Teradata Corporation (TDC) Q4 2014 Earnings Report, Transcript and Summary

Welcome to the Q4 2014 Earnings Call. My Name is John, and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Gregg Swearingen. Gregg, you may begin.

Thank you, and good morning, everyone, and thanks for joining us for our 2014 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 2015. 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 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. A replay of this conference call will also be available later today on that site. Teradata assumes no obligation to update or revise the information included in this conference call, whether as a result of new information or future results. I will now turn the call over to Mike.

Thanks, Gregg, and good morning, everyone. Teradata finished the fourth quarter with revenue of $761 million, which was down 1% from prior year and was lower than we had anticipated mainly due to currency. Revenue in constant currency was up 3% over prior year, which was roughly in line with what we were expecting. Non-GAAP earnings per share of $0.91 was up 3% over prior year despite the unfavorable impact of currency. For the full year, revenue growth of 3% in constant currency and non-GAAP earnings per share of $2.86 were both in line with our guidance. We had another excellent quarter for adding new data warehouse customers. We set a record in Q4, and for the year, it was our second highest ever. The strength of our new customer wins during the past couple of years has been driven by our investments to go broader in the market and to expand our analytics portfolio, which now includes our IDW, our data warehouse appliances, Aster, Hadoop and the Teradata Cloud. Turning to the regions. The Americas' Q4 revenue of $456 million was down 2% from prior year and down 1% in constant currency. For the full year, revenue was down 1% as reported and flat in constant currency. We saw some improvements with the Americas top 50 customers in 2014. Revenue only declined 4% versus the 11% decline in 2013. Furthermore, we grew 3% in the top 50 outside of our financial services customers. After driving the highest growth of any industry by far in the Americas from 2010 to 2013, financial services revenue declined as expected in 2014. The Americas had a strong quarter adding new data warehouse customers with Q4 wins being the second highest ever for a fourth quarter. Wins included a leading U.S. health services company, which chose our Teradata Cloud to deliver analytics to their Fortune 500 customers. One of North America's largest commercial real estate companies also selected our Teradata Cloud. Community Health Systems, one of the largest U.S. hospital groups, selected Teradata to integrate financial data from its many acquisitions into an IDW. And we added another state government, which is using Teradata to discover unrecognized revenue and to increase tax collections. Significant upgrades and expansions included TIAA-CREF, which added Aster and Hadoop to its Unified Data Architecture for Big Data Analytics. One of the top U.S. cable operators added Aster, Hadoop and Teradata Loom to its UDA for advanced advertising analytics. And one of our airline customers added an IDW. Turning to our international region. Q4 revenue of $305 million was flat as reported compared to prior year, but it was up 8% in constant currency. For the full year, international revenue was up 5% as reported and up 8% in constant currency. International had another record quarter for new data warehouse customer wins and set a record for new customer wins for the year. Wins in the fourth quarter included: one of the world's largest biotech companies, which is using Teradata to support analytics on real-world data outside of clinical trials; a top telco in China, which chose Aster for its social connections analytic platform; one of the world's largest auto manufacturers that purchased Teradata for cross-departmental data analytics, warranty analysis and predictive maintenance; Loyalty Management, located in the Netherlands, is implementing Teradata Appliances, Teradata Analytics for SAP and our marketing applications for its customer loyalty programs; and Anbang Insurance Group in Hong Kong is using Teradata to integrate and centralize insurance, banking and securities data to support its rapid business expansion. Significant upgrades and expansions included, METRO GROUP, a top global retailer, added Aster as a recommendation engine to its UDA to support marketing automation. Westpac Banking added Hadoop to its UDA. And one of the world's largest telcos, which is an IDW customer, is consolidating 7 different marketing systems into our Integrated Marketing Cloud to enable its marketers and their agencies to better control and manage their marketing efforts. In 2014, our Aster, Hadoop, UDA and related services had strong revenue growth. And we grew the number of customers using Aster by right around 50%. However, our overall Big Data Analytics revenue, which includes the 1000 Series appliance, came in at $80 million, which was short of our $100 million target for 2014. This was due to the timing of some larger 1000 Series deals. We are looking for strong big Data Analytics growth in 2015. We strengthened our Big Data Analytics portfolio in 2014 through M&As, such as with the acquisitions of RainStor, Revelytix, Hadapt