2020 Annual Report

2020 Annual Report

TDC

Dear Fellow Shareholders,

It is my honor to write to you as Teradata's President and CEO. I joined the Company in June of 2020, and when I looked at Teradata, I saw incredible opportunity. An organization at the center of helping companies succeed by leveraging all of their data, with technology that is unmatched in helping companies solve their most complex data challenges. And with people who are deeply committed to the success of the customers we serve and who operate with respect for each other. I wanted to be part of this successful transformation. I am pleased with our progress and yet know we are just getting started.

I joined Teradata during the global COVID-19 pandemic and immediately saw the resilience of our people and the critical importance of our technology. When COVID began its march around the world, Teradata took immediate actions to protect the health and safety of our employees, customers, and partners.

The Company seamlessly pivoted to work from home, while reasserting our commitment to providing value to our customers, despite the challenges posed by the pandemic. The COVID19 crisis made very clear the essential role Teradata plays in our customers' success. At a time when standard business models of entire industries were completely disrupted, our customers were able to rely on data and their Teradata platform to help them manage through the tumultuous times and navigate to a brighter future. We immediately turned to remotely delivering ongoing support and service at the high level of performance and availability our customers know.

In 2020, we placed a renewed focus on being Cloud-First, and we made significant advances throughout the company. We are accelerating our transformation to a connected multi-cloud data platform company, while continuing our strong ethos of helping customers unlock business value from their data. In 2020, Teradata executed extremely well, and we are well positioned for a bright future.

Teradata has a tremendous market opportunity and a strong market position

Teradata participates in a large, growing and strategically important market. The world runs on data, and we help many of the world's industry-leading businesses unlock value from their data. Around the globe, companies rely on data to inform decisions on every aspect of their business--from delivering exceptional customer experiences to improving operations and supply chains that can bring life-saving drugs to market, to providing critical patient care, to managing effective financial controls, and so much more.

Teradata provides the best technology in the world to enable companies to leverage their data, apply analytics to solve mission critical problems, and deliver material business outcomes--at the scale the world's leading companies need. This is where Teradata excels and why companies build their future with us, and that future is now in the cloud.

Our purpose of transforming how businesses work and people live through the power of data has never been more relevant. Organizations will continue to need partners who will help them leverage their ever-proliferating data in the cloud without rapidly escalating costs. This provides a tremendous growth opportunity for Teradata.

2020 was a transformational year of progress

Our strong performance is a result of concentrated efforts from across the organization, supporting our core principles of being market and customer-driven, agile in execution and accountable to each other. Our team significantly advanced our cloud technology, delivered solid sales execution in all regions, and directly addressed outdated market perceptions with clear market messages, while keeping our culture vibrant and inclusive.

Financially Strong

We delivered $106 million in public cloud annual recurring revenue, an increase of 165% yearover-year. Teradata ended 2020 with year-over-year growth in recurring revenue, gross profit, operating income, earnings per share, cash provided from operations and free cash flow. Plus, we completed our multi-year transition from a perpetual license model to a subscription-based business, improving the predictability of our revenue and the durability of our cash flows. We also implemented a more focused cost discipline, realigning our cost structure and optimizing our business model to better position the Company for our transformation to the cloud and ongoing profitable growth. We will continue this strong operational oversight as we move forward.

Technology Innovation Momentum

We relentlessly worked to ensure that Teradata VantageTM is the fastest, lowest risk, highest performing, and most cost-effective path to the cloud. In 2020, we delivered more cloud capabilities than ever before, and brought cloud-native integrations to Vantage at a record pace. We inverted our R&D investment, with now 70%, or $200 million, of our R&D focused on cloud.

Supporting customer choice in today's multi-cloud environment, we established and built strong, partnerships with the leading cloud service providers, Amazon Web Services, Google Cloud and Microsoft Azure. We further extended our market reach by making Vantage, our cloud platform, available in these cloud Marketplaces, enabling customers to purchase and use Vantage quickly and simply. In addition, to further make it easy for customers to take advantage of the power of Vantage, we introduced new flexible cloud pricing options.

We kept our focus on driving innovation in our software so that customers can apply analytic insights to data wherever it resides--in the cloud, in multiple clouds, or in on-premises environments. With full multi-cloud support, Vantage software is consistent from one environment to the next, risk is reduced, and the process is greatly simplified. This means bringing faster time to value with the scale, security, availability, and analytics performance customers rely on from Teradata--a tremendous benefit to our customers.

All of our hard work and progress was acknowledged. Teradata earned recognition as a leader in the major industry analyst evaluations rating technology providers in the cloud database management solution market. We also received rating upgrades from sell-side analysts.

Our People Distinguish Teradata

Our progress reflects on the strength of our people. Teradata is rich with incredibly knowledgeable people who bring unmatched expertise to help companies uncover great value from their data. We have made good progress in modernizing our Go-to-Market efforts, with improvements in the areas of customer success, renewals, aligning consulting to our cloud focus, and strengthening our partner ecosystem. We have also significantly strengthened our

executive team, adding seasoned leaders to guide our going-forward strategy, drive our Go-toMarket organization, inspire innovation in our Products organization, apply sound and prudent legal judgment to advise the Company, and advance our internal information systems.

We cultivate a workplace where equality, inclusion, diversity, and openness are a company-wide priority, and are always underscored with ethics and integrity. Our entire leadership team pledged publicly to take ongoing actions to drive lasting change for racial equality. Additionally, we were pleased to be included in the Human Rights Campaign Foundation's Corporate Equality Index for the first time. Further gratifying was being recognized by the Ethisphere Institute for the 11th consecutive year for our ethical business practices. You can be assured that we will drive continuous improvement across the board to support our people.

Committed to a Better World

We believe environmentally sustainable business practices, corporate social responsibility, and responsible governance are right for our business and good for our world. We will continue to build on our commitment to sustainable corporate stewardship and ESG practices that leads to long-term value creation for all of Teradata's stakeholders. In 2020, Teradata has been included for the 11th consecutive year in the Dow Jones Sustainability Index, North American Index, and in the DJSI World Index for the 5th time.

Looking Ahead to a Bright Future

We are reimagining Teradata and moving agilely and purposely, growing profitably, and providing increasing value to our customers and to you, our shareholders. We are excellently positioned to provide the enterprise scale and flexibility our customers need with our connected multi-cloud data platform. We are accelerating our cloud roadmap, and we anticipate driving strong growth in cloud ARR, recurring revenue, profitability, and free cash flow in 2021.

I am incredibly proud of the focus and efforts of our people from across the Company in our progress. Our momentum in the cloud is just getting started and we will continue to accelerate in 2021.

On behalf of all of our dedicated Teradata employees, we are confident in our bright future as we drive Teradata forward. I thank you for your support. We remain steadfastly committed to customer excellence and delivering value to our shareholders.

Steve McMillan President and CEO Teradata

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