Good afternoon. My name is Cameron and I will be your conference operator today. At this time, I would like to welcome everyone to the Teradata Third Quarter 2024 Earnings Call. [Operator Instructions] I would now 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 third quarter earnings call. Steve McMillan, Teradata’s President and Chief Executive Officer, will lead our call today; followed by Claire Bramley, Teradata’s Chief Financial Officer, who will discuss our financial results and 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 and that could cause actual results to differ materially. These risk factors are described in today’s earnings release and in our SEC filings, including our most recent Form 10-K and in the Form 10-Q for the quarter ended September 30, 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 and 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 on 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 our Investor Relations page of our website at investor.teradata.com. A replay of this conference call will be available later today on our website. And now I will turn the call over to Steve.

Thanks, Chad, and thanks, everyone, for joining us today. In Q3, Teradata grew our cloud business delivered enhanced technology innovations that strengthen our hybrid trusted AI position and added to our partner ecosystem, all core elements of our strategic plan. Cloud ARR grew 26% year-over-year as reported in Q3 with a solid cloud net expansion rate of 120%, and we have already closed 1 8-figure cloud deal in the fourth quarter. Despite strong growth in cloud ARR, we have recently seen a change in our large transformational deals. Customers are planning to migrate workloads to the cloud in a more staged process. The total customer spend with Teradata is unchanged, and there is no impact on our total ARR. However, this shift results in a reduction to our cloud ARR and we are, therefore, lowering our 2024 outlook to 18% to 22% for the full year. We see an ongoing healthy growth in our quote business and continued migrations, which we anticipate is going to help us increase the mix of cloud in the future and help drive total ARR growth in 2025. The strength in the fundamentals of our business is clear serving customers’ needs across both our cloud and our on-prem businesses. We are increasingly seeing customers leverage our hybrid capabilities as they look to transform and commit to Teradata technology for the long term. As we have shared, we see that Teradata is increasingly becoming more strategic. The very large organizations we work with have both data in the cloud and on-prem and we believe we are uniquely positioned to address their needs with our differentiated hybrid platform. We remain comfortable in closing deals over time as evidenced by the 8-figure deal I mentioned. We’re seeing signs of greater engagement with both customers and prospects and improvement…

Thank you, Steve, and good afternoon, everyone. In the third quarter, cloud ARR grew to 38% of our total ARR, up from 30% at this time last year. We continue to demonstrate strong improvement in operating margin, profitability and free cash flow generation. Year-over-year free cash flow nearly doubled and our operating margin increased over 800 basis points. As Steve mentioned, we anticipate a different migration product within our large transformational cloud deals. The durable nature of our business model remains intact with over 80% of our revenue being recurring, delivering a gross margin of over 70% and a total operating margin of 20%. With the reiteration of our total ARR outlook, we continue to expect improvement in our overall retention rates going forward. Let me now share more details on our quarterly financial results, starting with revenue. Third quarter recurring revenue was $372 million, up 3% year-over-year as reported and 5% year-over-year in constant currency. Recurring revenue was driven by the strong growth in cloud revenue. We saw a small net benefit from upfront revenue in the quarter. Recurring revenue as a percentage of total revenue was 85% up from 82% from the prior year period. Third quarter total revenue was $440 million, flat year-over-year as reported and up 2% in constant currency. The year-over-year constant currency growth in recurring revenue was partially offset by lower consulting revenue. Moving to profitability and free cash flow. Total gross margin was 61.6%, up 130 basis points year-over-year, driven by our strategic focus on recurring revenue. Operating margin was 22.5%, up over 800 basis points year-over-year. Non-GAAP diluted earnings per share was $0.69, exceeding the top end of our guidance range. The primary drivers for the EPS outperformance were currency and upfront revenue. We generated $69 million of free cash flow in…

[Operator Instructions] Your first question comes from the line of Matt Hedberg with RBC. You may proceed.

Great. Thanks for taking my questions. Maybe one for Steve and then one for Claire, you noted sort of at the top of your mark, there was a change in how customers are thinking about cloud migration. I’m curious if you could just maybe double-click on that a bit more. Is this an industry-wide thing? Do you think it’s something that’s sort of unique maybe to your base? And I’m just sort of curious, has it changed sort of the medium-term outlook on cloud mix and kind of overall growth when obviously that cloud mix is part of a big part of sort of the total company acceleration.

