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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number 001-33458
TERADATA CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 75-3236470
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
17095 Via Del Campo
San Diego, California 92127
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (866548-8348
Securities registered pursuant to Section 12(b) of the Act:
Title of each class:Trading SymbolName of Each Exchange on which Registered:
Common Stock, $0.01 par valueTDCNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ý  Accelerated filer ¨
Non-accelerated filer ¨  Smaller reporting company 
  Emerging growth company 
1


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes    No  ý
At July 29, 2022, the registrant had approximately 102.8 million shares of common stock outstanding.
2



TABLE OF CONTENTS
PART I—FINANCIAL INFORMATION
 
  
DescriptionPage
Item 1.Financial Statements
Item 2.
Item 3.
Item 4.
PART II—OTHER INFORMATION
  
DescriptionPage
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
3

Part 1—FINANCIAL INFORMATION
A
Item 1.Financial Statements.
Teradata Corporation
Condensed Consolidated Statements of Income (Unaudited)
Three Months Ended
June 30,
Six Months Ended June 30,
In millions, except per share amounts2022202120222021
Revenue
Subscription software licenses$65 $81 $158 $174 
Services and other280 295 573 574 
Total recurring345 376 731 748 
Perpetual software licenses, hardware and other8 17 34 40 
Consulting services77 98 161 194 
Total revenue430 491 926 982 
Cost of revenue
Subscription software licenses5 4 12 8 
Services and other91 83 189 169 
Total recurring96 87 201 177 
Perpetual software licenses, hardware and other6 11 24 22 
Consulting services70 83 142 166 
Total cost of revenue172 181 367 365 
Gross profit258 310 559 617 
Operating expenses
Selling, general and administrative expenses163 161 320 310 
Research and development expenses81 79 157 156 
Total operating expenses244 240 477 466 
Income from operations14 70 82 151 
Other expense, net
Interest expense(5)(7)(11)(14)
Interest income3 2 5 3 
Other expense(12)(6)(21)(9)
Total other expense, net(14)(11)(27)(20)
Income before income taxes 59 55 131 
Income tax expense4 15 23 34 
Net (loss) income$(4)$44 $32 $97 
Net (loss) income per common share
Basic$(0.04)$0.40 $0.31 $0.89 
Diluted$(0.04)$0.39 $0.30 $0.86 
Weighted average common shares outstanding
Basic103.5 109.0 104.2 108.9 
Diluted103.5 112.7 107.1 112.7 
See Notes to Condensed Consolidated Financial Statements (Unaudited).

4


Teradata Corporation
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
Three Months Ended
June 30,
Six Months Ended June 30,
In millions2022202120222021
Net (loss) income$(4)$44 $32 $97 
Other comprehensive (loss) income:
Foreign currency translation adjustments(24)7 (25)(1)
Unrealized loss on cross-currency net investment hedge, net of tax(1) (1) 
Total currency translation adjustments(25)7 (26)(1)
Derivatives:
Unrealized (loss) gain on derivatives, before tax(3)3 5 7 
Unrealized (loss) gain on derivatives, tax portion1 (1)(1)(2)
Unrealized (loss) gain on derivatives, net of tax(2)2 4 5 
Defined benefit plans:
Defined benefit plan adjustment, before tax2 3 5 5 
Defined benefit plan adjustment, tax portion(1)(1)(2)(1)
Defined benefit plan adjustment, net of tax1 2 3 4 
Other comprehensive (loss) income(26)11 (19)8 
Comprehensive (loss) income$(30)$55 $13 $105 
See Notes to Condensed Consolidated Financial Statements (Unaudited).

5

Teradata Corporation
Condensed Consolidated Balance Sheets (Unaudited)
In millions, except per share amountsJune 30,
2022
December 31,
2021
Assets
Current assets
Cash and cash equivalents$545 $592 
Accounts receivable, net266 336 
Inventories17 26 
Other current assets93 152 
Total current assets921 1,106 
Property and equipment, net249 288 
Right of use assets - operating lease, net17 26 
Goodwill390 396 
Capitalized contract costs, net95 111 
Deferred income taxes194 202 
Other assets29 40 
Total assets$1,895 $2,169 
Liabilities and stockholders’ equity
Current liabilities
Current portion of long-term debt$ $88 
Current portion of finance lease liability70 77 
Current portion of operating lease liability8 12 
Accounts payable83 67 
Payroll and benefits liabilities108 148 
Deferred revenue530 552 
Other current liabilities79 89 
Total current liabilities878 1,033 
Long-term debt497 324 
Finance lease liability48 53 
Operating lease liability13 18 
Pension and other postemployment plan liabilities129 138 
Long-term deferred revenue11 27 
Deferred tax liabilities7 7 
Other liabilities90 109 
Total liabilities1,673 1,709 
Commitments and contingencies (Note 8)
Stockholders’ equity
Preferred stock: par value $0.01 per share, 100.0 shares authorized, no shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively
  
