Teradata Corp (TDC) 2012 Q1 法說會逐字稿

Welcome to the Q1 2012 Teradata earnings call.

My name is John and I will be your operator for today's call.

At this time all participants are in a listen-only mode.

Later, we will conduct a question and answer session.

Please note that this conference is being recorded.

I will now turn the call over to Mr.

Gregg Swearingen, Mr.

Swearingen, you may begin.

Good morning and thanks for joining us for our 2012 first-quarter earnings call.

Mike Koehler, Teradata's CEO, will begin today by summarizing Teradata's Q1 results.

Steve Scheppmann, Teradata's CFO, will then provide more details regarding our financial performance, as well as our increased guidance for 2012.

Darryl McDonald, Teradata's EVP of Applications, Business Development, and CMO is also in the room.

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 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 GAAP results to our non-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 www.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 this conference call whether as a result of new information or future results.

I will now turn the call over to Mike.

Good morning, everyone and thanks for joining us.

We were pleased to get off to another strong start again in 2012.

Q1 revenue of $613 million was up 21% over Q1 2011, and up 22% in constant currency.

This was our highest organic constant currency revenue growth ever achieved in a quarter.

Q1 was also the second-largest quarter ever, next to Q4 in 2011.

Product revenue increased 31% and 32% in constant currency, which set a record for product revenue growth in the quarter.

Non-GAAP earnings per share grew 25% and non-GAAP operating margin of 23.9% was our second-highest quarter ever.

Turning to the regions, all three regions grew revenue double digits in constant currency.

The Americas led the way with $388 million of revenue, which was a 26% increase over our strong Q1 in 2011.

New customer wins included Blue Cross Blue Shield of Tennessee, which purchased a data warehouse and our Healthcare Logical Data Model to use as their foundation for their clinical healthcare analytics, along with our partner, SAS.

Our activity in healthcare is increasing, as these organizations are looking to Teradata for advanced analytics, to gain insight into clinical, patient, provider, and claims information for better medical outcomes and at lower costs.

JEVCO, a Canadian insurance company, became a new customer in the quarter as well.

JEVCO's IT environment had evolved over the years to include many data sources, data marts, and also duplication of data.

Leveraging our data warehouse, financial services logical data model, and our consulting services expertise, JEVCO is now centralizing and integrating data to reduce costs and provide better information for market development, risk management, and operations.

Cars.com, the leading destination for online car shoppers, also selected Teradata in Q1 as their data warehouse provider.

And Liverpool, Mexico's largest department store retailer, selected Teradata to improve marketing and operations.

Customer upgrades and expansions included Supervalu, which added an Aster Data appliance to their ecosystem of Teradata analytics solutions.

Aster is a complementary extension of their existing Enterprise Data Warehouse and is slated to deliver rapid analytics for large multi-structured data sets spanning eight years of history.

A leading US telecommunications company is also adding an Aster Data appliance to analyze click-stream data in order to improve targeted advertising to mobile devices and more rapidly identify potential customer churn.

Southwest Airlines, which is leveraging their EDW to help integrate data from its acquisition of AirTran, and to help improve forecasting and revenue management.

And at Cincinnati Bell, which is now implementing the Aprimo Marketing Studio on demand to improve marketing in its wireline and wireless businesses across both residential and business markets.

Other upgrades and expansions in the quarter included Arrow Electronics, Comcast, CBS, Kaiser Permanente, Macy's, Safeway, Unilever, WellPoint, and Banco Agrario in Colombia.

Turning to Europe, Middle East, and Africa, revenue of $136 million was up 9% over Q1 2011, and up 13% in constant currency.

New customer wins in EMEA included El Corte Ingles which is the largest retailer in Spain, and is implementing both Teradata's Enterprise Data Warehouse and Aprimo Relationship Manager.

They will use the Data Warehouse to enable business users to do their own detailed analytics, and Aprimo Relationship Manager to improve marketing campaigns and customer interactions.

Another retail new customer win was Jeronimo Martins, the second-largest retailer in Portugal.

Jeronimo Martins will now use a Teradata Data Warehouse to integrate all of its sales, store, and inventory data to improve operations and profitability.

And EADS France, a leader in aerospace and defense; it's Airbus military division will use our Data Warehouse and our Manufacturing Logical Data Model to expand mission-critical services such as monitoring the usage and health of its fleet to improve the efficiency of its maintenance, repair, and operations activities.

Some of the major upgrades and expansions in the quarter included Repsol, in Spain, Aviva, the UK's largest insurer and the sixth largest globally, which is creating a single view of their customers across their general insurance, life, and healthcare businesses.