and Think Big Analytics. And we've been adding to our Big Data Analytics portfolio through investments in R&D with innovations such as QueryGrid, graph, machine learning, text analytics and more. We have also broadened our strategic partnerships, which now includes Hortonworks, Cloudera, MapR and MongoDB. Now that many of the leading companies have worked with Hadoop and the broader analytical ecosystem, there's now, generally speaking, a more pragmatic view in the marketplace about the capabilities of all these various technologies. Furthermore, there is a growing appreciation of the costs and the complexities of managing the analytic ecosystem. Our UDA is key to simplifying the architecture, the management of multiple systems, and minimizing the costs and complexities. It is also clear the IDW will play a key role in the analytic ecosystem going forward. This week, The Information Difference annual Data Warehousing Landscape report ranked Teradata the strongest overall technology in 2014 and noted that our customers were ranked the happiest of those surveyed. Going forward, we will continue to enhance our data warehouse technologies, our UDA capabilities and to add to our Big Data Analytics portfolio. Turning to our applications business. We finished the year with revenue of $244 million and recurring revenue growth of only 2%. We are not happy with these results. On the one hand, we have done a pretty good job selling into our existing data warehouse customer base, where most of these are larger enterprise customers that have been implementing our on-premise applications. On the other hand, we have not been focusing and investing at the appropriate levels to take advantage of the faster-growing integrated marketing cloud opportunity that we have in the broader market. To better address this opportunity, we created an integrated business unit for our Marketing Applications at the start of the year that now includes R&D, sales, marketing, consulting and services. In addition, we moved our nonmarketing applications to Teradata Labs so that we can make this business 100% focused on marketing applications. We believe this will enable us to have a better focus and alignment for operational decisions and execution and also for longer-term strategic decision making. This in turn will help us to better serve our customers and to grow our revenues. We will continue to increase our marketing demand creation investments to reach the broader market that we started last year. We are already generating significantly higher leads and expect this to convert to higher orders and revenue over time. And we continue to increase our R&D investments for our Marketing Cloud as well as add capabilities through M&As. In Q4, we acquired the mobile marketing provider, Appoxee, which provides us with mobile push capabilities. And earlier this year, we acquired a social media monitoring company as well as a digital marketing consultancy. The good news is that we have leading marketing application solutions as evidenced by the various industry analyst reports, and we continue to enhance them. Just this week, Gartner again named Teradata as a leader in marketing resource management, noting our broad and deep solution, the advanced maturity of our MRM customers, our focus on client value and our continued market traction. In 2014, we made good progress with our Teradata Analytics Cloud. In the fourth quarter, we added our first customers in Canada, Latin America and in the U.K. Teradata provides a wide range of cloud analytics solutions from a fully functional IDW to a data warehouse, to discovery analytics with Aster and Hadoop, to doing specific functions, such as disaster recovery and test and development. Turning to guidance. Given the currency and other headwinds, we are expecting revenue growth as reported to be flat to down 2% in 2015 and up 3% to 5% in constant currency at this point in time. Currency is estimated to have a negative 5% impact on revenue or about $130 million. And we expect a 1% to 2% revenue headwind as we continue to grow our Teradata Cloud and our subscription revenue. Our recent top 50 customer survey for 2015 showed that the vast majority of overall IT budgets will be flat or down again this year with security and mobile being top spending priorities. In addition, we are expecting to slow start in 2015 with a revenue decline in Q1 due to currency and also going against the most challenging prior year quarter comparable. We expect non-GAAP EPS to be in the range of $2.50 to $2.70 for 2015, which reflects an estimated $0.22 impact from currency. 2015 will be a year of investment. We are increasing investments by about $50 million, primarily aimed at our high revenue growth opportunities, Big Data Analytics, Marketing Applications and our Teradata Analytics Cloud. These investments will be focused on R&D and demand creation to reach the broader market for all of our solutions. Since the majority of the revenue in these high-growth markets is subscription and services, we will not see a meaningful impact on revenue growth in 2015. So short term, these investments will be impacting our profitability and our earnings per share in 2015 but should lead to higher revenue growth and higher earnings per share in 2016 and beyond. With that, I'll now turn the call over to Steve to provide more financial details. Steve?