Thanks, Matt, for that question, and I’ll let you come back to ask a clearer question afterwards. Fundamentally, we are seeing strength in our business, both from a cloud perspective and from an on-prem perspective. But as I said in my prepared remarks, we have seen recently a material change and the buying behavior in a handful of our large conversion deals. The way these customers are approaching their cloud strategy is in a more staged nature. They’re breaking down that cloud migration into smaller deals. And as they’re doing that, they’re actually leveraging the hybrid nature of our platform where they can run both in the cloud and on-prem. So to your point, we are seeing a mix change of committing in the cloud and on-prem. And so while initially, we’re less than the cloud, we don’t see a change to the total commitment or opportunity, and that’s why we reiterated our full year ‘24 total ARR gain. And in ‘25, we talked about returning to growth from a total ARR perspective. So we saw a handful of 8-figure deals essentially, in some cases, convert into a set of 7-figure deals.

Got it. That’s super helpful, Steve. And then maybe sort of a related question for Claire, to me, it feels like there’s a bit more higher priority on Q4 on-premise spending within your base. And I guess I’m wondering, I think a lot of us are wondering, do we see maybe a bit more of a December budget flush this year? And I’m wondering, did your guidance contemplate maybe a bit more of that given that historically budget flush, I think, tends to impact more on-prem than cloud. And then when you think about sort of cloud growth and maybe even reacceleration, what are the building blocks of that essentially?

Hi, Matt, yes. So just on your first part of your question with regards to budget flush, we haven’t factored any uplift from a budget for us. We’ve done a customer by customer pipeline analysis. And as Steve said, look at what we expect to close in ‘24 and factor that into our updated assumptions for both total ARR and cloud ARR. So no budget flush assumed for on-prem at the end of 2024 in December. With regards to as you look forward into the future, so I think just generally on 2025, I would say we’re still driving towards the metrics that we talked about last quarter. As Steve just mentioned, that means total ARR growth in 2025 and also growth in our free cash flow year-over-year in 2025, and we continue to anticipate a robust growth in cloud ARR in 2025 as well. So naturally, we’re not providing detailed guidance. And this quarter, we’ll provide it at our Q4 earnings, which is in line with when we would normally provide it, which is in February of next year.

I appreciate the answer to both of you. Thanks a lot.

Thanks, Matt.

Thanks, Matt.

Your next question comes from the line of Chirag Ved with Evercore ISI. The line is open.

Thank you so much for taking my question. Steve, if you think about the business over the next couple of quarters, given the mix change and customer approach to cloud, does this change how much you’re indexing on cloud versus on-prem in terms of your approach to innovation, contracts, renewals at this point? And what are you seeing to support and guide that decision-making process?

Thanks, Chirag, for the question. So I just want to reiterate, we are completely committed to our cloud-first strategy. We believe it continues to reposition Herida in the marketplace as modern and relevant for our customers. And we believe that the innovations that we develop from a cloud perspective, they actually enable additional capabilities on-prem. So as an example, I was talking about being able to bring your own language model. We are actually able to leverage our technologies and technology development to actually deliver that capability, both in the cloud and on-prem. So the focus from a strategic perspective, it’s very much to keep on that cloud first mission, cloud first, but not cloud only, is absolutely our strategy. I would say as well that as we look forward, the strength of our cloud pipeline still remains intact. We expect these customers to continue a migration path to the cloud with Teradata and we have continuously demonstrated that we are the [indiscernible] path to the cloud for some of the largest organizations in the world to move that complex, large workload to the cloud and utilize the Teradata technology set in the cloud. So because we’re not seeing that – we are not seeing any deterioration overall in the pipeline, we’re just seeing that time line of migration pushing out into the future, we remain committed to that cloud strategy and code execution and we believe it will still remain a fundamental part of our growth strategy as we move forward.

Great. And then, Claire, maybe one for you. Recurring revenue came in ahead of where the street was at for Q3 and you maintain the full year guide. Can you talk through what happened in Q3 and what you’re expecting in Q4 from the recurring revenue point of view?

Yes. So I think it’s just more of a linearity in the modeling, Chirag, so not a big difference in terms of what we’re expecting internally. We did see a slight benefit from more upfront revenue which hits both total revenue and recurring revenue, but that was more of a linearity change. So no overall change to what we’re expecting, just a slight shift between Q3 and Q4, which is why the full year guide remained unchanged.