Common stock: par value $0.01 per share, 500.0 shares authorized, 102.8 and 107.2 shares issued at June 30, 2022 and December 31, 2021, respectively
1 1 
Paid-in capital1,874 1,808 
Accumulated deficit(1,496)(1,211)
Accumulated other comprehensive loss(157)(138)
Total stockholders’ equity222 460 
Total liabilities and stockholders’ equity$1,895 $2,169 
See Notes to Condensed Consolidated Financial Statements (Unaudited).
6

Teradata Corporation
Condensed Consolidated Statements of Cash Flows (Unaudited)
 Six Months Ended June 30,
In millions20222021
Operating activities
Net income$32 $97 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization7376
Stock-based compensation expense63 52 
Deferred income taxes2 9 
Changes in assets and liabilities:
Receivables70 32 
Inventories9 9 
Current payables and accrued expenses(26)15 
Deferred revenue(38)48 
Other assets and liabilities71 (3)
Net cash provided by operating activities256 335 
Investing activities
Expenditures for property and equipment(3)(9)
Additions to capitalized software(1)(2)
Net cash used in investing activities(4)(11)
Financing activities
Repurchases of common stock(317)(121)
Proceeds from long-term borrowings500  
Repayments of long-term borrowings(413)(19)
Payments of finance leases(45)(44)
Other financing activities, net1 18 
Net cash used in financing activities(274)(166)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(25)(4)
(Decrease) increase in cash, cash equivalents and restricted cash
(47)154 
Cash, cash equivalents and restricted cash at beginning of period595 533 
Cash, cash equivalents and restricted cash at end of period$548 $687 
Supplemental cash flow disclosure:
Assets acquired under operating lease$1 $3 
Assets acquired under finance lease$34 $58 
Annual variable incentive payout settled in equity$ $17 
Reconciliation of cash, cash equivalents and restricted cash to the Condensed Consolidated Balance Sheets:
June 30, 2022December 31, 2021
Cash and cash equivalents$545 $592 
Restricted cash3 3 
Total cash, cash equivalents and restricted cash$548 $595 

See Notes to Condensed Consolidated Financial Statements (Unaudited).
7

Teradata Corporation
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)
Common StockPaid-inAccumulated Accumulated Other Comprehensive 
In millionsSharesAmountCapitalDeficitLossTotal
December 31, 2021107 $1 $1,808 $(1,211)$(138)$460 
Net income— — — 36 — 36 
Employee stock compensation, employee stock purchase programs and option exercises, net of tax3 — 34 — — 34 
Repurchase of common stock, not yet settled— — (50)— — (50)
Repurchases of common stock, retired(5)— — (250)— (250)
Pension and postemployment benefit plans, net of tax— — — — 2 2 
Unrealized gain on derivatives, net of tax— — — — 6 6 
Currency translation adjustment— — — — (1)(1)
March 31, 2022105 $1 $1,792 $(1,425)$(131)$237 
Net loss— — — (4)— (4)
Employee stock compensation, employee stock purchase programs and option exercises, net of tax— — 32 — — 32 
Repurchase of common stock, settled— — 50 — — 50 
Repurchases of common stock, retired(2)— — (67)— (67)
Pension and postemployment benefit plans, net of tax— — — — 1 1 
Unrealized loss on derivatives, net of tax— — — — (2)(2)
Currency translation adjustments— — — — (25)(25)
June 30, 2022103 $1 $1,874 $(1,496)$(157)$222 
Common StockPaid-inAccumulatedAccumulated Other Comprehensive 
In millionsSharesAmountCapitalDeficitLossTotal
December 31, 2020108 $1 $1,656 $(1,114)$(143)$400 
Net income— — — 53 — 53 
Employee stock compensation, employee stock purchase programs and option exercises, net of tax4 — 52 — — 52 
Repurchases of common stock, retired(3)— — (85)— (85)
Pension and postemployment benefit plans, net of tax— — — — 2 2 
Unrealized gain on derivatives, net of tax— — — — 3 3 
Currency translation adjustment— — — — (8)(8)
March 31, 2021109 $1 $1,708 $(1,146)$(146)$417 
Net income— — — 44 — 44 
Employee stock compensation, employee stock purchase programs and option exercises, net of tax— 35 — — 35 
Repurchases of common stock, retired— — — (36)— (36)
Pension and postemployment benefit plans, net of tax— — — — 2 2 
Unrealized gain on derivatives, net of tax— — — — 2 2 
Currency translation adjustment— — — — 7 7 
June 30, 2021109 $1 $1,743 $(1,138)$(135)$471 

