Derivative Instruments and Hedging Activities |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments and Hedging Activities | 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 uses foreign exchange forward contracts designated as fair value hedges to mitigate the impact of currency fluctuations on foreign currency denominated assets and liabilities. These contracts generally mature in three months or less; Teradata holds both long and short positions such that net exposure is less than total contract notional amount. 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. On June 17, 2026, the Company restructured its net investment hedge by terminating its existing cross-currency swap and simultaneously entering into two replacement cross-currency swaps (designated as net investment hedges of the Company's euro-denominated net investment in certain foreign subsidiaries) of €71 million / $75 million, each. One swap matures on June 29, 2029 and the second swap matures on June 30, 2031. The restructuring extended the hedge horizon without changing the Company's risk management objective. In connection with the restructuring, the Company made a cash payment of approximately $1 million to reduce the embedded market value of the original swap. The remaining fair value was incorporated into the pricing of the replacement swaps and is being recognized consistent with the accounting for net investment hedges. As of June 30, 2026, the Company maintained these two cross-currency swaps with an aggregate notional amount of €143 million and $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. Under the agreements, the Company will deliver Euro notional amounts and receive U.S. dollar notional amounts at maturity and receives fixed-rate interest payments from the counterparties over the remaining terms of the swaps. The Company performed an effectiveness assessment upon designation of the replacement swaps and concluded they were highly effective. Effectiveness is evaluated quarterly. Changes in fair value are recorded in Accumulated other comprehensive loss and periodic settlements are recorded in interest expense. The Company will systematically amortize the initial excluded component, which was immaterial at inception, to interest expense over the term of the hedging relationships. On June 24, 2026, the Company repaid the outstanding balance of its term loan and terminated the related five-year Secured Overnight Financing Rate ("SOFR") based interest rate swap (initial notional amount of $450 million, stepping down per the term loan amortization schedule). As a result of the debt extinguishment, the forecasted interest payments previously designated as the hedged transactions were no longer probable of occurring and the Company discontinued hedge accounting. Amounts previously deferred in Accumulated Other Comprehensive Loss associated with the interest rate swap were reclassified into earnings. The Company received approximately $4 million upon termination of the interest rate swap, including less than $1 million related to accrued interest settlements and approximately $3 million related to the derivative's fair value. The following table identifies the contract notional amount of the Company’s derivative financial instruments:
All derivatives are recorded at fair value in the condensed consolidated balance sheets. Notional amounts do not represent amounts exchanged and are not a measure of the instruments. See Note 9, Fair Value Measurements. The Company does not hold or issue derivatives for trading or speculative purposes. Counterparty credit risk is managed by transacting exclusively with highly rated financial institutions.
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