2018 Guide to Effective Proxies

6 TH EDITION | GUIDE TO EFFECTIVE PROXIES 276 TERADATA CompensationDiscussionandAnalysis Ourtraditionoftechnologyinnovationcontinued,asweenhancedandintroduced: INTELLIFLEX™ ourdataanalyticsplatformthat deliversseventimesmore computingpowerthanour previousproductandprovides customerswithenhanced performance,storageandmemory capabilities,whilereducingcostly datacenterspaceandsaving energycosts. INTELLICLOUD™ ourmanagedcloudoffering thatprovidesdataandanalytics software-as-a-service. INTELLIBASE™ arevolutionarymultipurpose platformthatsupportsseveral softwaretechnologies(including Teradata,TeradataAsterAnalytics andHadoop)onre-deployable hardwareataneconomicalprice point. Wealsorealignedourconsultingservicesorganizationtostreamlineourofferingstoamorebusiness outcome-ledapproach. Wecontinuedtorecognizethebenefitsofournewgo-to-marketstrategyoffocusingoncustomerswho representthe500largestanalyticalopportunities. During 2017, stockholders saw the benefits of our strategic initiatives through financial and operating metric improvements and increased total stockholder return. Key financial highlights for the year included: 2016 2017 41% Ourstockpriceincreasedmorethan 41% duringtheyear,andmorethan 57% since May4,2016,thedaybeforeMr.Lundbegan servingasCEO. 2016 2017 7% Significantgrowthinsubscription-based licensesthatbuildfuturerecurringproduct revenue,demonstratedinpartbyrecurring revenuegrowthof 7% overprioryear. 2016 2017 24% Withinconsultingservices,totalbusiness consultingrevenuefromourstrategic serviceofferingsaroundanalytics consultingandbusinessconsulting increased 24% fromprioryear. 2016 2017 13% Totalannualrecurringrevenue(“ARR”) growthof 13% overprioryear.(ARRis theannualvalueatapointintimeofall ofourrecurringcontracts–includes subscriptionandcloudlicenses,software upgraderights,rentals,maintenanceand, for2017,excludesmanagedservices.) 2016 2017 17% 17%“TCore”growth fromour2016 year-endinstalledbase.(TCoreisa metricthattracksaconsistentunitof consumptionacrossallofTeradata’s productsoverthewidevarietyof configurationanddeploymentoptions, bothon-premisesandinthecloud.) 30 2018PROXYSTATEMENT Total of 03 pages in section Compensation DiscussionandAnalysis 2017resultsincludedkeystrategicperformancemetrics,includinganEPSgoalthatwasconsistentwithour guidancetoinvestorsfortheyear,andweachievedbetterthanexpectedearningsresultsin2017.Inaddition,as explainedbelowonpage40ofthisCD&A,theCommitteehadtheabilityunderthetermsoftheseequityawards topayoutabovetargetlevel,butitchosetoreducethetotalpayoutlevelto100.3%ratherthan110.3%. • Forourcurrent2017-2018long-termincentiveprogram,70%ofthelong-termincentiveopportunityisb sedon cumulativeachievementof3-yearfinancialgoalstiedtoourstrategicobjectiveincreasingsubscription-based revenue.Thesegoalsrepresentsignificantimprovementsandgrowthfromcurrentlevels,includingdouble-digit compoundedgrowthfortheannualrecurringrevenuemeasure. • AsexplainedinthisCD&A,webelieveTeradatahasmadesignificantprogresstransformingthebusinessin2017, andthecompensationofourexecutivesisconsistentwiththislevelofperformance.Inaddition,theCommittee hasdemonstrateditscommitmenttosettingchallengingperformancegoalsunderourexecutivecompensation programthatwilldriveourstrategicdirectionforyearstocome. 