See Notes to Condensed Consolidated Financial Statements (Unaudited).
8

Notes to Condensed Consolidated Financial Statements (Unaudited)
1. Basis of Presentation
These statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission ("SEC") and, in accordance with those rules and regulations, do not include all information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). In the opinion of management, the condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to fairly state the results of operations, financial position and cash flows of Teradata Corporation ("Teradata" or the "Company") for the interim periods presented herein. The year-end 2021 condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make use of estimates and assumptions that affect the reported amounts and disclosures. Actual results may vary from these estimates. 
These condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Teradata’s most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the "2021 Annual Report"). The results of operations for any interim period are not necessarily indicative of the results of operations to be expected for the full year.
2. New Accounting Pronouncements
Reference Rate Reform. In March 2020, the Financial Accounting Standards Board ("FASB") issued new guidance to provide relief to companies that will be impacted by the expected change in benchmark interest rates, as participating banks will no longer be required to submit London Interbank Offered Rate ("LIBOR") quotes by the U.K. Financial Conduct Authority. The new guidance allows companies to, provided the only change to existing contracts are a change to an approved benchmark interest rate, account for modifications as a continuance of the existing contract without additional analysis. For new and existing contracts, companies may elect to apply the amendments as of March 12, 2020 through December 31, 2022. The Company has evaluated this new guidance and concluded it will not have a material impact on our consolidated financial statements or related disclosures.




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3. Revenue from Contracts with Customers
Disaggregation of Revenue from Contracts with Customers
The following table presents a disaggregation of revenue:
Three Months Ended June 30,Six Months Ended June 30,
in millions2022202120222021
Americas
Recurring $215 $233 $461 $451 
Perpetual software licenses, hardware and other3 4 15 11 
Consulting services31 37 63 75 
Total Americas249 274 539 537 
EMEA
Recurring75 86 164 187 
Perpetual software licenses, hardware and other3 7 14 20 
Consulting services25 35 54 68 
Total EMEA103 128 232 275 
APJ
Recurring55 57 106 110 
Perpetual software licenses, hardware and other2 6 5 9 
Consulting services21 26 44 51 
Total APJ78 89 155 170 
Total Revenue$430 $491 $926 $982 

Rental revenue, which is included in recurring revenue in the above table, was as follows:
Three Months Ended June 30,Six Months Ended June 30,
in millions2022202120222021
Rental revenue* $45 $48 $95 $87 
*Rental revenue includes hardware maintenance.
Contract Balances
The timing of revenue recognition, billings and cash collections results in billed accounts receivable, contract assets, and customer advances and deposits (deferred revenue or contract liabilities) on the condensed consolidated balance sheet. Accounts receivable include amounts due from customers that are unconditional. Contract assets relate to the Company’s rights to consideration for goods delivered or services completed and recognized as revenue but billing and the right to receive payment is conditional upon the completion of other performance obligations. Contract assets are included in other current assets on the balance sheet and are transferred to accounts receivable when the rights become unconditional. Deferred revenue consists of advance payments and billings in excess of revenue recognized. Deferred revenue is classified as either current or noncurrent based on the timing of when the Company expects to recognize revenue. These assets and liabilities are reported on a contract-by-contract basis at the end of each reporting period.
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The following table provides information about receivables, contract assets and deferred revenue from contracts with customers:
As of
in millionsJune 30, 2022December 31, 2021
Accounts receivable, net266 $336 
Contract assets15 10 
Current deferred revenue530 552 
Long-term deferred revenue11 27 
Revenue recognized during the six months ended June 30, 2022 from amounts included in deferred revenue at the beginning of the period was $346 million.
Transaction Price Allocated to Unsatisfied Obligations
The following table includes estimated revenue expected to be recognized in the future related to the Company's unsatisfied (or partially satisfied) obligations at June 30, 2022:
in millionsTotal at June 30, 2022Year 1Year 2 and Thereafter
Remaining unsatisfied obligations$2,087 $1,373 $714 
The amounts above represent the price of firm orders for which work has not been performed or goods have not been delivered and exclude unexercised contract options outside the stated contractual term that do not represent material rights to the customer. Although the Company believes that the contract value in the above table is firm, approximately $1,243 million of the amount is under contracts that are subject to customer-only general cancellation for convenience terms that the Company is contractually obligated to perform unless the customer notifies us of cancellation. The Company expects to recognize revenue of approximately $449 million in the next year from contracts that are non-cancelable. The Company believes the inclusion of this information is important to understanding the obligations that the Company is contractually required to perform and provides useful information regarding remaining obligations related to these executed contracts.
4. Contract Costs
The Company capitalizes sales commissions and other contract costs that are incremental direct costs of obtaining customer contracts if the expected amortization period of the asset is greater than one year. These costs are recorded in capitalized contract costs, net on the Company’s balance sheet. The capitalized amounts are calculated based on the annual recurring revenue and contract value for individual multi-term contracts. The judgments made in determining the amount of costs incurred include whether the commissions are in fact incremental and would not have occurred absent the customer contract. Costs to obtain a contract are amortized as selling, general and administrative expenses on a straight-line basis over the expected period of benefit, which is typically around four years. These costs are periodically reviewed for impairment. The following table identifies the activity relating to capitalized contract costs:
in millionsDecember 31, 2021CapitalizedAmortizationJune 30, 2022
Capitalized contract costs$111 $15 $(31)$95 
in millionsDecember 31, 2020CapitalizedAmortizationJune 30, 2021
Capitalized contract costs$98 $20 $(21)$97 