This will also enable Aviva to build marketing campaigns through multiple channels to increase average product holdings across its customer base, run campaigns that enable cross-sell, upsell, and retention activities, and drive overall revenue growth.

Additional expansions from EMEA included Nordea Group, Telenor Pakistan, DHL, and Vodafone Spain.

And finally, Asia-Pacific and Japan generated $89 million of revenue in Q1, which was up 20% over Q1 2011, and up 18% in constant currency.

Major new customer wins included one of Japan's leading airlines, which will use our Data Warehouse to integrate customer, operations, and fuel data as well as to merge and analyze passenger name records and weblog data to improve its marketing.

Another major new customer win was a leading auto manufacturer in India, which is implementing our Data Warehouse and Manufacturing Logical Data Model to analyze its inventory and warranty services to better meet demand and to improve customer satisfaction.

We saw a number of expansions and upgrades across APJ, including Toho Bank, Resona Bank, Yamanashi Chuo Bank, and Club Tourism International in Japan.

And in Australia we had expansions at Telstra, and also in government to address health and human services management, tax compliance, and defense logistics.

Our strategic growth initiatives have been a key contributor to a higher growth rate the past couple years, and will continue to be a key contributor going forward.

Consulting services revenue grew 15% in constant currency in the quarter, and we continue to add industry and technical consultants to meet increasing demand.

We added several new sales teams in Q1, and we're on target to add another 35 to 45 new territories for the full year in 2012.

Our number of partnerships continues to increase.

In Q1 we added a couple of new strategic partnerships, including Narus, a leading cybersecurity company that can now provide real-time security and network monitoring for Teradata customers.

And Hortonworks, the leading contributor and distributor of open source Apache Hadoop.

This partnership will allow customers to ingest and transform big data in a Hadoop environment, with deep integration to Aster Data and Teradata for analytics.

Last, we continue to increase investments in R&D.

Recent announcements from Teradata Labs included our Active Data Warehouse Private Cloud, which is based on our 6690 Enterprise Data Warehouse platform.

A key benefit of Private Clouds is to increase the utilization of IT computing resources.

This in turn reduces data center footprints and associated costs as well as CapEx and support for hardware among other things.

According to industry analysts on average, the utilization of computing resources in corporations today is only 20% to 25%, and that includes data marts.

Teradata's Enterprise Data Warehouses have been consolidating underutilized data marts for years, integrating the data in those centralized Data Warehouse that can serve multiple users and organizations.

And as a result, most of our customers have utilization rates that are somewhere between 90% to 100%.

Teradata's Virtual Computing Storage software and workload management capabilities allow us to meet the demands of thousands of concurrent users, queries, and workload complexities, required in a private cloud, as well as providing mission-critical availability on commodities, servers, and storage.

The Teradata Active Data Warehouse Private Cloud provides significant cost savings, a single version of information for the business to operate from, and better information from the integrated data, versus data mart silos with 20% to 25% utilization.

With this announcement we have added a significant industry first.

We are now providing elastic capacity on demand.

Customers can now pay on a use basis for additional capacity as needed, to address spikes in demand.

We're pleased with the Aster wins we had in the quarter, and also the activity we are seeing in the US and now internationally.

We are making good progress for the development of use cases, which is critical for the adoption of big data analytics in the mainstream market.

We are hosting a series of big data analytics conferences here in the US.

These conferences are focused on helping businesses cut through the big data hype and leverage new types of data and applications to gain deeper business insights.

We held our first event in San Francisco two weeks ago, and had over 500 attendees.

Additional events will be held in Boston, Chicago, and New York over the next four months.

Going forward, Teradata's objective is to provide best-in-class Data Warehouse Analytics, consulting, and support to all of our customers and all of their organizations.

And to do this for all of our customers' data both structured and multi-structured.

In addition, it is our objective to be the best-in-class integrated marketing management provider.

A little over a year ago, we acquired the leader in integrated marketing management, Aprimo, and combined it with our Teradata applications business.

We have experienced good success to date, and had a strong Q1.

Yesterday, we made a significant addition to our integrated marketing management portfolio, with the signing of the definitive agreement to acquire Munich-based eCircle.

eCircle is the European leader in cloud-based digital marketing with e-mail, mobile, and social capabilities.

Forrester estimates digital marketing to be a $6 billion market today, growing to $16 billion by 2016.

We see a great opportunity for Teradata to go deeper into integrated marketing management along with digital marketing.

Marketing organizations have been a leader in leveraging analytics over the years.