Thanks, Mike, and good morning. Fourth quarter product revenue of $360 million was down 3% from the fourth quarter of 2013, down 1% in constant currency. For the full year, product revenue was flat, up 1% in constant currency. In the quarter, services revenue of $401 million was up 1% from the fourth quarter of 2013 and up 6% in constant currency. For the full year, services revenue was up 3%, up 5% in constant currency. Within services revenue, in the quarter, consulting services revenue was $225 million, flat versus the fourth quarter of 2013, up 5% in constant currency. Maintenance services revenues was $176 million, which was up 2% from Q4 2013 and up 6% in constant currency. For the full year, consulting services was flat, but up 2% in constant currency and maintenance revenue was up 7%, up 8% in constant currency. Overall, currency created a 4-point headwind on the reported revenue growth for the quarter, which was 2 points higher than what we had previously assumed. For the full year, currency created a 2-point headwind, which is twice was much as the 1 percentage point impact we expected on our full year results when we provided our commentary at the time we announced our third quarter results. Not only did currency have a meaningful impact on our year-over-year revenue comparisons, but it also negatively impacted our profitability as approximately 1/3 of the currency impact on revenue hits our operating income. At this time, I'll provide color on the global 2014 revenue contribution by industry vertical to our Data Warehouse, Big Data and consulting services revenue. These contributions do not include maintenance or applications revenue. The following significant industry verticals contributed the same percentage of revenue in 2014 and 2013: financial services 31%, communications 19%, retail 14% and manufacturing 13%. With respect to the other industries, health care contributed 6% of our revenue versus 8% in 2013; government was 7% of our revenue, up from 6% in 2013; travel and transportation also contributed approximately 7%, up from 6% in 2013; energy and utilities generated a little more than 1% of revenue in each year; while Other accounted for the remaining 2% in both years. In terms of year-over-year revenue change, all industries were up 1% to down 3% except: travel and transportation, up 20%; government, up 14%; energy and utilities, up 8%; and health care, down 16%. During my discussion today, except where otherwise noted, I'll be addressing margins and expenses on a non-GAAP basis, which excludes stock-based composition and other special items. Product gross margin in the fourth quarter returned to the mid-60s as anticipated, specifically 65.8% compared to last year's Q4 product margin of 68.5%. The primary drivers of the change were deal mix and product mix. For the full year, product gross margin was 65.2% compared to 66.2% in 2013. The lower margin in 2014 was primarily the net result of increased FAS 86 amortization. Services gross margin in the quarter was 48.9%, up 200 basis points from the 46.9% in Q4 2013. The increase was driven by improved maintenance and consulting yields. Services gross margin for the full year was 47.6%, similar to last year's 47.5%. Overall gross margin was 56.9% in the fourth quarter versus 57.3% in the fourth quarter of 2013. For the full year, gross margin was 55.5% compared to 56% in 2013. The net decrease was largely due to the increased amortization of FAS 86. Turning to operating expenses. SG&A expense of $198 million was only $1 million higher than the fourth quarter of 2013. For the full year, SG&A was 1 -- $715 million, a modest 2% increase from the 2013 level. Research and development expense in the quarter was $48 million, up $9 million from the fourth quarter of 2013. For the year, R&D increased 9% to $180 million. For both the quarter and the full year, the increase in R&D expense was primarily due to additional investments, including acquisitions in our Big Data and Marketing Analytics Solutions. Total R&D spend for the fourth quarter, which includes the R&D expense just described plus the additions to capitalized software costs from the cash flow statement less capitalization of internally developed software, was $64 million. This compared to $60 million in Q4 2013. Year-to-date, total R&D spend was $248 million or 20% of our product revenue versus $237 million in 2013. As a reminder, these capitalized costs, when amortized, are classified in the income statement as product cost of revenue, which reduces product gross margin. As a result of these items, operating margin for the quarter was 24.6% versus 26.7% in Q4 2013. For the full year, operating margin was 22.7% versus 23.8% in 2013. Our non-GAAP effective tax rate for the fourth quarter was 25.1% versus 29.4% for the same period in 2013. The difference was due to a higher proportion of foreign pretax earnings in 2014 versus the prior period and a $4 million discrete tax benefit for the retroactive restatement of the 2014 U.S. Federal Research and Development Tax Credit recognized during the fourth quarter 2014. The full year 2014 non-GAAP effective tax rate was 27.2%, 1 point lower than the 2013 tax rate due to higher proportion of foreign pretax earnings in 2014 versus the prior period. Looking forward. For 2015, we expect the GAAP effective tax rate to be approximately 26% and the non-GAAP effective tax rate to be approximately 27% to 28% with the actual rate being heavily dependent on our earnings mix. In addition, both tax rates presume that the U.S. R&D tax credit will be reinstated in 2015. However, our quarterly effective tax rates will be negatively impacted by approximately 80 basis points until such time the credit is reinstated. In terms of earnings per share. Our Q4 GAAP EPS was $0.77 compared to $0.68 in Q4 2013. Adjusting for stock-based compensation and other special items, which equated to $22 million or $0.14 in the quarter, our non-GAAP EPS was $0.91 compared to $0.88 in Q4 2013. For the full year, GAAP EPS was $2.33 compared to $2.27 in 2013. Stock-based compensation and other special items negatively impacted our full year GAAP net income by $85 million or $0.53 per share in 2014 versus $82 million or $0.49 per share in 2013. Adjusting for these items, 2014 full year non-GAAP EPS was $2.86 versus $2.76 in 2013. Turning to cash flow. Net cash provided by operating activities in Q4 was better than expected at $97 million in Q4 2014. This was a meaningful increase over the $63 million in the fourth quarter of 2013. The strong cash flow performance was primarily due to net changes in accounts receivable due to timing of collections. After $35 million of capital expenditures, which include additions of capitalized software development costs and expenditures for property and equipment, versus $38 million in the fourth quarter of 2013, we generated $62 million of free cash flow versus the $25 million of free cash flow generated in Q4 2013. Free cash flow in 2014 was $551 million versus $372 million in 2013. The timing of accounts receivable collections led to the higher free cash flow versus 2013. Going forward, due to the expected differences between free cash flow and net income, such as stock-based compensation and acquired intangible amortization, we now expect full year free cash flow to be within a range that is up to $50 million higher than GAAP net income. Moving on to the balance sheet. We had $834 million of cash as of December 31, 2014, up $139 million from December 31, 2013. Of this balance, over 90% is held offshore. During the fourth quarter, we repurchased approximately 6 million shares for $268 million. For 2014, we repurchased approximately 13 million shares of our stock for $560 million. To fund a portion of these share repurchases in the fourth quarter, we drew down $220 million on our credit facility as of 12/31/2014. As of December 31, 2014, we had approximately $394 million of share repurchase authorization remaining available for additional share repurchases. Additionally, we repurchased 2.1 million shares in the first quarter of 2015 at a cost of $92 million. As a result, we have now approximately $300 million of share repurchases authorization remaining. We also used approximately $20 million for tuck-in acquisitions during the quarter, $69 million during the year. With respect to accounts receivable, accounts receivable decreased $98 million in Q4 2014 versus Q4 2013. Days sales outstanding was 83 days as of December 31, 2014, compared to 97 days at December 31, 2013. And finally, total deferred revenue was $388 million as of December 31, 2014, which was down $27 million from December 31, 2013. As I transition into the guidance discussion, I just want to highlight a few items. As the market and our business continues to evolve, we are stepping up our investments in our Big Data Analytics and application businesses in 2015. We expect to increase our investments by approximately $50 million during the year in various aspects of our business, which should lead to an improving situation in 2016. Even though our operating income and EPS will be negatively impacted in 2015 by these investments, we expect revenue, operating income, recurring revenue and EPS to see improvement in 2016 and beyond. However, for 2015, as it relates to currency, assuming the currency exchange rates as of January 30, we expect currency to create a 5% headwind to our full year revenue comparisons in 2015 with also a 5% headwind in Q1 2015. As it relates to revenue, we expect reported revenue to grow in the range of minus 2% to 0% or 3% to 5% when measured in constant currency. This would translate into a full year reported revenue in the approximate range of $2.677 billion to $2.732 billion. Correspondingy, in terms of EPS, we expect GAAP EPS in the $1.91 to $2.11 range, which translates to $2.50 to $2.70 on a non-GAAP basis when excluding stock-based compensation expense and special items. Currency is obviously having a big impact on many U.S.-based companies that have a high percentage of their business internationally. For Teradata, approximately half our business is done outside of the U.S. As a result of the currency impact we see on our top line revenue growth, we expect about 1/3 will flow through to impact operating income. If you adjust for currency, our 2015 constant-currency non-GAAP EPS would be in the $2.72 to $2.92 range. However, to reiterate, our non-GAAP reported EPS guidance range for 2015 is $2.50 to $2.70. Other specific items impacting our 2015 guidance include the following: One, decrease in FAS 86 capitalization of $5 million to $10 million occurring in 2015, especially pronounced in the first part of the year with $7 million decrease expected in Q1. As a reminder, decreased FAS 86 capitalization has the effect of increasing the amount of R&D expense reported on the income statement. Second, increase in incentive variable compensation cost due to not achieving our bonus thresholds in 2014 but assuming in our plan we reach the thresholds in 2015, thereby creating an increase in incentive comp of approximately $30 million. Third, full year GAAP effective tax rate of approximately 26% and non-GAAP effective tax rate of approximately 27% to 28% that is heavily dependent upon the earnings mix. In addition, both rates presume that the U.S. R&D tax credit will be reinstated in 2015. However, until such time the credit is officially reenacted, our effective tax rate for each quarter will be negatively impacted by approximately 80 basis points. Fourth, weighted average shares outstanding for the full year is expected to approximate 146 million but naturally higher in Q1. And finally, specifically as it relates to Q1 2015, we expect reported revenue to decline as our international region will face an approximately 13-point currency headwind. And our Americas region compares against an 8% growth rate in Q1 2013. As a result of these factors and our anticipated Q1 revenue mix and including our increased expenses, operating income will be significantly below Q1 2013's results. In closing, we are proactively investing in our businesses, including stepped-up R&D initiatives, sales support and demand creation resources for both our Data Warehouse Analytics business as well as our Applications business in order to drive future revenue growth and further enhance our technology leadership position. And with that, we are ready to take questions.

