Hadoop for doing the things Hadoop's good at doing now and includes Teradata, includes other types of platforms. So moving forward, it's rationalizing and sorting out, what's a logical ecosystem for analytics, for corporations, and the UDA helps sort that out a lot. The other part of the headwinds, and especially in our top 50 largest customers, is the large CapEx headwinds. And quite frankly, we don't have a feel for when that's going to get alleviated. As long as we have companies -- you read with lay-offs and cutting back and things like that, these are headwinds that we can't predict when they're going to come to an end.

Our next question comes from Katy Huberty with Morgan Stanley.

What are the drivers that can help accelerate both top and bottom line growth as you move beyond the first quarter? And when do you think you'll have better visibility as to where you land in the guidance range?

As far as better visibility to where we'll land, Katy, for the full year, on the guidance range, it typically does not happen until we get well out into the second quarter and into the third quarter. The drivers of what we're trying to do top line and bottom line is we're trying to get as broad as we can in the marketplace, as fast as we can. We've been doing that the new territories. We experienced good growth, great growth in the Americas outside of the top 50s. We've broadened our portfolio. You can see that in our results in the Americas outside of the top 50. I actually think we've done a pretty good job at taking actions to drive top line revenue growth outside of the top 50. We have a lot more revenue coming from outside of our top major accounts -- a lot more revenue coming outside of our top major accounts than we did 3 or 4 years ago. So we've got that in place. The other thing we're going to do is we've added a lot of territories over the past 6, 7 years. We had 385 territories in 2008, we have 600 today. Over the course of time, before 2008, we didn't have that much many, less than 385. We have a huge opportunity to drive productivity in the existing territories that we have today. And we're really loading up on resources to drive more productivity that specialists, consultants and everything we can add to drive an expertise, to drive more revenue short term out of the existing territories, and we think that should help us in 2014. And of course, the big data piece of this we're continuing to pile investments and resources into big data analytics.

And our next question comes from Keith Bachman with Bank of Montréal.

I had related questions. Phil asked about maintenance, I was hoping you could just speak to a little bit on how you're thinking about product revs in that 3% to 7% context? And then as part of that, how do you see new territories growing in calendar year '14 and other types -- the number of territories specifically, growing in calendar year '14 and/or any other metrics specifically related to product investments, where you think you might make some additional -- see some additional opportunities?

Keith, I'll start with the first part of that. With respect to product revenue, on that range, we're expecting product revenue on the low end of the range to be flat to 1%, okay? And then growing from -- to the higher end of that range. Underneath product revenue, product margin, even on the low end of that range, that 3% range, we see product margin improving -- or remaining relatively flat with last year for the full year, so even on a 3% relatively flat product gross margin, which is strong from a pricing and competitive position. So that gives you a little color for more [ph] product revenue growth is for that 3% to 7% range, and I'll turn it over to Mike on the sales territories.

On the new sales territories, this year, we're taking an approach of doing it opportunistically. So we constantly see opportunities to add new territories, but we don't want to commit to a number right now. So we will add opportunity -- or we will add territories as opportunities present themselves. But for now, we want to look at how do we accelerate revenue growth in existing territories, because we think we can get a bigger impact in 2014 from them and we want to make sure we do that, which will also, by the way, help us longer term as we get more territories that we've ramped up over these past several years productive.

Our next question comes from Matt Hedberg with RBC Capital Markets.

I'm curious about some early feedback from your new Data Warehouse as a Service product. I believe that officially launched earlier in Q4.

In terms of technology, the feedback is very, very good. So in other words, the customers we have with Teradata's Data Warehouse as a Service, performance wise and everything else and meeting requirements and expectations, excellent. In terms of market demand, we still don't see a lot of market demand. There are some customers that have a preference to do as much as they can in the cloud. It's a strategic direction for the company and those customers, we work with -- we're working with. The mid-market is -- if there's in any place where there is a demand, it's more in the mid-market.

Our next question comes from Brad Reback with Stifel. Brad R. Reback - Stifel, Nicolaus & Co., Inc., Research Division: Mike, could you review your existing relationship with Hortonworks, what level of integration you have there and what type of economics occur there?

Well, first of all, Brad, we try to partner with all the players that are in our space because typically, we want to work with who our customers want us to work with on a lot of things. So that said, Hortonworks is very aligned with us strategically as it relates to a vision of the Unified Data Architecture. And when that occurs, it naturally flows through that companies -- when companies share the same visions and the same thoughts and logic of how different things should play, like in the Unified Data Architecture, it lends itself very well to partnering. And it's very easy for the people that work in both companies, as you engage customers, to be on the same page. So I would characterize -- that's the biggest driver of a lot of the success we've shared together with Hortonworks, and they are a great partner and we very much appreciate the partnership. As far as monies or things like that, Brad, I wouldn't say there's anything unique or nothing [ph] there, okay?

And our next question comes from Derrick Wood with Susquehanna.

Mike, I wanted to touch on the UDA comment. You said half-year American -- top Americas customers have adopted UDA and there's more to come. I mean, this to me suggests that they're starting to position to use Teradata for broader big data needs, integration into Hadoop. So I guess, would this -- is this a leading indicator for you that perhaps the delayed decision cycles around kind of exploring what Hadoop can do may loosen in 2014 as people position more on the UDA vision?

I think that's a fair observation, Derrick. First of all, it's a little bit less than half the customers in the top 50 that have adopted the UDA. But the Unified Data Architecture, first of all, it is an architecture and it's not so much about the Teradata products or whatever. And once a customer can get sorted out, the logic that resides in the Unified Data Architecture and the roles that the different things that reside in it such as Hadoop, the roles that each of these platforms can provide, you're correct -- from there, then it's easier to define what is the needs by the customer in different parts of the business. And then that's an opportunity for Teradata to sell, not only just Aster- or Hadoop-related appliances and services and things like that, but also, in some cases, our own data warehouses, if it's a new customer. So I think that's a fair way to look at it as a potential leading indicator.

Our last question will come from Ed Maguire with CLSA.

I just had a question about the -- your -- the big data and Aster businesses. It sounds like some very encouraging trends there. Could you comment on the relative deal sizes, profitability and the scope of the deals? And particularly, are there different sales cycles? And do you feel that the sales processes and structure that you have in place now is going to be appropriate to really -- to take advantage of the opportunities within your customer base?

To give a general framework, Ed, first of all, the sales cycles are shorter. The expertise required is different than in a business-related enterprise data warehouse. So the use cases and the ROIs that are driven from EDW, although some of it might be applicable over on the big data side, it's really unique use cases as it relates to insights that we -- that can be gained from all the big data types that are coming from the web, sensor and everything else like that. In terms of deal sizes, I think it's fair to categorize it as -- these aren't large CapEx transactions as it relates to today. In terms of software, and in some cases, related hardware revenue, it -- these are below the $5 million types of sizes. They do bring along a good part of consulting, as well as support services along with them. Okay. With that, I'd like to thank everyone for joining us here today. And I'd like to hope that you all have a good day. Thanks for joining us.

Thank you, ladies and gentlemen. This conclude today's conference. Thank you for participating. You may now disconnect.