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5. Supplemental Financial Information
 As of
In millionsJune 30,
2022
December 31,
2021
Inventories
Finished goods$11 $17 
Service parts6 9 
Total inventories$17 $26 
Deferred revenue
Deferred revenue, current$530 $552 
Long-term deferred revenue11 27 
Total deferred revenue$541 $579 
6. Income Taxes
Income tax provisions for interim periods are based on estimated annual income tax rates, adjusted to reflect the effects of any significant infrequent or unusual items which are required to be discretely recognized within the current interim period. The Company expects that a majority of its foreign earnings will be repatriated back to the United States ("U.S."). As a result, the effective tax rates in the periods presented are largely based upon the forecasted pre-tax earnings mix and allocation of certain expenses in various taxing jurisdictions where the Company conducts its business.

The effective tax rate is as follows:
 Three Months Ended June 30,Six Months Ended June 30,
In millions2022202120222021
Effective tax rate972.0 %25.4 %41.8 %26.0 %

For the three months ended June 30, 2022, the Company recorded $4 million of net discrete tax expense, a majority of which related to the recording of a valuation allowance against the current tax receivable and deferred tax asset balance that is not expected to be realized as a result of the discontinuation of the Company’s business in Russia in the first quarter of 2022. As a result of this tax expense, the Company’s effective tax rate for the quarter was 972%.

For the six months ended June 30, 2022, the Company recorded $1 million of net discrete tax benefits, a majority of which related to the excess tax benefit derived from $6 million of stock compensation vesting, offset by $5 million of discrete tax expense associated with valuation allowances against the current tax receivable and deferred tax asset balance that is not expected to be realized as a result of the discontinuation of the Company’s business in Russia in the first quarter of 2022.