2017 Strategic and Financial Performance at a Glance TeradatacontinuedtomaketremendousprogressintransformingtheCompany byexecutingourstrategicinitiativesanddeliveringvaluetoourstockholders,as evidencedbyourstockpriceincreasingmorethan41%in2017.Underthe leadershipofourPresidentandCEO,Mr.Lund,wesawrealtractionwithour strategytoprovidecustomerswithnewpurchasinganddeploymentoptionsand enhancedopportunitiestodrivebusinessoutcomeswithTeradataproducts, solutionsandservices.Inaddition,weexceededourguidancetoinvestorsforthe yearwithrespecttorevenueandearningspershareexpectations. FORTHEYEAR– 41.6% STOCKPRICE INCREASE EXCEEDEDREVENUE ANDEPSGUIDANCE Ourstrategicshifttomultiplepurchaseanddeploymentoptionsforourcustomersledtomoresubscription-based licenses.Asaresult,revenuecontinuedtobedownsomewhatin2017fromtheprioryearonaconstantcurrency basis,althoughrevenuefromsubscription-basedofferingswasupfortheyearinlinewithourchangingbusiness model.Otherhighlightsofourkeystrategicadvancementsduringtheyearincludethefollowing: WeintroducedTeradataEverywhere™,whichbringstogetherourexpandedofferingsacrosscloud andon-premiseswithaflexiblepricingandlicensingmodel.Customersbeganadoptingthisofferingthrough whichtheynowcan: “ANALYZEANYTHING” withtheadditionofnew analytictoolsand enginescoupledwith Teradata’sleading databasesoftware. Theseexpanded capabilitiesenable userstoworkwiththeir preferredanalytictools andlanguagesacross datasources,atscale. “DEPLOYANYWHERE” eitheronpremisesorin thecloudwithflexibility tochangeasbusiness needsevolve. “BUYANYWAY” throughincreased optionsinhow customerschooseto purchaseourbest- of-breedtechnology withnewsubscription licensingoptions,pricing tiers,andsimplified pricingbundlesthat addresstheneedsof differentcustomers. “MOVEANYTIME” whichallowscustomers tomovetheirsoftware licensesfreelybetween deploymentoptions withTeradata’sportable softwarelicensesas theirbusinessesevolve. Withthisrevolutionary softwarelicense portability,thereisno lock-inaswithother vendors.Anindustryfirst. 29 COMPENSATION DISCUSSION AND ANALYSIS ThisCompensationDiscussionandAnalysis(this“CD&A”)describestheexecutivecompensationprogramfor2017 establishedbytheCompensationandHumanResourceCommittee(the“Committee”).Ournam dexecutiveofficers for2017include: NAME POSITION VictorLund PresidentandChiefExecutiveOfficer MarkCulhane EVPandChiefFinancialOfficer(effectiveNovember10,2017) OliverRatzesberger ChiefOperatingOfficer DanielHarrington EVP,CustomerSupportandServices JohnDinning FormerEVPandChiefBusinessOfficer(priortoFebruary5,2018) StephenScheppmann FormerEVPandChiefFinancialOfficer(priortoNovember10,2017) SECTION 1: EXECUTIVE SUMMARY Business Transformation Highlights and Key Compensation Decisions • Teradataisinthemidstofastrategicturnaroundthatimpactedour2017reportedfinancialr sul sandis factoredintoourexecutivecompensationprogramasdescribedbelow. • In2017,westructuredourexecutivecompensationprogramtobeheavilyweightedonperformance-based compensationthatwastiedtoourstrategy–annualcashincentivesweredesignedtodriveprofitablegrowth andlong-termequityawardsweretiedtokeybusiness,financialandoperationalmeasuresthatarecriticaltothe executionofourtransformation.Nochangestobasesalariesweremadeforournamedexecutiveofficersin2017. • OurbusinessmodelischangingwithournewstrategyasTeradataisshiftingtomoresubscription-based offeringsinwhichrevenueisrecognizedoverthemulti-yearlifeofthecustomeragreementratherthanall upfrontashasbeenthehistoricalpractice.Becausesubscription-basedrevenueprovidesamorepredictable revenuestreamovertime,itprovideslonger-termbenefitstotheCompanyandourstockholders.Asaresult, growingsubscription-basedrevenueisoneofthekeyfactorsthatinvestorsusetomeasureoursuccess, particularlyasourreportedrevenueisnegativelyimpactedinthenearterm. 