Teradata Reports 2014 Third Quarter Results

ATLANTA, Ga., Nov. 6 — Teradata Corp. reported revenue of $667 million for the quarter ended September 30, 2014, versus $666 million reported in the third quarter of 2013. Revenue in the third quarter increased 1 percent when compared in constant currency.

Gross margin in the third quarter was 52.5 percent, as reported under U.S. Generally Accepted Accounting Principles (GAAP), versus 53.8 percent in the third quarter of 2013. On a non-GAAP basis, excluding stock-based compensation expense and the other special items described in footnote #2, gross margin was 53.8 percent, versus 55.0 percent in the third quarter of 2013.

Teradata reported third quarter net income of $94 million, or $0.60 per diluted share, which compared to net income of$98 million, or $0.59 per diluted share, in the third quarter of 2013. Stock-based compensation expense and other special items reduced Teradata’s third quarter net income by $17 million (or 11 cents of EPS) as reported under GAAP. Excluding stock-based compensation expense and the other special items detailed in footnote #2, non-GAAP net income in the third quarter of 2014 was $111 million, or $0.71 per diluted share, versus $116 million, or $0.70 per diluted share, in the third quarter of 2013.

“We continue to experience excellent revenue growth with our Big Data analytics solutions which include Aster, Big Data appliances, Hadoop and related software tools and services,” said Mike Koehler, president and chief executive officer, Teradata Corporation.  “Data Warehouse new customer wins in the quarter and year-to-date are at near record levels, and we are seeing strong market adoption of our Unified Data Architecture.  Our increased investments in Big Data analytics and Integrated Marketing Cloud solutions will help drive further revenue growth longer term.”

Operating Income

Third quarter operating income of $123 million decreased from $132 million reported in the third quarter of 2013. On a non-GAAP basis, operating income was $150 million versus $158 million in the third quarter of 2013. The difference was primarily due to lower product margins due to increased amortization of previously capitalized software development costs, product and deal mix and increased research and development expense.

Cash Flow

During the third quarter of 2014, Teradata generated $102 million of cash from operating activities, a 59 percent increase compared to $64 million in the prior-year period. Teradata generated $66 million of free cash flow (cash from operating activities less capital expenditures and additions to capitalized software) in the third quarter of 2014, compared to $29 million in the same period in 2013.

Year to date, Teradata generated $583 million of cash from operating activities, a 30 percent increase compared to $447 million in the prior-year period. Teradata generated $489 million of free cash flow in the first nine months of 2014, a 41 percent increase from $347 million generated in the same period in 2013.

Balance Sheet

Teradata ended the quarter with $848 million in cash, down $86 million from the cash balance at June 30, 2014. During the quarter Teradata purchased approximately 2.4 million shares of its stock worth approximately $102 million. Year to date, through September 30, Teradata purchased 6.9 million shares, worth approximately $293 million.

As of September 30, 2014, Teradata had total debt of $255 million outstanding under a term loan. Additionally, Teradata has $300 million available through a pre-arranged credit facility; however, no funds were drawn from the credit facility.

2014 Outlook

Teradata continues to expect full-year 2014 constant currency revenue growth to be at the low end of its original 3-7 percent guidance range.  However, based on currency rates at the end of October 2014, currency translation is now expected to have a 1 percentage point headwind on Teradata’s full-year revenue comparison.

Teradata continues to expect 2014 non-GAAP earnings per share (which excludes stock-based compensation expense and other special items) to be at the low end of the $2.85-$3.00 range.