[Operator Instructions] And our first question comes from the line of Raimo Lenschow of Barclays.

First question is for Mike on the guidance for the year. So if I look in 2014, we ended up at 3% constant-currency revenue growth. Now the new guidance assumes, on constant currency, 3% to 5%. So we look like we're stabilizing to actually slightly accelerating. But when you talked about the items of investment, you talked about 2016 acceleration. So can you talk us through the puts and takes for that guidance number?

Yes. Raimo, this is Mike. Basically, when we look at 2015, there are a couple of additional headwinds, such as our cloud and subscription business for our Data Warehouse Analytic business will continue to grow and have an impact of 1 percentage point or 2 points on growth. We see improvement in 2014 in a good trend in the top 50. We feel we're -- in the Americas, we feel we're pretty stable there. We basically have a lot of good things going if you look at it going into 2015. So we actually, we have the guidance at a 3% to 5%. You could look at it outside of some headwinds of transitioning some of the business to subscription and cloud, we're looking at 4% to 6%. And I think the more difficult thing when you look at the 3% to 5% guidance is we're making the investments and we're playing offense in a very difficult environment. And those investments are going in to our high-growth opportunities, which are Big Data Analytics, our Applications business and our Cloud, which basically is more of a subscription model. The bulk of the revenue is in a subscription model and you kind of recoup the revenue over 3 years. So we can't move the dial a lot in 2015, but what we're looking at doing is building up our recurring revenue file for all those businesses during the year and exit the year with a larger increase in our annual recurring revenue final value that'll set the stage in 2016 for further growth. So just to make sure I'm being a little clearer, we're making investments in something where the revenue comes slower, but we're going to build up the file value of it in 2015, which will benefit us in 2016.