800 1,500 2015 2016 2017 TotalRevenueMix ($M) Recurring Non-Recurring • Duetothisshiftingrevenuestreamandinvestmentsrelatedtoourtransformation,theCompany’sreported financialperformancehasbeennegativelyimpacted,whichwasfactoredintoourannualincentiveplanrevenue goals(forexample,the2017revenuetargetwasbelowreported2016results).Webelievethattheactual performanceoftheCompanyin2017isbestmeasuredbytakingthisrevenueshiftintoconsideration,andthe 2017annualincentiveplanwasdesignedtakingintoaccountournewbusinessmodeltomeasureresultsona “perpetualequivalentvalue”basis(seepage36ofthisCD&Aformoreinformationonthiscalculation).When viewedonthisbasis,wesucceededinexceedingourrevenueplanfortheyearand,consequently,ourannual incentiveswerepaidoutat111%. • Thedesignofthelong-termincentiveopportunitiesforourexecutivesisalsoconsistentwiththeevolutionofour businessduringtheCompany’stransformation.Thegoalsfortheperformance-basedequityawardsbasedon 28 2018PROXYSTATEMENT UNITED RENTALS, INC. Fordetails,pleasereferto“The2017ExecutiveCompensationPrograminDetail”sectionstartingon page42. 2017PayMix Ourexecutivecompensationprogramemphasizesvariablepaythatalignscompensationwith performanceandstockholdervalue.FortheNEOs,themixofcompensationelementsisheavily weightedtowardvariable,performance-basedcompensationwithabalancedfocusongrowth, profitability,andreturns.TheCEO’scompensation,inparticular,hasagreateremphasisonvariable compensationthanthatoftheotherNEOsbecausehisactionshaveagreaterinfluenceonthe performanceoftheCompanyasawhole. Asshownbelow,thesignificantmajorityofNEOpaycontinuestobevariable(93%fortheCEOandan averageof83%forourotherNEOs)baseduponactualfiscalyear2017compensation.Forpurposes ofthechartsbelow,performance-basedRSUsareincludedattargetusingthe2017grantdatestock priceof$129.78. 93% VariablePay 83% VariablePay CEO OTHERNEOs 7% Base Salary 22% AICP 61% Performance- BasedRSUs 10% Time-BasedRSUs 17% Base Salary 31% AICP 39% Performance- BasedRSUs 13% Time-BasedRSUs 2017StockholderEngagementand“SayonPay”Results Wevalueourstockholders’perspectiveonourbusinessandeachyearproactivelyinteractwith stockholdersthroughnumerousstockholderengagementactivities.In2017,theseincludedourannual meetingofstockholders,quarterlyearningscalls,variousinvestorconferences,andseveral(non-deal) roadshows.Inaddition,attheBoard’srequest,managementconductedthe2017StockholderOutreach Programtoengagewithourtopstockholdersaboutkeygovernanceandcompensationtopicsspecificto theCompany,alongwithothertopicsandtrendsourstockholderswishedtodiscuss.Detailsaboutthe 2017StockholderOutreachProgramareoutlinedonpage4ofthisProxyStatement. AttheCompany’s2017annualmeetingofstockholders,wereceivedsubstantialsupportforour executivecompensationprogram,withover93%ofthestockholderswhovotedonthe“sayonpay” proposalapprovingthecompensationofourNEOs,whichwasconsistentwiththepositivefeedback wereceivedindiscussionswithourstockholdersthroughouttheyear. 38 Total of 04 pages in section Notably,theCompanycompletedtheacquisitionsofNESRentals(“NES”)inApril2017andNeff Corporation(“Neff”)inOctober2017.Theseacquisitionscontributedsignificantlytothe2017year- over-yearincreasesintotalandrentalrevenuenotedabove.Onaproformabasisreflectingtheimpact ofNESandNeff(i.e.,includingthestandalonepre-acquisitionresultsofNESandNeff),totalrevenue increased7.7%andrentalrevenueincreased7.6%year-over-year.Theproformaincreaseinrental revenuewasdrivenbyimprovementinallthreeunderlyingmetrics(allonaproformabasis):volume wasup7.1%year-over-year,rateswereup0.4%year-over-year,andtimeutilizationincreased150 basispointsyear-over-yearto69.1%,whichwasarecordfortheCompany. Further,theCompany’sspecialtyrentaloperationsofTrenchSafety,Power&HVAC,andPump Solutionsexperiencedsolidgrowthin2017.Rentalrevenueforthesegmentincreased27.5%year- over-year,andrentalgrossmarginincreasedby260basispointsyear-over-yearto49.6%.Thebulk f therevenueincreasecamefromsame-storeperformance. Muchofthissuccesscanbeattributedtotheskilledimplementationofourbusinessstrategybythe Company’sseniormanagementandtheBoard,whocontinuedtocollaborateoncreatinglong-term valueforourstockholdersin2017.Thechartbelowshowsthetotalcumulativereturnofthe Company’sstocksinceDecember31,2014,comparedwiththeS&P500andtheCompany’s2017 ExecutiveCompensationPeerGroup(asdefinedonpage41). 