Teradata Reports 2015 First Quarter Results

ATLANTA, Ga., May 7 — Teradata Corp. reported revenue of $582 million for the quarter ended March 31, 2015, versus $628 million reported in the first quarter of 2014. Revenue in the first quarter decreased 7 percent, and 2 percent when compared in constant currency.

Gross margin in the first quarter was 47.6 percent, as reported under U.S. Generally Accepted Accounting Principles (GAAP), versus 53.0 percent in the first quarter of 2014. On a non-GAAP basis, excluding stock-based compensation expense and the other special items described in footnote #2, gross margin was 49.3 percent, down from 54.9 percent in the first quarter of 2014 due to revenue mix and currency impact.

Teradata reported first quarter net income of $22 million, or $0.15 per diluted share, which compared to net income of $59 million, or $0.37 per diluted share, in the first quarter of 2014. Stock-based compensation expense and other special items reduced Teradata’s first quarter net income by $22 million (or 15 cents of EPS). Excluding stock-based compensation expense and the other special items detailed in footnote #2, non-GAAP net income in the first quarter of 2015 was $44 million, or $0.30 per diluted share, versus $87 million, or $0.54 per diluted share, in the first quarter of 2014.

“Although we had a slow start in 2015, we are seeing progress in Q2, and more so in the second half of the year,” said Mike Koehler, chief executive officer, Teradata Corporation. “We have been investing to go broader in the market and to strengthen our position with our data warehousing, big data analytics, and marketing applications solutions – both in the cloud and on-premises – to generate higher revenue growth longer term.”

Operating Income

First quarter operating income of $30 million decreased from $89 million reported in the first quarter of 2014. On a non-GAAP basis, operating income was $61 million versus $125 million in the first quarter of 2014. The difference was primarily due to lower revenue, lower product margins due to product and deal mix, the negative impact from currency fluctuations and the company’s increased investments in research and development and demand creation.

Cash Flow

During the first quarter of 2015, Teradata generated $222 million of cash from operating activities compared to $343 million in the prior-year period, which was as expected due to lower operating income and the early collection of accounts receivables in the fourth quarter of 2014. Teradata generated $190 million of free cash flow (cash from operating activities less capital expenditures and additions to capitalized software) in the first quarter of 2015, compared to $310 million in the same period in 2014.

Balance Sheet

As of March 31, 2015, Teradata had $881 million of cash. During the quarter, Teradata purchased approximately 6.3 million shares of its stock worth approximately $273 million.

On March 25, 2015, Teradata refinanced its existing term loan with a new 5-year, $600 million senior unsecured term loan due in March 2020. Also on that date, the company replaced its revolving credit facility with a new 5-year revolving credit facility with a credit line of $400 million. As of March 31, 2015, total debt was $600 million, and there were no funds drawn on the new revolving credit facility.

On May 4, 2015, Teradata’s Board of Directors authorized an additional $300 million to be utilized to repurchase Teradata common stock under its open market share repurchase program. Teradata now has a total of approximately $431 million authorized for share repurchases under this share repurchase program. The stock is anticipated to be repurchased periodically on an ongoing basis in open market transactions at management’s discretion, in accordance with applicable securities rules regarding issuer repurchases. The increased share repurchase authorization is effective immediately and the program expires on December 15, 2017.

2015 Outlook

Teradata continues to expect full-year 2015 constant currency revenue growth to be in the 3 to 5 percent range. Reported revenue growth is still expected to be flat to down 2 percent for the full-year 2015.

Teradata now expects its 2015 non-GAAP earnings per share (which excludes stock-based compensation expense and other special items) to be at the low end of its initial guidance range of $2.50 – $2.70.  On a GAAP basis, full-year earnings per share is expected to be at the low end of $1.97 – $2.17 guidance range.