Prefect. Thank you both.

Thank you.

Thanks.

Our next question comes from the line of Tyler Radke with Citi. Your line is now open.

Thanks for the question. Steve, I wanted to go back to the commentary you made around the staged migrations that you’re seeing with customers in terms of moving the cloud, I guess why do you think this is happening and why now? I mean, is this a macro budgetary-driven decision? I mean it would seem like budgets have been tight for a while. So what’s kind of your theory on why this is happening and why now? And just to clarify is this only customers that you saw in Q3, what makes you think that this was just a function of the sample size versus a broader trend that extends into next year?

Yes, Tyler, thanks for the question. So over the past couple of months, we’ve branded our customer marketing events, both in London and L.A. gave us the opportunity to talk in depth with a number of our customers regarding what their plans are and how they plan to move forward. Now we’re seeing an impact in a handful of our really very large deals. So that – looking at those 8-figure deals and where we’ve had appetite for customers to make a migration path with this and migrate their entire real estate to the cloud and one program, just like the deal that we signed early in the fourth quarter, the 8-figure deal that we signed. But we are seeing a handful of customers that are choosing to essentially take from their perspective, a less risk approach to these major transformational programs that they are executing. They’re still committing to Teradata and in many cases, they’re committing incremental spend with Teradata across both on-prem and the cloud. But for the cloud deals, we expect those to close in a more staged process. So instead of 1 8-figure deal, we’ll close multiple 7-figure deals over a longer time period.

Very helpful. And a follow-up on that for Claire. So last quarter, you talked about seeing similar cloud growth as your prior guide in 2025 is 2024, which I think was around 30% and $1 billion in cloud in 2026. Do you still expect $1 billion in 2026 or does this sort of change the trajectory of that cloud business ramping to $1 billion?

I guess, Tyler, just on that, I would say we still see a path to the $1 billion for cloud ARR in 2026. Naturally, we’re working with these customers on the detailed timing of their stage processes. So we will obviously update the cloud era for 2025 in February. We don’t anticipate to recover all of this in 2025, but definitely, we anticipate as Steve mentioned, some of these additional stages to close in 2025. So we’ll come back on the 2025 cloud ARR, but we still see that part to the $1 billion because, as Steve said, they’re still committing to migrate with us over time.

Great. Thank you.

Thank you. Thanks a lot.

Your next question comes from the line of Erik Woodring with Morgan Stanley. Your line is open.

Great. Thanks so much for taking my question guys. Steve, maybe I’ll start with you just it feels like Teradata has faced a bit of a perfect storm of headwinds this year between some on-prem erosion, some deal elongation and now supplied migration, timing dynamics. And I’m just wondering how can you be sure that the headwinds that you have encountered this year have nothing to do with competitive pressures. For example, longating cells cycling cycles are taking longer to migrate to the cloud. Is there a sign that those are – is there a risk that those customers are potentially evaluating maybe other cloud-native platforms? Just help us gain some comfort that this isn’t competitive risk and this is more just related to timing and maybe company-specific issues? And then I have a quick follow-up. Thank you so much.

Yes. Thanks, Erik. Look, we absolutely expect to convert these opportunities over time that are in the pipeline. And I want to refer to the fact that those customers are actually making commitments to us from both an on-prem and a cloud perspective. So they are – we expect them to start those cloud journeys with us. So we’re just seeing essentially a more staged approach to the execution. From a competitive perspective, I’m very proud of how we’re doing from a competitive perspective. I mentioned in my prepared remarks, one customer that had migrated to Snowflake that has recently made the decision to come back to utilizing the Teradata platform in the cloud. But I’m also really happy with how we’re doing from a competitive perspective against the newer players like Databricks. I made the reference to a Latin American bank that had migrated workloads from Databricks. And actually, they are utilizing Teradata, and they’re doing it twice as fast in terms of process and speed and it’s half the cost. And we’re continuously building up that catalog of competitive execution and competitive win backs. We are absolutely convinced of our lowest cost per query in comparison to the competition. I think what we see as we look at these very large deals and some of the largest organizations in the world, it’s really all about risk appetite, and for DC with Teradata as the least risk way of actually migrating to the cloud and getting the benefits of cloud technology. So, I think the way that they are using and deploying our technology set in terms of our hybrid capabilities is something that none of the other competition can actually deliver against. And so leveraging that hybrid capability as they execute through and a migration that serves [ph] a differentiated position, so that’s how we can be more assured that we are doing well from a competition perspective.