For the three months ended June 30, 2021, the Company had no material discrete tax adjustments.
For the six months ended June 30, 2021, the Company recorded $4 million of discrete tax benefit, a majority of which related to the excess tax benefit derived from stock compensation vesting.
The Company estimates its annual effective tax rate for 2022 to be approximately 40%, which takes into consideration, among other things, the forecasted earnings mix by jurisdiction and the impact of discrete tax items to be recognized in 2022. Under U.S. tax law, U.S. shareholders are subject to a tax on global intangible low-taxed income ("GILTI") earned by certain foreign subsidiaries. The Company has elected to provide for the tax expense related to GILTI in the year in which the tax is incurred. Effective on January 1, 2022, the U.S. tax law changed and now requires R&D expenses to be capitalized and amortized for tax purposes under Internal Revenue Code Section 174; as a result of this law change, the Company is currently forecasting approximately $9 million of tax expense related to GILTI in our marginal effective tax rate for 2022. Should Congress enact proposed legislation to defer the
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implementation of R&D capitalization rules retroactively by the end of the year, the Company’s GILTI tax and overall effective tax rate for 2022 would be significantly reduced.
7. Derivative Instruments and Hedging Activities
As a portion of Teradata’s operations is conducted outside the U.S. and in currencies other than the U.S. dollar, the Company is exposed to potential gains and losses from changes in foreign currency exchange rates. In an attempt to mitigate the impact of currency fluctuations, the Company uses foreign exchange forward contracts to hedge transactional exposures resulting predominantly from foreign currency denominated inter-company receivables and payables. The forward contracts are designated as fair value hedges of specified foreign currency denominated inter-company receivables and payables and generally mature in three months or less. The fair values of foreign exchange contracts are based on market spot and forward exchange rates and represent estimates of possible value that may not be realized in the future. Across its portfolio of contracts, Teradata has both long and short positions relative to the U.S. dollar. As a result, Teradata’s net exposure is less than the total contract notional amount of the Company’s foreign exchange forward contracts.
Gains and losses from foreign exchange forward contracts are fully recognized each period and reported along with the offsetting gain or loss of the related hedged item, either in cost of revenues, operating expenses or in other income (expense), depending on the nature of the related hedged item.
During June 2022, Teradata entered into a cross-currency swap designated as a net investment hedge, to hedge the Euro currency exposure of its net investment in certain foreign subsidiaries. This agreement is a contract to exchange fixed-rate payments in one currency for fixed-rate payments in another currency. Changes in the fair value of this swap are recorded in Accumulated Other Comprehensive Loss in the same manner as foreign currency translation adjustments. In assessing the effectiveness of this hedge, the Company used a method based on changes in spot rates to measure the impact of the foreign currency exchange rate fluctuations on both its foreign subsidiary net investment and the related swap.
The cross-currency swap contract has an expiration date of June 29, 2026. At maturity of the cross-currency swap contract, the Company will deliver the notional amount of €143 million and will receive $150 million from the counterparty. The Company will receive monthly interest payments from the counterparty based on a fixed interest rate until maturity of the agreements.
In June 2022, Teradata refinanced its long-term debt and its associated interest rate swap, which were due to mature in June 2023. As a result, Teradata terminated its five-year London Interbank Offered Rate ("Libor") interest rate swap that had a $500 million initial notional amount to hedge the floating interest rate of its Libor term loan. On June 28, 2022, Teradata executed a five-year Secured Overnight Financing Rate ("SOFR") interest rate swap with an initial notional amount of $450 million. The Company uses interest rate swaps to manage interest rate risks on future interest payments caused by interest rate changes on its variable rate term loan. The notional amount of the hedge steps down according to the amortization schedule of the term loan. The notional amount of the hedge was $450 million as of June 30, 2022.
The Company performed an initial effectiveness assessment on the interest rate swap and the net investment hedge foreign currency swap, and the hedges were determined to be effective. The hedges are being evaluated qualitatively on a quarterly basis for effectiveness. Changes in fair value are recorded in Accumulated Other Comprehensive Loss and periodic settlements of the swap will be recorded in interest expense along with the interest on amounts outstanding under the term loan.