Today, the majority of our Data Warehouses are being used by marketing organizations.

And a good portion of those are using our Teradata Aprimo multichannel campaign management application.

But going forward, we believe that marketing will lead the way in most corporations to drive innovation from game-changing new analytics with big data.

It is marketing that can use and apply the new insights created from social and mobile data to impact their corporation's top and bottom line.

And it's marketing that will leverage the new channels created with social and mobile to interact with and market customers.

Forrester estimates that 45% of big data implementations are in marketing.

Gartner said that by 2017 the CMO will likely spend more on IT than the CIO.

We believe the combination of Aprimo, eCircle, Aster, and Teradata provides a great foundation for marketing organizations to reap the benefits from big data and the new channels they bring.

We are expecting to complete the transaction in Q2, subject to all regulatory clearances.

As I said earlier, we are off to a strong start in 2012, longer-term we are well-positioned in three large and growing markets, data warehousing, big data analytics, and integrated marketing management.

As we look at the remainder of the year, our activity remains strong across all the regions, but we expect our growth, our revenue growth to increase at a lower rate than we achieved in Q1.

We will be going against stronger prior-year comparables starting with Q2, and currency headwinds in Q2 and Q3, particularly in EMEA.

The net net is we are increasing our 2012 full-year revenue growth guidance 2 points to 12% to 14%, or 13% to 15% in constant currency.

Without the pending eCircle acquisition, our revenue growth guidance would be 12% to 14% in constant currency.

We're also increasing our non-GAAP EPS guidance range $0.04 to a range of $2.60 to $2.70, which includes $0.01 from eCircle.

Now I'll turn the call over to Steve to provide more details on Q1 and our full-year guidance.

Steve?

Thanks, Mike, and good morning.

We just completed another strong quarter driven by the heightened demand for analytics and business intelligence.

This was one of the best quarters in Teradata's history, highlighted by 21% revenue growth, non-GAAP operating margin of 23.9%, non-GAAP earnings per share up 25%, and an 105% increase in free cash flow generated in Q1 versus the prior-year period.

First-quarter revenue of $613 million was up 21% from the first quarter of 2011, up 22% in constant currency.

Product revenue of $308 million was up 31% from the first quarter 2011, up 32% in constant currency.

Services revenue of $305 million was up 13%, up 14% in constant currency.

Within our services revenue, consulting services was up 14%, up 15% in constant currency, and maintenance services was up 11% in the quarter, up 12% in constant currency.

During 2011, we had special items largely related to our acquisition activity, as well as stock-based compensation expense.

We have discussed the special items in prior quarters, so I won't go through the details today.

However, these special items are described in the footnotes to our earnings release and are shown in the GAAP to non-GAAP reconciliation schedules in our earnings release, as well as on our website.

During my discussion today, I will be addressing margins and expenses on a non-GAAP basis.

Gross margin in the first-quarter of 2012 was 55.9%, up from the 55.7% in the first quarter of 2011.

The increase in gross margin was driven primarily by a greater proportion of product revenue.

The Americas and APJ regions experienced solid improvements in gross margin, while the EMEA's region gross margin declined primarily due to consulting revenues growing faster than product revenue as well as timing of transactions and deal mix.

Product gross margin in the first quarter was 67.9%, up 30 basis points from the first quarter of 2011.

This performance mitigated the expected headwind from increased SFAS 86 amortization of prior capitalized software development costs, and the higher hard disk drive prices resulting from the flooding in Thailand as we discussed last quarter.

As a component of product revenue, our 2000 series appliance revenue in Q1 was at the lower end of the 10% to 15% range we discussed previously.

However, we continue to expect that the 2000 series appliance revenue will be at the higher end of the range for the full year.

Since the appliance revenue was a lower percentage of product revenue in the quarter, it provided a favorable mix shift as it relates to product gross margin in Q1 2012.

Services gross margin in the quarter was 44%, versus 45% in Q1 2011.

The decline is primarily due to a higher mix of consulting revenue while operational maintenance margins remained relatively consistent between quarters.

Consulting revenues grew faster than the maintenance revenue, which lowers the overall services gross margin since consulting margins are lower than the maintenance gross margins.

Turning to our operating expense structure, SG&A expense of $154 million increased $18 million or 13% from Q1 2011.

The increase in SG&A for the quarter was primarily driven by acquisition-related headcount and the increased number of sales territories.

As we discussed in previous quarters, we expect a continued increase in our selling expense in 2012 as we incur the full year or annualized cost of the new sales territories added in 2011, as well as the additional territories we anticipate adding in 2012.