Okay. Thank you. So, that’s really helpful. And then maybe my follow-up is for you, Claire, which is, can you maybe just talk a little bit more about the change in gross margin profile of your recurring revenue base, given some of these mix shifting dynamics and what – and really when you expect that recurring revenue gross margin to kind of bottom and stabilize and start to expand? Has that timeline changed as you have now kind of thought about the different underlying mix between on-prem and cloud and your business? Thanks so much.

Thanks Erik. Yes. So, just with regards to gross margin, we have actually been very stable with our total gross margin and our recurring gross margin over the last couple of quarters. And I am pleased that even though we have been increasing the mix of cloud ARR, we have been able to offset the negative impact that, that has by an improvement in our cloud margin rate. So, seeing a continued improvement in cloud margin rate year-over-year and quarter-over-quarter and expecting that to continue, and we are seeing that offset the negative impact from the mix change. And I think as we look out into the future and we continue to increase the mix of cloud ARR, we will continue to maintain that stability.

Great. Thanks so much for that guys.

Thank you.

Your next question comes from the line of Howard Ma with Guggenheim. Your line is open.

Thanks. Steve, I want to – I understand you already gave a pretty thorough explanation of the stage migrations. But what can you point to further? I mean maybe – so I just – I was just brainstorming. I was thinking maybe it’s verbal customer commits around the timing of migration expansions, even if it’s not contractual, right, maybe you can share some data on conversations or maybe it’s telemetry data on – that support the stickiness on Teradata, or maybe you have a pronounced on-premise renewal base next year? So, really anything more concrete that could instill confidence that, that slower cloud migrations or what you are calling steady migrations won’t translate into future competitive losses?

Yes. Thanks for the question. Look, I would start off by saying like we are strategically positioned in all of these accounts that we are talking about. And overall, our pipeline remains strong. And our deal opportunity hasn’t really changed at the aggregate level. It’s just changed shape in terms of timing of execution. And also to the point we were just talking about, we have not had any lost cloud opportunities from that large deal set. And in fact our total ARR remains unchanged. So, the total customer commitment and spend commitment with Teradata has remained unchanged. If I look specifically in the second half in terms of our execution, we have actually got better renewal and retention rates in the second half of 2024. And that’s going to help power some of our total ARR growth as we move into 2025.

Got it. And for Claire, speaking of 2025, I respect that you are not giving any discrete guidance so far, but you are making some pretty big initiatives. I mean there is product initiatives at your recent customer conference, your go-to-market re-org is underway. Can you help – can you just paint a picture for us and help us understand when these initiatives will kick in. I mean we are in November already, right? So, as we look around the quarter to next year, how would they kick in into the numbers? And on the back of that, why should we not expect significant acceleration next year?

Yes. So, we are committing to a total ARR growth in 2025, Howard. So, we are committing to an increase, an improvement compared to 2024. And the three main drivers of that that’s supporting that total ARR growth in 2025 include a higher percentage of cloud, so that obviously drives more growth. So, we are anticipating robust growth in 2025, and that will increase the percentage of cloud. The other things as well that we are expecting a meaningful improvement in our retention rates, for the full year in 2025. And finally, we expect on-prem expansion improvement year-over-year as well. So, there is multiple things, including robust cloud growth that will be helping us to move back to total ARR growth next year, which obviously I would say, is a meaningful improvement compared to where we are in 2024.

Okay. Thank you.

Your next question comes from the line of Nehal Chokshi with Northland Capital Markets. Your line is open.

Yes. Thank you. Help us understand what it means in terms of change in year-end total workloads on Teradata given takedown cloud ARR, but no change in total ARR.

