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May 10, 2016

Teradata Reports 2016 First Quarter Results

ATLANTA, Ga., May 10 — Teradata Corp. (NYSE: TDC) reported revenue of $545 million for the quarter ended March 31, 2016, versus $582 million in the first quarter of 2015. Revenue in the first quarter decreased 6 percent, down 4 percent when compared in constant currency. Excluding the Marketing Applications business the company expects to exit around the end of the second quarter of 2016, revenue was $511 million, which was down 6 percent, or down 4 percent in constant currency compared to $544 million the first quarter of 2015.

Gross margin was 49.4 percent, as reported under U.S. Generally Accepted Accounting Principles (GAAP), versus 47.6 percent reported in the first quarter of 2015. On a non-GAAP basis, excluding stock-based compensation expense, special items and the Marketing Applications business as described in footnote #2, gross margin was 51.1 percent, versus 49.3 percent in the first quarter of 2015. The increase in non-GAAP gross margin for the quarter resulted primarily from favorable deal and product mix and higher services margin.

Teradata reported a GAAP net loss of $(46) million in the first quarter, or $(0.36) per diluted share, which compared to net income of $22 million, or $0.15 per diluted share, in the first quarter of 2015. Stock-based compensation expense, special items (including impairment of goodwill and other assets of $73 million, or $0.56 per diluted share) and the Marketing Applications business reduced Teradata’s first quarter net income by $108 million, or $0.83 per diluted share. Excluding stock-based compensation expense, special items and the Marketing Applications business, non-GAAP net income in the first quarter of 2016 was $62 million, or $0.47 per diluted share. Excluding stock-based compensation expense and special items in the first quarter of 2015 non- GAAP net income was $44 million, or $0.30 per diluted share.

For the Three Months Ended March 31

Teradata reported a $(42) million GAAP operating loss in the first quarter of 2016 which included a goodwill and other assets impairment charge of $80 million. This compared to $30 million of operating income reported in the first quarter of 2015. On a non-GAAP basis, excluding stock-based compensation expense, special items and the Marketing Applications business, operating income was $92 million. Non-GAAP operating income in the first quarter of 2015, excluding stock-based compensation expense and special items, was $61 million. The year over year increase in non-GAAP operating income was primarily due to the company’s cost reduction initiatives and the exclusion of the Marketing Applications business, as well as the benefit of higher product and services gross margin rates.

Cash Flow

During the first quarter 2016, Teradata generated $251 million of cash from operating activities, compared to $222 million in the prior year period. Teradata generated $225 million of free cash flow (cash from operating activities less capital expenditures and additions to capitalized software) in the first quarter of 2016, compared to $190 million in the same period in 2015. The increase in cash generation was largely due to the timing of working capital items and lower capital expenditures.

Balance Sheet

Teradata ended the first quarter 2016 with $917 million in cash, with over 95 percent of its cash held outside the United States. During the quarter, the company used $100 million of domestic cash to pay down its revolving credit facility. Additionally during the first quarter, Teradata purchased approximately 2 million shares of its stock for $47 million.

As of March 31, 2016, Teradata had total debt of approximately $673 million, including $593 million outstanding under a term loan and $80 million drawn on its $400 million revolving credit facility.

Sale of Marketing Applications business

On April 22, 2016, Teradata signed a definitive agreement to sell its Marketing Applications business for $90 million. After adjustments, closing costs and taxes, net proceeds from the sale are expected to be approximately $55-60 million, which will be used short-term to reduce the company’s revolving credit facility. The transaction is expected to close around the end of the second quarter of 2016. Teradata recorded the “assets held for sale” and “liabilities held for sale” at a current estimate of fair value less expected cost to sell.

2016 Outlook

GAAP revenue for 2016 is now expected to be in the $2.320 billion to $2.390 billion range, which includes approximately $70 million of revenue related to the Marketing Applications business. Excluding the Marketing Applications business, revenue for 2016 is now expected to decline 2 to 5 percent from 2015 (or $2.250 billion to $2.320 billion). Teradata no longer anticipates any currency impact on its year-over-year revenue comparison.

Full-year 2016 GAAP earnings per share guidance is $0.97 to $1.12, which includes the results of the Marketing Applications business that is expected to be sold around the end of the second quarter of 2016 and the incremental discrete tax expense associated with the sale. On a non-GAAP basis, which excludes stock-based compensation expense, other special items and the Marketing Applications business, earnings per share continues to be expected in the $2.35 – $2.50 range. Teradata’s Marketing Applications business experienced approximately $45 million of operating loss in 2015. The year over year increase in non-GAAP earnings per share is benefited by Teradata’s cost rationalization initiatives, exiting the Marketing Applications business, as well as the benefits of share repurchases.

Business Transformation Update

Teradata is making good progress in its business transformation, including the expected exit of its Marketing Applications business. The company will provide more information regarding these initiatives during its earnings conference call today as well as later this year at an Analyst Day.

Source: Teradata

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