We should however, continue to slightly improve SG&A's inefficiency ratio described as a percentage of revenue.

R&D in the quarter was $43 million, versus $33 million in the first quarter of 2011.

Keep in mind our R&D spend in Q1 2012 includes a full quarter of R&D spend for the Aprimo and Aster Data.

While we only had two months of R&D spend from Aprimo in Q1 2011, and the Aster Data transaction did not close until April of last year.

As we have discussed over the last few quarters, we continue to increase our investments in R&D, particularly through enhancements to our core technology base as well as continuing to build out our Teradata product family and ecosystem, including big data capabilities.

For 2012, we estimate that the non-GAAP R&D expense should grow slightly less than 10% over 2011, factoring in the full year impact of the R&D expense from the acquisitions.

As we've mentioned before, we invest more in our R&D activity than what is reported on the R&D operating expense line on our income statement.

Total R&D spend for the first quarter before capitalization of internally developed software, which is included in the line items additions to capitalized software on the statement of cash flows was approximately $59 million, compared to approximately $51 million in Q1 2011, or a 16% increase.

As a reminder, these capitalized software costs are then amortized back to the income statement as product cost of revenue, which reduces product gross margin.

As a result of these items, Teradata's operating margin in the first quarter was 23.9%, versus 22.7% in Q1 2011.

The contribution from higher revenue and favorable deal mix offset the increased investments in sales-related activities and R&D, as well as the higher SFAS 86 software amortization cost and higher cost of our hard disk drives.

Our GAAP effective tax rate in Q1 2012 was 28%, the same as is in the first quarter of 2011.

Our non-GAAP effective tax rate for the first quarter was 29%, again, the same as the prior-year period.

We continue to expect our full-year GAAP tax rate to be approximately 27%, and our non-GAAP tax rate to be slightly higher, approximately 1 percentage point higher than the associated GAAP effective tax rate, as a majority of the non-GAAP pretax earnings, including stock-based compensation expense, as well as acquisition related and other special items, are weighted more to the US.

The effective tax rate guidance for 2012 assumes that the federal R&D tax credit, which expired as of December 31, 2011, will be retroactively restated for the full year 2012, prior to the end of 2012.

In terms of earnings per share, our Q1 GAAP EPS was $0.53 versus $0.38 in Q1 2011.

Non-cash stock-based compensation expense is included in our GAAP EPS.

During the quarter stock-based compensation expense was approximately $0.04 per share.

We expect stock-based compensation expense to be approximately $0.15 per share in 2012.

This reflects the normal increase in stock-based compensation expense as well as the full-year increase related to the acquisitions made during 2011.

As I mentioned earlier, a couple of acquisition-related items were also included in our GAAP results in Q1.

These items are described in the footnotes of our earnings release and on our website.

Excluding stock-based compensation expense, and the acquisition-related items, our non-GAAP EPS was $0.60 in Q1 2012, compared to $0.48 in Q1 2011, a 25% increase.

Turning to cash flow, we had a strong quarter in terms of net cash provided by operating activities, generating $192 million in Q1 2012, versus $106 million in the first quarter of 2011, or an 81% increase.

After $30 million of capital expenditures, which include additions to capitalized software development costs and expenditures for property and equipment, versus $27 million in the first quarter 2011, we generated $162 million of free cash flow versus the $79 million of free cash flow generated in Q1 of 2011.

The 105% increase in free cash flow was driven by our increased net income in the first quarter of 2012, as well as a smaller increase in receivables in the first-quarter 2012 as compared to the first quarter of 2011.

As a reminder, Teradata defines free cash flow as cash flow from operating activities, less capital expenditures for property and equipment and additions to capitalized software.

Turning to the balance sheet, we had $978 million of cash as of March 31, 2012, a $206 million or 27% increase from December 31, 2011.

Approximately 30% of our cash balance is available in the US, with the remainder being held offshore.

With respect to our accounts receivable, days sales outstanding was 74 days as of March 31, 2012, compared to 76 days as of December 31, 2011.

DSO as of March 31, 2011 was 85 days.

With respect to deferred revenue, deferred maintenance, and subscriptions continue to account for over 70% of the deferred revenue balance as of March 31, 2012.

The deferred revenue change from March 31, 2012 versus December 31, 2011 increased as expected over the change from March 31,2011 versus December 31, 2010, after removing the impact that Aprimo had on the March 31, 2011 deferred revenue.

The Aprimo acquisition closed during Q1 2011.

Turning to foreign currency, to provide further transparency around currency movement, and the potential impact on our future revenue, we provide a schedule on our website detailing how currency has impacted the first quarter of 2012 and how this movement is expected to impact our year-over-year revenue comparisons throughout 2012.