Hi Nehal. Thanks very much for the question. It’s as we have been executing these customer events recently, I had the opportunity to talk to a lot of our customers. And what we see is that they still have the requirement to operate data at an enormous scale and do that in the most effective and efficient way. And Teradata is definitely the platform that can enable them to do that. When we talk to them about the most recent capability developments, we have had both from analytics perspective, our analytic capabilities and database or in platform or utilizing the analytic capabilities of the environment in which they are working. These are all ways that our customers want to utilize the Teradata technologies. The thing that really resonated with our customers is the fact that we meet our customers where they want to be met. So, if they want to leverage the Teradata platform in the cloud, they can do that. If they want to leverage on-prem, they can do that. And if they want to do that in a hybrid environment, that’s something that Teradata can deliver uniquely in the marketplace in terms of giving that one platform across those environments. So, we still see a real demand in terms of utilizing the Teradata platform for these modern workloads and in modern environments.

So, the reason why I asked that question is because I thought that on an on-premise customer converts or in their on-premise estate to cloud, there is an expansion associated with that. So, if we have a slowdown in the cloud migrations, you would actually have less total ARR. Is that not correct?

Yes. So, Nehal, it’s a good point. We do normally and on average see an uplift at the point of migration. In the grand scheme of things, in terms of our total ARR range that we guided, we were able to build that in that range. So, yes, there is an impact linked to the reduction of the cloud ARR, but we have been able to absorb that in our total ARR previous numbers.

I see. Understood. Okay. And then of the $50 million takedown for cloud ARR for 2024, is there a significant concentration within that $50 million to like just a couple of customers?

I mentioned in the prior questions that there is a handful of customers where the deals have moved from eight figures to seven figures. And clearly, you just need a few of those, and you have quite rapidly build up that cloud ARR number. What I would say is, and it goes to that – the question about is it something systemic inside the marketplace. We are still seeing our customers committed to us and the message to execute on that cloud migration with us, and we will clearly capture the expansion that we have been talking about. But we are also seeing those customers actually looking to expand our overall spend with Teradata and the combination of both on-prem and cloud in many cases.

Got it. And then if I can sneak one more in. Steve, you cited a few customers within the quarter boomeranging back to Teradata or Snowflake, what’s the frequency of this type of customer case? And any change in that frequency that you are seeing relative to a quarter or a year ago?

Yes. We are definitely seeing that our platform becomes more and more performing and also the capabilities in our platform from an analytics perspective enabling us to compete for those data science workloads, for example, from Databricks. So, as we continue the development in our cloud-first strategy, it’s enabling us to go back with a win-back message and the ability to address customer requirements and customer needs that we haven’t been able to in the past. So, I believe our competitive position and will continue to improve over time.

Thank you.

Your next question comes from the line of Wamsi Mohan with Bank of America. Your line is open.

Hi. Yes. Thank you. Steve, can you perhaps just address the broader macro trends as well, where are you seeing maybe just in terms of expectations of spend going into ‘25? And large deal cadence, are you seeing any changes in the way those are progressing, not just in these cloud migrations that you have spoken about, but just in the base business as well. And I have a follow-up.

Yes, Wamsi, I will just reiterate that I think the fundamentals of our business remain very strong. We don’t see increased competitive pressures we talked – I talked in my prepared remarks about winning a bank in the Asia Pacific region against in a highly competitive environment. But we see the customer spend at to Teradata remaining strong, both now and into the future. And clearly, you know our business very well. We deal with some of the largest organizations in the world, so having that commitment has given us the confidence to say that we are going to return to total ARR growth next year. From a spend perspective, we are working to increase our addressable market with the capabilities that we are developing from an AI perspective. We are working with some large banks in the U.S. where we are actually deploying generative AI use cases in the Teradata platform, using hugging face language models as an example. So, we are starting to expand not only make sure that we might maximize our presence in enterprise data warehousing and data lake and data lake house, but also in terms of the analytical workloads that we can operate against. So, I am confident in terms of the opportunity that we will have as we move into the future.

Okay. Thanks Steve. And I guess just to follow-up on your point around AI also. You said 20% of your pipeline includes active AI sales engagement. How would you think about the rate and pace of this business? Is this something that’s got pretty long proof-of-life, proof-of-concept like timing, or do you think that you have something that’s that will translate much faster and this 20% pipeline will significantly grow a quarter from now?