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The following table identifies the contract notional amount of the Company’s derivative financial instruments:
As of
In millionsJune 30,
2022
December 31,
2021
Contract notional amount of foreign exchange forward contracts$112 $110 
Net contract notional amount of foreign exchange forward contracts$56 $41 
Contract notional amount of foreign currency exchange (net investment hedge)$150 $ 
Contract notional amount of interest rate swap $450 $413 
All derivatives are recognized in the condensed consolidated balance sheets at their fair value. The notional amounts represent agreed-upon amounts on which calculations of dollars to be exchanged are based and are an indication of the extent of Teradata’s involvement in such instruments. These notional amounts do not represent amounts exchanged by the parties and, therefore, are not a measure of the instruments. Refer to Note 9 for disclosures related to the fair value of all derivative assets and liabilities.
The Company does not hold or issue derivative financial instruments for trading purposes, nor does it hold or issue leveraged derivative instruments. By using derivative financial instruments to hedge exposures to changes in foreign exchange and interest rates, the Company exposes itself to credit risk. The Company manages exposure to counterparty credit risk by entering into derivative financial instruments with highly rated institutions that can be expected to fully perform under the terms of the applicable contracts.
8. Commitments and Contingencies
Legal Proceedings. In the ordinary course of business, the Company is subject to proceedings, lawsuits, governmental investigations, claims and other matters, including those that relate to the environment, health and safety, employee benefits, export compliance, intellectual property, tax matters and other regulatory compliance and general matters. It is not currently a party to any litigation, nor is it aware of any pending or threatened litigation against it that the Company believes would materially affect its business, operating results, financial condition or cash flows, other than the following.
On June 19, 2018, the Company and certain of its subsidiaries filed a lawsuit (the "TD-SAP 1" suit) in the U.S. District Court for the Northern District of California against SAP SE, SAP America, Inc., and SAP Labs, LLC (collectively, "SAP"). In the TD-SAP 1 lawsuit, the Company alleged, among other things, that SAP misappropriated certain of the Company’s trade secrets within the Company’s enterprise data analytics and warehousing products and used such trade secrets to help develop, improve, introduce, and sell one or more competing products. The Company further alleged that SAP employed anticompetitive practices using its substantial market position in the enterprise resource planning applications market to pressure the Company’s customers and prospective customers to use one or more of SAP's competing products and reduce or eliminate customers' and prospective customers' use of the Company's offerings. The Company sought an injunction barring SAP’s alleged conduct, monetary damages, and other available legal and equitable relief. In July 2019, SAP filed patent infringement counterclaims against the Company based on five of SAP’s U.S. patents. On August 31, 2020, the Company filed a second lawsuit against SAP (the "TD-SAP 2" suit) in the U.S. District Court for the Northern District of California, in which the Company alleged infringement by SAP of four of the Company's U.S. patents. On February 16, 2021, SAP filed additional patent infringement counterclaims against the Company in response. On the same day, SAP also filed a lawsuit in Germany (the "TD-SAP 3" suit) for infringement of a single German patent. In November 2021, the district court dismissed the Company’s antitrust claims and most of its trade secret claims in the TD-SAP 1 suit. In December 2021, the Company appealed that decision to the U.S. Court of Appeals for the Federal Circuit in Washington, D.C. In the meantime, the Company and SAP have entered into a partial settlement agreement that has resulted in full dismissal of all claims and counterclaims in the TD-SAP 2 suit in California and the TD-SAP 3 suit in Germany as well as a stay of all claims and counterclaims remaining in the TD-SAP 1 suit pending resolution of the Company’s appeal. Currently, it is not possible to determine the likelihood of a loss or a reasonably estimated range of loss, if any, pertaining to any of SAP’s remaining patent counterclaims in the TD-SAP 1 lawsuit.
Other Contingencies. The Company provides its customers with certain indemnification rights. In general, the Company agrees to indemnify the customer if a third party asserts patent or other infringement on the part of the
14

customer for its use of the Company’s offerings. The Company has indemnification obligations under its charter and bylaws to its officers and directors, and has entered into indemnification agreements with the officers and directors of its subsidiaries. From time to time, the Company also enters into agreements in connection with its acquisition and divestiture activities that include indemnification obligations by the Company. The fair value of these indemnification obligations is typically not readily determinable due to the conditional nature of the Company’s potential obligations and the specific facts and circumstances involved with each particular agreement. As such, the Company has generally not recorded a liability in connection with these indemnification arrangements. Historically, payments made by the Company under these types of agreements have not had a material effect on the Company’s consolidated financial condition, results of operations or cash flows.
Concentrations of Risk. The Company is potentially subject to concentrations of credit risk on accounts receivable and financial instruments such as hedging instruments, and cash and cash equivalents. Credit risk includes the risk of nonperformance by counterparties. The maximum potential loss may exceed the amount recognized on the balance sheet. Exposure to credit risk is managed through credit approvals, credit limits, selecting major international financial institutions (as counterparties to hedging transactions) and monitoring procedures. Teradata’s business often involves large transactions with customers, and if one or more of those customers were to default in its obligations under applicable contractual arrangements, the Company could be exposed to potentially significant losses. However, management believes that the reserves for potential losses were adequate at June 30, 2022 and December 31, 2021.
The Company is also potentially subject to concentrations of supplier risk. Our hardware components are assembled exclusively by Flex Ltd. ("Flex"). Flex procures a wide variety of components used in the manufacturing process on behalf of the Company. Although many of these components are available from multiple sources, Teradata utilizes preferred supplier relationships to provide more consistent and optimal quality, cost and delivery. Typically, these preferred suppliers maintain alternative processes and/or facilities to ensure continuity of supply. Given the Company’s strategy to outsource its manufacturing activities to Flex and to source certain components from single suppliers, a disruption in production at Flex or at a supplier could impact the timing of customer shipments and/or Teradata’s operating results. In addition, a significant change in the forecasts to any of these preferred suppliers could result in purchase obligations for components that may be in excess of demand.
9. Fair Value Measurements
Fair value measurements are established utilizing a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets or liabilities; Level 2, defined as significant other observable inputs, such as quoted prices in active markets for similar assets or liabilities, or quoted prices in less-active markets for identical assets; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
The Company’s assets and liabilities measured at fair value on a recurring basis include money market funds, interest rate swaps, foreign currency swaps and foreign currency exchange contracts. A portion of the Company’s excess cash reserves are held in money market funds which generate interest income based on the prevailing market rates. Money market funds are included in cash and cash equivalents in the Company’s balance sheet. Money market fund holdings are measured at fair value using quoted market prices and are classified within Level 1 of the valuation hierarchy.
When deemed appropriate, the Company minimizes its exposure to changes in foreign currency exchange rates through the use of derivative financial instruments, specifically, foreign exchange forward contracts. Additionally, in June 2022, Teradata executed a five-year interest rate swap with a $450 million initial notional amount in order to hedge the variable interest rate on its term loan and a four-year cross-currency swap with initial notional amounts of €143 million/$150 million, as a net investment hedge to hedge the Euro currency exposure of our net investment in certain foreign subsidiaries. The fair value of these contracts and swaps are measured at the end of each interim reporting period using observable inputs other than quoted prices, specifically market spot and forward exchange rates. As such, these derivative instruments are classified within Level 2 of the valuation hierarchy. Fair value of unrealized gains for open contracts are recorded in other assets and the fair value of unrealized losses are recorded
15