Your next question comes from the line of Wamsi Mohan of Bank of America Merrill Lynch.

Just to follow-up on Raimo's question here. Your revenue guidance is reflecting a slight improvement here in constant currency. So do you think that'll be driven more by Americas or international as you look out in 2015? And are you -- I heard you say, Mike, that you're expecting stability. Should we think that the top 50 will be flat in 2015? And lastly, you made the comment on the Big Data portfolio of coming in at $80 million. Just wondering if you can give us a dollar expectation here going into 2015?

Okay. In terms of where we see the growth coming in constant currency in 2015, we expect EMEA -- excuse me, our international business to grow a little bit more than what we're seeing in the Americas. So that's how we've modeled 2015. Regarding the top 50 stabilizing, I do think we have a good shot that the top 50 could be flat and stabilized in 2015. I'm not exactly counting on it, but I do think there's a good opportunity that it could be flat or it could even grow in 2015. I think your last question, Wamsi, was around the Big Data revenue, of which we missed this year, and we're at -- finished at $80 million. There -- we have a target for 2015 of about $150 million in revenue, so in that neighborhood of $150 million in revenue. And I believe that's a very reasonable target, and we could come up plus or minus $10 million, but we've got our sights set on $150 million.

Your next question comes from the line of Derrick Wood of Susquehanna International Group.

Steve, could you give us a sense how you expect gross margins to trend in 2015? And then I guess, Mike or Steve, I mean, can you give us thoughts as to where you think long-term growth rates can go once we transition more to the cloud and investments start paying off? Where would you like to see long-term revenue growth rates? And maybe where operating margins could stabilize at?

Okay. Derrick, yes, as you said, I'll address the gross margins, and then I'll turn over to Mike on the long-term growth rates. But from a product gross margin side, this year, we had about 100 basis points impact on our product gross margin due to FAS 86. I see a 50 basis point headwind on that in '15. So product gross margins, we finished the year about 65 plus. We could be in that plus or minus that 65 range of that FAS 86 headwind for product gross margin. On the services gross margin, that's where our Big Data consulting, Think Big, is captured. We're going to, as Mike indicated, continue to make investments in that capability from a cost side. So the services gross margin, we finished probably around 47.5% for the year. We could be down because of those investments 100 basis points, really focused on that Think Big consulting resources expenses, which gets captured -- reflected in our services gross margin. So if you look at the overall gross margin, you could see we're basically at, Derrick, 55.5% for the year. We could be down under that, call it, 100 basis points plus because of those investments on Think Big -- big data consulting and that FAS 86 headwind of 50 basis points for 2015. So Mike, do you want to -- his question on the longer-term growth?

Okay. Derrick, on the longer term, I mean, if you look at the trajectory we're on, we're making some baby steps here with 2% in constant currency in 2013 and 3% in 2014. You look at our guidance, you take the midpoint of it, it's 4%. I think if you look where we're headed longer term, I'll start on 2016. I think it's very reasonable, very reasonable with the investments we're making and everything else, that we should be growing mid-single digits or higher, okay, in 2016. And then I think if you look at the business longer term, out beyond 2016, we absolutely have the opportunity to grow high single digits. So we've been making a lot of progress in areas that have been softer the past couple years with the top 50 and some of these other things, we're taking action, we're investing heavily into the big growth opportunities, in the Big Data Analytics. I love our position and how we've solidified our portfolio there and we continue to grow it. It is mostly a subscription kind of model. But over time, it is going to contribute meaningfully to growth. And I like the opportunity, we have to get back on track with our marketing applications. So it's really all about executing right now and revenue is going to set up for good things to come in the years after.

Your next question comes from the line of Phil Winslow of Crédit Suisse. Philip Winslow - Crédit Suisse AG, Research Division: So I want to get some commentary on just your expectations in sort of by the verticals. I mean, you gave us some of the color on 2014. But when you look at 2015 by verticals, are there some where you just expect sort of just less of a headwind or maybe a turnaround in seeing growth? Just going back to your comment about sort of the baby steps idea, just how do you mix that. And then just one quick follow-up.