Assuming the currency rates as of the end of April and assuming currency rates do not change throughout 2012, we expect currency to create about approximately 1 point of a headwind for us for the full year and 2 points of headwind in Q2.

Mike provided our increased revenue and EPS guidance earlier in this call.

But I want to give a little more color on some specific items.

We had another strong quarter in Q1 and our pipeline remains solid.

In light of the tough Q2 2011, comparable particularly in EMEA when they grew revenue 34% as reported, and the FX headwind in Q 2012 (sic), we are increasing our full-year revenue guidance to 12% to 14%, or 13% 15% in constant currency from our original guidance of 10% to 12%, or 11% to 13% in constant currency, due to the good start we had in Q1.

And approximately 1% of that revenue growth from the digital marketing acquisition, eCircle we announced yesterday eCircle.

Turning to EPS, specifically we continue to expect headwind on product gross margins going into Q2 due to a higher disk drive costs and increased amortization of capitalized software.

And we still expect to decline approximately 1 percentage point for the full year 2012 versus 2011.

Higher R&D expense, up approximately 10% from 2011, including R&D from the acquisitions.

G&A expense to increase in the low-single digits on a percentage basis, again including the ongoing G&A from the acquisitions.

And higher selling expense primarily from the new sales territories added in 2011, as those territories anticipated to be added in 2012.

And higher variable incentive compensation and presale consulting expense from the new sales territories as productivity improves across all sales organizations.

Incorporating all of these factors into our EPS guidance, we are changing our expectations for GAAP EPS to a range of $2.24 to $2.34.

However, this includes approximately $0.15 a share of stock-based compensation expense, $0.01 a share of estimated purchase accounting adjustments related to our acquisitions, $0.12 a share of amortization acquired intangible assets, and $0.08 a share of transaction and integration costs.

Excluding these nonoperational items, we are increasing our expectations for non-GAAP EPS to a range of approximating $2.60 to $2.70 per share in 2012.

To provide further color around EPS growth for the remainder of the year, assuming the midpoint of our 2012 non-GAAP EPS guidance, this would imply a remaining nine-month EPS increase of $0.21 when compared to the same nine months of 2011.

And we expect the majority of the increase to incur during Q4 2012, primarily due to the effect our variable incentive compensation programs had on our Q4 2011 results.

In closing, we are very pleased with our strong start to 2012, and we remain confident in our ability to continue to execute and drive our business model to leverage our opportunities during the remainder of 2012.

And with that, operator, we're ready to take questions.

(Operator Instructions)

Katy Huberty, Morgan Stanley.

Congrats on the quarter.

I know you don't break out metrics as it relates to number of new customers, versus revenue from existing customers.

But can you just talk qualitatively around where the upside came from in the first quarter, and as it relates to the higher full-year guidance?

Is that coming from existing customers spending more?

Or new customer wins?

Thanks.

Katy, it's Mike Koehler.

The revenue increase especially in the product revenue was pretty broad-based.

But the majority of it came from the user base.

Wamsi Mohan, Bank of America.

Steve, you commented that appliances were at the low end of the 10% to 15% for Q1 but you expect that to move higher for the year.

Are you taking any steps specifically to drive appliance sales in terms of the dedicated salesforce later in the year?

Just wondering why you think it ends up as a higher part of the mix for the rest of the year.

And a quick clarification on your GAAP number, which moved slightly lower.

Were all the items because of the pending acquisition of eCircle, or some of the acquisition and integration costs, are they turning out higher for Aprimo and Aster?

Thank you.

Wamsi, it's Mike Koehler.

I'd like to first comment on the appliances contributing closer to the 10% of product revenue.

That's really more the result of the strong overall product revenue growth we had, which was 31% in the quarter, and the big product revenue growth we had in the Enterprise Data Warehouse class product.

So the appliances in the 2000 had good revenue growth in the quarter, but as a percent of revenue contribution, it was at the lower end of the 10% to 15%.

And regarding the salesforce, we do not have a dedicated salesforce.

We do back up our sales teams with subject matter experts, centers of expertise, if you will, as it relates to Aster Data, as it relates to all of our products.

And we have technical consultants as well that have in-depth knowledge around the various products to support our salesforce.

Wamsi, with respect to the GAAP to non-GAAP, yes, we did make an estimate for the acquisition related costs for the eCircle acquisition, and those estimates are in there.

With respect to the prior ones, no, we are running pretty consistent to what we had estimated.