in other liabilities in the Company's balance sheet. The fair value of foreign exchange forward contract assets and liabilities at June 30, 2022 and December 31, 2021 was not material. Realized gains and losses from the Company’s fair value and net investment hedges net of corresponding gains or losses on the underlying exposures were immaterial for the three and six months ended June 30, 2022 and 2021.
The Company’s other assets and liabilities measured at fair value on a recurring basis and subject to fair value disclosure requirements at June 30, 2022 and December 31, 2021 were as follows:
  Fair Value Measurements at Reporting Date Using
In millionsTotalQuoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets
Money market funds at June 30, 2022
$230 $230 $ $ 
Money market funds at December 31, 2021
$148 $148 $ $ 
Liabilities
Interest rate swap at June 30, 2022
$7 $ $7 $ 
Interest rate swap at December 31, 2021
$12 $ $12 $ 
Foreign currency swap at June 30, 2022
$1 $ 1 $ 
10. Debt
On June 28, 2022, the Company entered into a Credit Agreement that provides for (i) a five-year unsecured term loan in an aggregate principal amount of $500 million (the "Term Loan"), and (ii) a five-year unsecured revolving credit facility in an aggregate principal amount of up to $400 million, including a $50 million sublimit for the issuance of standby letters of credit and a $50 million sublimit for swingline loans (the "Revolving Facility" and, collectively with the Term Loan, the "Credit Facility"). The Credit Facility replaces the Company's prior revolving credit agreement in the maximum principal of $400 million and its prior term loan agreement in the initial principal amount of $500 million, both of which were entered into in 2018 (the "Prior Agreements"). In connection with the execution of the Credit Facility, the $400 million term loan outstanding under the Prior Agreements was repaid in full.

All outstanding borrowings pursuant to the Revolving Facility are due and payable on June 28, 2027, however, the maturity date of the Revolving Facility may be extended by agreement of the parties for up to two additional one-year periods. The Term Loan is payable in quarterly installments, which commence on June 30, 2024, with 1.25% of the initial principal amount due on each of the first twelve payment dates, with all remaining principal due on June 28, 2027. Under the terms of the Credit Facility, Teradata from time to time and subject to certain conditions may increase the lending commitments under the Credit Facility in an aggregate principal amount up to an additional $450 million, to the extent that existing or new lenders agree to provide such additional commitments. The outstanding principal amount of the Credit Facility bears interest at a floating rate based upon, at Teradata’s option, a negotiated base rate or an adjusted term SOFR rate, plus in each case, a margin based on the Company's leverage ratio.