So I think as we sit today and take a look at this, first of all, 2014 was a mixed bag. Steve gave the results globally for the industries. And when you look at it by geographies, international and the Americas, there were some pretty good swings there. So financial services was down low double digits in the Americas, but it was up double digits in international. Retail was up a lot in international, down in the Americas. So I think I would give you a different answer when you look at it by geography. I do think retail is in a tough environment here in the U.S., and I wouldn't expect that to be a big uptick when we look at 2015. I think financial services, we had a tough year in the Americas, but I think it won't hurt us to the degree it did in 2014. A lot of the spending and the priorities is moving to security and things like that, but in some of these other industries where we're underpenetrated, like manufacturing, I expect continued good growth. Communications industry, media and entertainment has been a good growth market for us here in the U.S. in 2014, and I would expect that would be a good one in 2015. So it's a little bit of a mixed bag. But generally speaking, when you view it by industry segments, generally, we have pretty good trends going. Philip Winslow - Crédit Suisse AG, Research Division: Well, I assume -- I hope, financial services will do better in 2015, too. But just one quick follow-up to that, too. Just on the Big Data side. You talked about maybe some pushout of some larger deals. Just maybe some more color there and sort of was it by a vertical. Or was it feature? Or just sort of why the pushout and then just sort of what the reason was from the customers?

Yes. These things are a little frustrating when we get some of these large transactions going and they hit, and they don't hit. So we did have a couple of larger 1000 Series that pushed out into 2015. So we'll capture them here in 2015. At the same time, we did have some other non-Big Data that came into the fourth quarter. And it's normal puts and take, but we're so riveted on the Big Data Analytics and the revenue we're generating there, and we really thought $100 million, in a way, was a layup this year. And yes, it's disappointing we had a couple of slips there. But the core Big Data Analytics business, outside of the 1000 Series Appliance, did have very, very strong growth, and that's where a lot of our investing is going into. So the whole Aster, Hadoop, UDA and everything else, it's been growing rapidly. It came from a small base, of course, 3 or 4 years ago. But it continued to go very well in the year. So in that regard, I'm a little less concerned of our miss but nonetheless disappointed.

Your next question comes from the line of Bhavan Suri of William Blair. Bhavan Suri - William Blair & Company L.L.C., Research Division: Just as a quick one on gross margins and not longer-term gross margin, but if you were to compare the on-premise EDW business and the equivalent cloud-based business, any color on sort of the delta in gross margins between the 2?

No. Bhavan, when we look at the pricing, it is pretty consistent over the term of that relationship. And so you'll have more services component upfront on that. You'll have more costs associated with that internally because you're hosting it, okay. And so the hosting, pure hosting gross margin, because of those costs, are down. But bottom line, if you get down to the operating margin line, they're pretty consistent over the term of the relationship. Bhavan Suri - William Blair & Company L.L.C., Research Division: On a dollar basis, but not on a margin basis.

On a -- over -- because of the mix, the services, from a -- bottom end margin -- operating margin perspective pretty consistent all the way through. But again, product gross margin, yes, overall gross margin, you'll see it down because of the mix. Bhavan Suri - William Blair & Company L.L.C., Research Division: You would. Okay, okay. And then when I look at -- and one last one from me, but when you look at the sort of win rates and the new customer adds, something, Mike, we've chatted about before, they've been pretty strong. But you haven't seen that flow into the EDW or IDW business in terms of sort of that doubling on average every couple of years and sort of that cycle sort of upticking because you had a few quarters now, especially in '14 and then even late '13, where you had a lot of new customer wins in the IDW side, but we haven't sort of seen that business sort of growing. In fact, that seems to -- the Big Data piece seems to be growing faster. So help me understand how we should think about that given that those wins have been -- the customer counts have been very solid?