And so the biggest delta does relate to the anticipated cost acquisition and special items relating to eCircle transaction.

Ed Maguire, CLSA.

I had a question on Aster Data.

Could you comment on at least what the revenue activity that you're seeing so far there and how that is impacting the core business?

I noticed you've had some partnerships with some of the Hadoop vendors and I'm interested in how that's impacting the core Enterprise Data Warehouse pullthrough as well.

Thank you.

Ed, this is Steve.

Aster Data as we've talked is really purely a technology play, technology opportunity.

And we're still in the very early stages in terms of revenue and defining use cases, we're very pleased with the development of those use cases, but again from a revenue perspective, still in the very early stages.

If I can add, Ed, the number of proof of concepts we're engaged in right now are very significant.

Pretty broad-based, mostly in the US, and we're starting to get activity going in international as well.

Aaron Schwartz, Jefferies.

Congratulations on the results.

Given the strong product revenue seen here in the first quarter, can you just talk about your expectations for the consulting mix for the later part of the year?

Will that start to pick up as a tail on the strong start to the year on the product side?

Aaron, this is Mike Koehler.

There isn't a direct correlation between the product and the consulting revenues.

There is more of a correlation as it relates to maintenance revenues when you have strong product revenue growth.

However, with the maintenance revenue, our larger Enterprise Data Warehouse customers, as they expand and add to systems, the pricing of the maintenance on those systems as they get added to and they become larger is not linear.

So although there is a correlation with maintenance with product revenue, it doesn't necessarily grow at the same rate as the product revenue.

The consulting, we've taken -- we've commented on this before between the correlations between consulting revenue and product revenue.

When you break apart our consulting business, approximately 25% of our revenue is a leading indicator, 45% is a lagging indicator.

So it's being drug along with implementation services and everything else as we're selling product revenue.

But in addition to those two buckets, if you will, we have 30% of our consulting revenue that's not related to product revenue at all, it's independent.

So things like our managed services and our BI consulting and a lot of other things that we're doing is independent and separate.

So I wouldn't draw any correlations from the strong product revenue growth with consulting revenue growth coming downstream.

Jesse Hulsing, Pacific Crest.

Would you say that 6000 series is driving more floor sweeps?

And how has the adoption of SSD trended?

Very good question, Jesse.

So the floor sweeps, even with the record 31% product revenue, the floor sweeps were very normal.

If anything, a little bit less than the normal amount of floor sweeps we see in the quarter.

So the 6690 and Hybrid Storage EDW has not accelerated floor sweeps, did not accelerate floor sweeps beyond what we normally see in the first quarter.

As far as the adoption of the Hybrid Storage EDW, roughly 50% of our EDW purchases in the first quarter were the Hybrid Storage Data Warehouses.

The Hybrid Storage -- for our customers with Enterprise Data Warehouses that are expanding them, most of them are doing that without adding on Hybrid Storage.

So we still had a pretty good volume of the non-Hybrid Storage EDW's in the mix -- in the first quarter.

Bhavan Suri, William Blair & Company.

Just a quick question.

Mike, you've talked about a couple years ago the core EDW being the central location for all the data, and then over the last couple years with Unity, with the appliances, with Aster, you start talking about ecosystem approach.

Could you just provide a little color on how many of the customers, what percentage of customers have started thinking about it as an ecosystem and layering on multiple products around the core EDW, whether it be Aster, Hadoop, or some of the smaller appliances?

Okay.

Bhavan, the way I would characterize it is like you said, core to Teradata was the integrated Data Warehouse, and Enterprise Data Warehouse.

And in a way, it's a no-brainer.

It's a best-in-class architecture and reduces a ton of cost by centralizing data that can give better insight into the business when it's integrated from other data across the enterprise.

And it also, as I discussed earlier about our Active Data Warehouse Private Cloud, it consolidates underutilized data marts and puts them in one central location to be shared with multiple organizations, multiple users, and everything else and drives a higher utilization.

And as a result, reduces data center footprint and gets a ton of cost down.

So for data that has better value being integrated, and for data that is relevant and should be used by multiple organizations in a company, and Enterprise Data Warehouse is without a doubt the right architecture.

Think of that as a workload.

So it's a workload for data that's used by lots of people, lots of organizations, and shared throughout the company to get higher utilization, lower cost, better information.

So what we saw with the workload-specific Data Warehouses or the Platform family, is what we began to see is there's workloads such as our Extreme Data Appliance where it's lots of history.

If it's archival or regulatory or it's click-stream data from the web that -- that data is relevant to less people within the organization.