Yes. I think as we look at the AI and GenAI, those data science projects, a number of them are failing, at a recent study, you said that more than 50%, 60% of AI and GenAI workloads are not moving out of proof-of-concept into production One of the reasons for that is operating at scale, what we are able to demonstrate for our customers is that we can actually take them from that idea and concept and then operationalize that at scale with all of their trusted data inside their ecosystem. And so I think as we look at our pipeline of opportunities and we are able to prove that out to our customers that we can pay them not just to lever on a proof-of-concept, but actually help them deploy these solutions at scale in the production environment, that’s really going to add to the tailwind for us as we move into the future.

Your next question is from the line of Derrick Wood with TD Cowen. Your line is open.

Great. Thanks. My first question, Steve, there is a lot of talk about growing adoption of Iceberg in the broader data analytics ecosystem. What are you guys seeing from your customers and do you think this changing cloud migration behavior has anything to do with companies contemplating data storage movements to Iceberg?

Yes. I think we talk to nearly every single one of our customers about how they plan to leverage an open table format on native object store. And we see that as a great opportunity for us. Our Cloud Lake platform supports open table formats. And we don’t lock our customers into one particular open table format. We have a strategy that we want to support both Iceberg and Delta Lake as an open table format. Now, if we look at that from a Teradata perspective, we see that again as looking to increase our TAM as we look at the amount of data that is in native object stores and putting structure around that data in native object stores, that’s something that the Teradata ecosystem only touches in a light way just now. As we look to the future, we look at that as an opportunity to, again, expand our addressable marketplace and the opportunities that we have in terms of unstructured data is often an order of magnitude larger than the structured data inside an organization.

Your next question comes from the line of Patrick Walravens with Citizens JMP. Your line is open.

Great. Thank you. So, Steve, I think you mentioned in your remarks that Hillary is going to be moving on and you are looking for a new Chief Product Officer. What is the – what are sort of the top characteristics that you are looking for in that individual?

Hi Pat. Thanks for your question. Just to be clear, Hillary is going to move on, but we are taking this opportunity to actually leverage the bench strength that we have inside the organization from both a product management, a product engineering and Chief Technology Officer perspective. So, I announced that Louis Landry is going to be appointed as our Chief Technology Officer. As we move into the future, I am nicely elevating the product management focus we have and inside the company and the product engineering focus that we have inside the company to have those roles report directly to me.

Your next question comes from the line of Raimo Lenschow with Barclays. Your line is open.

Perfect. Thanks for squeezing me in. Two quick questions, Claire, on the cash flow side, you outperformed this quarter, but yes, the full year unchanged and anything around timing of things that came in, in Q3, etcetera, that you want to point out? And then I have one follow-up for Steve.

Yes. To your point, Raimo, we were pleased with the performance of free cash flow. We anticipate there to be a slight linearity impact with regards to our working capital. So, slightly over-performed on DSO and BPO compared to our previous expectations. And so that would just be a linearity impact between Q3 and Q4. But we feel good about the meeting being in the range of our free cash flow guide for the full year, and it will be a similar increase in cash flow that we saw this time last year.

Your next question comes from the line of Austin Dietz with UBS. Your line is open.

Great. Hey Steve. Hey Claire. I know we have spent a lot of time on migrations and they are more stage nature on the call so far. But the cloud net expansion rate this quarter, it seemed to slow several percentage points. And I believe it’s a trailing 12-month metric towards that, the in-quarter piece would have slowed by more than that. So, do you mind just unpacking what you saw from a net expansion perspective this quarter? And then how should we think about that cloud net expansion rate over the near to medium-term?

Yes. Thank you, Austin for the question. So, as you mentioned, our net expansion rate was 120% in Q3 and is a trailing 12-month metric, so that’s a deceleration. And that was mainly driven by our healthcare vertical and also some of our European business. We do expect further deceleration into Q4 given the mix of migrations versus expansions. And as we look forward, we will obviously continue to monitor with the stage migrations that we see, what the impact will be in 2025. So, as a reminder, expansion at the point of conversion for the first 12 months is not included in our net expansion rate. So, we are also impacted by that as we update the migration timing of our customers’ migrations.

There are no further questions at this time. I will now turn the call back over to Steve McMillan for his final remarks.

Thank you and thanks everybody for the questions. The fundamentals of our business are strong, and we firmly believe in Teradata’s differentiated technology and future growth. We all remain focused on improving execution and accelerating that growth, and we remain committed to protecting and growing our free cash flow and returning that capital to our shareholders. Thank you all.

This concludes today’s conference call. You may now disconnect.