Bhavan, yes, your observation is correct. What's happening is we've gone very broader in the market, and that's what's enabled us to capture a lot more new customers. And in the mix -- so if you look at the mix within the record quarters and years and uptick we're having in new customer wins, we're having a bigger mix of customers as a percentage, I'd say, outside of the Fortune 500 or Fortune 1000. So when you look at it in aggregate, the dollar uptick we're getting in revenue is smaller than when if the mix had stayed stagnant with the number of large customers we're winning. So the number of large customers we're winning, it's not like it's decreased meaningfully or anything else like that, but we do have a different mix of customers. The other thing is, in this environment the past couple years, the spending is coming a little bit slower on the IDWs, whether it's an existing customer, some of our newer customers, so we may have to tweak the model a little bit. But at the end of the day, we're putting more footprints out there and what's laying out there is more opportunity for revenue growth coming from it. But we haven't seen to the degree -- we've received revenue growth but not to the magnitude we're used to seeing right now.

Our next question comes from the line of Joe Wittine of Longbow Research.

Are you able to provide a little bit more insight into, I guess, what drove you to up the investments here? It seemed like from the prepared comments that the lion's share of the incremental investments are in the marketing apps business. So from a high level, is the impetus to raise it here something that was missing in the strategy in that business and you need to penetrate some new accounts? Or just some more insight in the kind of your thinking as to what drove this uptick?

Joe, first of all, we've been increasing the investments in these areas, Big Data and in our Marketing Applications business year-to-year. And this year, we're actually stepping it up even further. And if you look at these investments, there's actually a little more going in the Big Data out of the $50 million that we cited versus our Marketing Applications. And what's driving it is just the opportunity that we see there, and what's great is, in this Big Data Analytics thing, it's kind of a new battleground, and there's all kinds of new opportunities and new things that are missing out there with tools and everything else to manage the analytical ecosystem and new point solutions and on and on and on. So the sea of opportunity, we could invest more than what we're doing today, and it's basically prioritizing what we see are the biggest opportunities in Big Data as well as in applications. And a lot of it is R&D, but also a lot of it is the demand creation. So we're trying to go bigger and broader outside the Teradata user base and outside the large enterprise customers traditionally where Teradata has played. And we've got to invest in inside sales and marketing as well as for both Big Data Analytics and as well as the Marketing Applications. And we got to invest in those things to go broader and more mass marketing in addition to the more experts and more selling expense in the field.

That's helpful. And I know you don't talk about adding new territories too much anymore, but is there any of that in this uptick? Or is this more along the lines of adding capabilities to the existing teams, the existing sales teams that are in the field?

We did add some territories last year, and we probably -- we'll be adding some territories this year. We have slowed it down because we ramped up so many territories, there's the opportunity to optimize them so you can combine them. There's all kinds of things you can do and not necessarily reduce your coverage from a territory perspective but actually increase it. But it gets it -- priorities in our investment and spending, and we're just seeing so much opportunity outside of the large enterprise accounts that we're after in the broader market.

Your next question comes from the line of Katy Huberty from Morgan Stanley.

Can you just talk about what drove the improving growth from the top 50 accounts in 2014? Was that floor sweeps, capacity expansion or just selling the new product portfolio? And then just on floor sweeps in particular, what are your expectation in terms of any uptick in 2015 and how that could impact product growth and margins?

Katy, thanks. The top 50 regarding floor sweeps, we can't point to a meaningful change regarding floor sweeps from 2013 to 2014. I do think what we're seeing is some pent-up demand or capacity, some of the basis at a situation where they need to add capacity. So we're benefiting from some of that. And the other thing that's happening is we've broadened our portfolio. And in a lot of these top 50s, we're heavily engaged with our UDA, Hadoop, Aster and Marketing Application solutions as well. So it's more along the lines of broader full portfolio going into the top 50, some that have been sweating the assets or adding capacity, and those are the primary drivers.

And you don't expect any meaningful change in floor sweeps this year?

Yes. Katy, right at this point in time, in our outlook, our forecast guidance for '15 is just pretty consistent with the -- between years. We're not anticipating anything significant.

With that, I would like to conclude the call. And I'd like to comment -- I want to reinforce, we're not satisfied with our 2014 results or the 2015 guidance we've just provided. So there's no confusion there. But we believe the investments we're making in our high-growth opportunities will position us well in the longer term, for longer-term revenue and for longer-term earnings growth. And I'm going to repeat, we're continuing to play offense in a difficult environment, and we believe we have a great opportunity. It's all about getting after it and executing as best as we can and better than we have. With that, I want to wish you all a good day. Thank you.

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