TDC

Teradata is a melting-but-profitable legacy franchise mid-transition to cloud. Revenue has fallen four straight years ($1.92B in FY2021 to $1.66B in FY2025, -5% YoY), and the MD&A confirms the pain is structural: on-premises and Maintenance ARR (-13%) and Subscription ARR (-4%) are eroding faster than Public Cloud ARR (+15% to $701M) can backfill. Total ARR did edge up 3% to $1,522M, but ~2pts of that was FX, and the Cloud Net Expansion rate fell from 117% to 108% — the single most important leading indicator of this story is decelerating, which is why I won't underwrite an inflection.

What keeps this off the sell list is cash quality. Despite the top-line slide, net income rose 14% to $130M and diluted EPS jumped 16.4% to $1.35, helped by a 2.5% lower share count from $140M of buybacks. Operating cash flow held at $305M against just $19M of capex, implying roughly $286M of free cash flow — a ~9% FCF yield on the $3.16B market cap. The balance sheet looks scary on the headline 6.73x liabilities/equity ratio, but that is an artifact of a $1.92B accumulated deficit (years of buybacks) crushing book equity to $230M; in cash terms TDC holds $493M against $456M total debt, i.e. roughly net-cash. Margins are slipping for an understandable reason — the 10-K attributes the gross-margin drop (60.5% to 59.4%) to a higher mix of lower-margin Public Cloud revenue that hasn't yet reached scale, partially offset by improving cloud gross rates.