So our 1000 series Extreme Data Appliance, we build something that has lots of storage, can have lots of data in it, but it doesn't have a lot of CPU to serve a lot of users, and in effect we're building a configuration that is a much lower cost per piece of data than an EDW to serve a smaller group of people that are using it.

So it's workload specific.

So when you look at the Aster Data appliance, once again, in a Aster Data appliance you're doing exploratory and discovery types of analytical analysis on big data.

And you don't need a mission-critical environment, similar to the 1000.

You don't need all the robustness that you need in an Enterprise Data Warehouse.

And you are using it with a smaller group of users.

So it gets back to a workload that's more specific for a limited number of users, and requirements that aren't the same as running your company on the Data Warehouse like our EDWs.

Our customers on the EDW side need 99.99% availability, it's mission critical, the thing is critical.

So we continue to slice and dice workload-specific Data Warehouses to address different workloads, and different user sets.

In addition to an Enterprise Data Warehouse to integrate and share data and information across all the organizations that that's required.

Because in that environment, that's the lower-cost solution.

Brent Thill, UBS.

Just on the product revenue, you saw less seasonal headwinds in Q1, and I know, Mike, you mentioned it was pretty broad-based but I was just curious if you could confirm that there were no oversized transactions that helped skew that as a one-time basis?

And I guess as a follow-on to that, when you look at your guidance for the back half of the year, given the great start, I certainly understand the FX and the comps but it seems like a massive deceleration.

Why would we see that given what you just put up in Q1?

First of all, on the first quarter, we did not have any large, super-large transactions.

We had a very, very -- I would call it normal mix of transactions in terms of size.

Actually I think -- when I'm thinking through the previous quarter's last year and everything, we didn't have transactions quite the size of some of the ones we saw in the previous four quarters in 2011.

So anyway, that's the answer to that one.

I think on the full-year guidance, there's a couple things going on.

The currency headwind is for real.

And some of the prior-year comparables are real, versus what we had in Q1 as a prior-year comparable.

And when you get into certain regions, so like in EMEA, the currency headwinds in the media in Q2 are 7%, and they are estimated at 5% in Q3.

When you look at EMEA's prior-year Q2, the revenue produced in Q2 in EMEA last year was the same amount EMEA produced in Q4.

This was a huge prior year for EMEA in Q2 2011.

In fact, the revenue growth in Q2 in 2011 was 34%.

So what happens is you start to slice and dice this thing and we've got strong headwinds in EMEA in Q2.

When you look at -- and the EMEA thing is not a macroeconomic thing.

Our business is fine.

It's just we're going to run into a tough prior-year comparable in EMEA in Q2, between the currency and the prior-year and some currency in Q3.

The only other thing we're seeing in terms of softness is in China, so we're very big in the financial services industry in China.

We have 12 of the top 15 banks, and there we are seeing delays in approvals and a slowdown in the financial services sector in China, we're seeing some -- I'm not saying to a great degree, but we are seeing some there.

But on the flip side, Japan, we're off to a really good start in Q1, and our activity in Japan is pretty good.

We finished the year strongly in Japan.

So that's the mix of things.

The other thing is when we look at the full year and similar to what we said, I believe we said on the last call, the services revenue is going to be more in the lower-double-digits range, and that's going to have an impact on the full year.

Raimo Lenschow, Barclays Capital.

Congrats on the quarter.

Quick question, Mike, going back to your earlier comments about when the enterprise business warehouse were useful, can you just relate that back to the mart trends that we're seeing at the moment?

Whether the in-memory boys are coming in?

And in a way trying to starting to create a decentralized environment again while it seems like you are actually gaining a good bit of traction with your customers on that notion of understand that you want to have your data in one place, how do you think that market is playing out?

Is that a fall through with your in-memory boys, how do you position yourself against them?

Thank you.

Okay.

So first of all, forget technology.

In-memory or solid state drives or storage or traditional whatever, it's just technology.

It gets back to the workload and what provides the best value and the lowest cost.

So it gets back to in Enterprise Data Warehouse, you centralize and integrate the data that should be centralized and integrated, you share it across a lot of users, organizations, and so forth and so on.

We virtualized our storage, so we -- when we virtualized our compute years ago, and we're agnostic to storage or memory or whatever, other than we want to automatically place data on the fastest type of technology because it's more expensive, so we want to get the data that's used the most often on the fastest type of technology.

And the data that's used less often we want to get it on the less expensive type of technology, so we want to offer our customers the highest performance for the lowest cost.

And you do that by virtualizing storage and automatically placing data.