The Credit Facility is unsecured but is guaranteed by certain of Teradata’s material domestic subsidiaries and contains certain customary representations and warranties, default provisions, and affirmative and negative covenants, including, among others, covenants regarding the maintenance of a leverage ratio and covenants relating to financial reporting, compliance with laws, subsidiary indebtedness, liens, sale and leaseback transactions, mergers and other fundamental changes, and entry into certain restrictive agreements. Most of the covenants are subject to materiality, thresholds, and exceptions. In addition, the Credit Agreement provides that Teradata may request that the Credit Agreement be amended to establish key performance indicators with respect to certain environmental, social, and governance ("ESG") targets, pursuant to which certain positive or negative adjustments would be made to various fees and applicable margin based on Teradata’s performance against such ESG targets.
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As of June 30, 2022, the Company had no borrowings outstanding under the Revolving Facility, leaving $400 million in borrowing capacity available under the Revolving Facility and the Term Loan principal outstanding was $500 million. The Term Loan is recognized on the Company's balance sheet at the unpaid principal balance, net of deferred issuance costs, and is not subject to fair value measurement. The Company was in compliance with all covenants under the Credit Facility as of June 30, 2022.

Teradata’s all-in interest rate, associated with the Company's Prior Agreements, for the three and six months ended June 30, 2022, was approximately 4.23%.

As disclosed in Note 7, Teradata entered into an interest rate swap to hedge the portion of the floating interest rate of the Term Loan and a cross currency swap to hedge a portion of Euro currency exposure of its net investment in certain foreign subsidiaries. As of June 30, 2022, the blended all-in interest rate was 3.98%.


11. Earnings per Share
Basic earnings per share is calculated by dividing net income by the weighted average number of shares outstanding during the reported period. The calculation of diluted earnings per share is similar to basic earnings per share, except that the weighted average number of shares outstanding includes the dilution from potential shares resulting from stock options, restricted stock awards and other stock awards. The components of basic and diluted earnings per share are as follows:
 Three Months Ended
June 30,
Six Months Ended June 30,
In millions, except per share amounts2022202120222021
Net (loss) income attributable to common stockholders$(4)$44 $32 $97 
Weighted average outstanding shares of common stock103.5 109.0 104.2 108.9 
Dilutive effect of employee stock options, restricted stock and other stock awards 3.7 2.9 3.8 
Common stock and common stock equivalents103.5 112.7 107.1 112.7 
Net (loss) income per share:
Basic$(0.04)$0.40 $0.31 $0.89 
Diluted$(0.04)$0.39 $0.30 $0.86 
For the three months ended June 30, 2022, due to the net loss attributable to Teradata common stockholders, common shares that otherwise potentially would cause dilution, such as employee stock options, restricted shares and other stock awards, have been excluded from the diluted share count because their effect would have been anti-dilutive. The fully diluted shares would have been 105.6 million for the three months ended June 30, 2022.
Options to purchase 0.4 million shares and 0.4 million shares of common stock for the three and six months ended June 30, 2022 and 0.2 million shares and 0.6 million shares of common stock for the three and six months ended June 30, 2021 were not included in the computation of diluted earnings per share because the exercise prices of these options were greater than the average market price of the common shares for the period, and therefore would have been anti-dilutive.
Accelerated Share Repurchase Agreement ("ASR")
On February 9, 2022 Teradata entered into an ASR agreement with JPMorgan Chase Bank, National Association ("JPMorgan Chase") to purchase shares of its common stock from JPMorgan Chase for an aggregate purchase price of $250 million. Pursuant to the ASR, the Company received an initial delivery of 3,930,045 shares of common stock based on the $50.89 closing price of the common stock on February 8, 2022. A final delivery of 1,635,863 shares was received on May 6, 2022 to complete the ASR agreement.
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12. Segment and Other Supplemental Information
Teradata manages its business under three geographic regions, which are also the Company’s operating segments: (1) Americas region (North America and Latin America); (2) EMEA region (Europe, Middle East and Africa) and (3) APJ region (Asia Pacific and Japan). For purposes of discussing results by segment, management excludes the impact of certain items, consistent with the manner by which management evaluates the performance of each segment. This format is useful to investors because it allows analysis and comparability of operating trends. It also includes the same information that is used by Teradata management to make decisions regarding the segments and to assess financial performance. The chief operating decision maker, who is the Company's President and Chief Executive Officer, evaluates the performance of the segments based on revenue and multiple profit measures, including segment gross profit. For management reporting purposes, assets are not allocated to the segments.
The following table presents segment revenue and segment gross profit for the Company:
 Three Months Ended
June 30,
Six Months Ended June 30,
In millions2022202120222021
Segment revenue
Americas$249 $274 $539 $537 
EMEA103 128 232 275 
APJ78 89 155 170 
Total revenue430 491 926 982 
Segment gross profit
Americas153