12/31/2017 URI S&P500 PeerGroup Ini�al Investment 78% 37% 19% $0 $50 $100 $150 $200 12/31/2014 12/31/2015 12/31/2016 1/31/2018 (1weekpostQ4 results) 2017IncentiveCompensationHighlights Consistentwithourrecordperformancein2017,weexcelledagainstourinternalbusinessplan,which includedtheforecastedfinancialimpactofourstrategicacquisitionsduringtheyear.Specifically,the CompensationCommitteeapprovedrevisedgoalsundertheincentiveplansconcurrentwiththe acquisitionofNESinApril2017andfurtheradjustedthegoalswiththeacquisitionofNeffinOctober 2017.TheadjustmentsincludedsignificantincreasestotheAdjustedEBITDAgoalstopreventany potentialunfairwindfall,andminordecreasestotheEPIandROICgoalstopreventanypotentialunfair penalization.Basedonourresults,thefundingwasabovetargetforbothourAnnualIncentive CompensationPlan(“AICP”)andourLong-TermIncentivePlan(“LTIP”)undertheadjustedgoals. Annualbonuseswerefundedat198.7%oftarget,andLTIPawardswereearnedat200%oftarget. 37 EXECUTIVE COMPENSATION Compensation Discussion and Analysis (“CD&A”) Our executivecompensationprogram aims to attract, retain, andreward highcalibermanagement talent whowillleadour businessandexecute our strategy for long-term profitablegrowth. ThisCD&A outlinesour 2017executivecompensationphilosophyandobjectives,describesthe elements of our executivecompensationprogram, andexplainshowthe CompensationCommittee (the “Committee”) of the Boardof Directors (the “Board”) arrived at its compensationdecisionsfor our 2017named executiveofficers (“NEOs”) listedbelow: NEO PrincipalPositionandTitle MichaelKneeland PresidentandChiefExecutiveOfficer (1) WilliamPlummer ExecutiveVicePresidentandChiefFinancialOfficer MatthewFlannery ExecutiveVicePresidentandChiefOperatingOfficer (2) DaleAsplund ExecutiveVicePresident,BusinessServicesandChiefInformationOfficer CraigPintoff ExecutiveVicePresident,ChiefAdministrativeandLegalOfficer (1) Mr.KneelandremainsasChiefExecutiveOfficerbutisnolongerPresident,effectiveMarch8,2018. (2) Mr.FlannerywaspromotedtoPresidenteffectiveMarch8,2018,assumingthetitlefromMr.Kneeland.Hewillcontinueas ChiefOperatingOfficer. EXECUTIVESUMMARY 2017BusinessHighlights TheCompanydeliveredarecordyearin2017.Totalrevenuewas$6.641billionandrentalrevenuewas $5.715billion,comparedwith$5.762billionand$4.941billion,respectively,for2016.AdjustedEBITDA (3) was$3.164billionandadjustedEBITDAmarginwas47.6%for2017,comparedwith$2.759billionand 47.9%,respectively,for2016.Returnoninvestedcapital(“ROIC”) (4) was8.8%for2017,comparedto8.3% for2016.Economicprofitimprovementwas(EPI) (5) $47.2million.Additionally,2017wasthesafestyearon recordforCompanyoperations. AdjustedEBITDA ($Billions) Revenue ($Billions) Returnon Invested Capital (ROIC) 2015 2016 2017 $5.817 $5.762 $6.641 2015 2016 2017 $2.832 $2.759 $3.164 2015 2016 2017 8.8% 8.8% 8.3% (3) AdjustedEBITDAisanon-GAAPfinancialmeasure,asdefinedonpage24oftheCompany’s2017AnnualReporton Form10-K.PleaserefertotheForm10-KfortheadjustedEBITDA-to-GAAPreconciliations. (4) ROICisanon-GAAPfinancialmeasurethatiscalculatedbydividingafter-taxoperatingincomeforthetrailing12monthsby averagestockholders’equity(deficit),debtanddeferredtaxes,netofaveragecash.Tomitigatethevolatilityrelatedto fluctuationsintheCompany’staxratefromperiodtoperiod,thefederalstatutoryrateof35%ineffectthrough2017w s usedtocalculateafter-taxoperatingincome. (5) EPIisanon-GAAPfinancialmeasurethatmeasurestheyear-over-yearchangeinthespreadbetweenROICandthe Company’sweightedcostofcapital,whichistheweightedaverageafter-taxcostoftheCompany’sdebtandequitycapital sources.For2017,weassumedaconstantweightedcostofcapitalof10%. 36