The notion of I'm going to take data out of something that shared across multiple organizations, I'm going to go put it in a data mart, whether it's an in-memory data mart or whatever kind of data mart it is just defies gravity.

You are creating another footprint, thing to put on the data center floor, you're adding to your costs, you've got to have humans run it and everything else.

I know a lot of our competitors advocate this because they cannot do what we do in an Active Enterprise Data Warehouse, which in effect has Private Cloud capabilities.

Darryl, I don't know if you want to --

The only other thing I would add as part of our strategy to Mike's point, we will leverage every type of technology in an appropriate way that best meets the price performance that the customers are looking for.

So today, Teradata takes advantage of in-memory today already as a part of its architecture.

We also work with partners like MicroStrategy and SAS and they have in-memory accelerators that also works in conjunction with Teradata.

So from our standpoint, it is a leveragable technology, in addition to as we look at the Platform family and the ecosystems that we build.

Derrick Wood, Susquehanna Financial Group.

Nice job on the quarter.

I was hoping you could talk a little bit more about the demand trends out of Aster.

First of all it sounds like demand has expanded beyond typical internet companies.

Just curious about what types of big data projects people are looking to use it for.

And then a second part to that, you announced a partnership in cybersecurity.

Is this a new area you guys plan to move into?

Would this be leveraging the Aster Data product?

Thanks.

This is Darryl.

We're seeing lots of good use cases being developed as we deploy Aster into accounts, as also as well as we talk to clients.

And some of the early ones that are very hot seem to be around digital marketing optimization, also fraud detection and prevention, as well as social network analysis.

But we're also seeing a trend where people are looking at traditional analytics and how can they add more transactional data in a time-series approach to understanding the bigger picture?

So people are looking at going from 2 years to 10 years of history and doing analysis on it like they traditionally did to try to gain new insights.

It's also very often we're seeing in marketing they are leveraging big data as a part of this new digital marketing phenomenon that's going on.

So if you look at some of the studies put out around impacts to CMOs, it's understanding the big data phenomenon as well as how to monetize the social environment, and we see that as a big take-up of leveraging this technology to help them better understand how to interact with those clients, as well as how to look at that transactional data in its raw form.

So those are definitely some of the areas we're seeing use case wise in the Aster front.

On the Narus, yes, it's a new relationship.

We're finding that a lot of our customers want to leverage the power of Active Data Warehouse to really look at things that come in and out of their data environments.

And how they start putting rules in place to spot fraud or transactional behavior that maybe is not a part of the way it typically runs in their business.

And they are leveraging that technology in conjunction with Teradata to spot those kinds of things on people entering and accessing the networks, and moving and changing data, and leveraging that as a part of their enterprise.

Today, it's currently working with Teradata and we'll continue to look at how we can leverage that across the other platforms.

Derrick, it's Mike Koehler.

If I can just add as it relates to Aster and big data, we're just not throwing technology at big data.

Of course, there is some innovators and early adopters that can take raw technology and apply it.

We're really focused on the use and the use cases and how you benefit from leveraging big data and the new analytics and everything that comes from it.

And if we're successful in doing it, and we are doing it, that's how you drive the adoption of a new capability into the mainstream market.

So a lot of our energy is there, which will show up a little bit over the longer term.

And of course, our investments in marketing are driven around a lot of Aster Data's customers prior to the acquisition, and today are using it -- the marketing organizations are using it for big data analytics, and we're working on that as an integrated solutions.

Alex Kurtz, Sterne Agee.

Back to your questions about, back to the point about product growth the rest of this year and looking at the prior-year comps, and your comments about Europe, would it seem like maybe this year you're going to have more of a barbelled kind of year where you're going to have a very strong margin December, but because of the tough EMEA comp and seasonality in September, we should expect bigger output coming out of December?

Alex, it could be.

The question is, our visibility as we go beyond the rest of this quarter, then we go into the third quarter, and then we go into the fourth quarter, and you get to the fourth quarter and our visibility is just -- it's not as good on the product revenue.

We get a pretty good handle of course on the maintenance and the annuity.

And to a degree on the consulting services we operate with a pretty good backlog.

And we do have a view on the currency in Q2 and Q3, so the things I did mention, these headwinds, and everything else, they are pretty lined up in Q2 and Q3, so there is an opportunity here in the fourth quarter when we get there.

And we'll be able to provide a lot more clarity, a lot more visibility on the next call.

So with that, I would like to thank you all for joining us here this morning.

And I hope that everyone has a great day.

Take care.

Thank you.

Ladies and gentlemen, this concludes today's conference.

Thank you for participating.

You may now disconnect.