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August 6, 2018

Teradata Reports 2018 Second Quarter Results

SAN DIEGOAug. 6, 2018 — Teradata Corp. (NYSE: TDC) reported revenue of $544 million for the quarter ended June 30, 2018, a 6 percent increase (4 percent  in constant currency from the second quarter of 2017. Recurring revenue of $312 million was up 11 percent (10 percent in constant currency from the second quarter of 2017. Subscription-based transactions contributed 66 percent of new bookings in the quarter, better than Teradata’s recently increased full-year expectation of 50-60 percent.

Teradata’s second quarter year-over-year revenue comparison was benefited by approximately 2 percentage points of foreign currency translation. However, this was one percentage point less benefit than assumed when the Company provided guidance on May 3, 2018.

Teradata reported net income of $4 million under U.S. Generally Accepted Accounting Principles (GAAP) in the second quarter of 2018, or $0.03 per diluted share, which compared to a net loss of $(4) million, or $(0.03) per share, in the second quarter of 2017. Non-GAAP net income in the second quarter of 2018, which excludes stock-based compensation expense and special items, was $32 million, or $0.26 per diluted share, as compared to $28 million, or $0.22 per diluted share in the second quarter of 2017.

“I am very pleased with our better than expected second quarter results, which were delivered even as our business is shifting faster than we had estimated to subscription-based transactions,” said Vic Lund, President and CEO of Teradata. “We are helping customers implement new use cases for Teradata every day, which provide valuable business outcomes and increase their desire to consume more of Teradata’s software. As a result, we are even more confident that we are on the path to success and well positioned to continue to grow as a leading provider of cloud-based enterprise analytics at scale. Our entire Teradata team is laser focused on our long-term strategy, as we partner with our customers to identify and operationalize the insights that drive their business forward.”

Gross Margin

For the second quarter of 2018, gross margin reported under GAAP was 46.0 percent versus 47.2 percent for the second quarter of 2017. On a non-GAAP basis, excluding stock-based compensation expense and special items, gross margin for second quarter of 2018 was 48.9 percent, versus 51.9 percent in the prior-year period. As the Company shifts more of its business to subscription-based transactions, the Company’s recognized perpetual revenue is predominantly hardware, which carries lower margins than software and thus negatively impacts gross margins.

Operating Income

Operating income reported under GAAP in the second quarter of 2018 was $10 million compared to $(1) millionoperating loss in the second quarter of 2017. On a non-GAAP basis, excluding stock-based compensation expense and special items, operating income was $45 million in the second quarter of 2018, versus $48 million in the second quarter of 2017. As expected, non-GAAP operating income was lower due to the shift to subscription-based transactions and strategic investments compared to the prior year.

Income Taxes

Teradata’s tax rate under GAAP was 33.3 percent for the second quarter of 2018 compared to (33.3) percent in the second quarter of 2017. Excluding special items, Teradata’s non-GAAP tax rate was 22.0 percent in the second quarter of 2018 versus 37.8 percent in the second quarter of 2017. The decrease in the non-GAAP effective tax rate was largely due to the decrease in the U.S. statutory rate effective in 2018 as a result of recently enacted U.S. tax reform.

Cash Flow

Teradata generated $106 million of cash from operating activities in the second quarter of 2018, compared to $61 millionin the same period in 2017. In the second quarter of 2018, Teradata generated $72 million of free cash flow (a non-GAAP measure defined as cash from operating activities less capital expenditures and additions to capitalized software), compared to $45 million in the second quarter of 2017. Cash from operating activities and free cash flow were better than expected and higher than in the prior year period, driven in part by a customer payment related to a multi-year contract. The positive impact of the advance payment was partially offset by the timing of various working capital items as well as the impact of the Company’s ongoing transition to subscription-based purchasing options, which results in the Company collecting less cash upfront as customers pay over time.

Year to date, Teradata generated $290 million of cash from operating activities versus $309 million in 2017. Free cash flow for the first six months of 2018 was $228 million, compared to $275 million in 2017. As expected, the year-over-year decline for the first half of the year was due to the Company’s ongoing shift to subscription-based transactions as well as investments in strategic transformation initiatives.

Balance Sheet

Teradata ended the second quarter of 2018 with $882 million of cash. Teradata repatriated $525 million of cash previously held internationally as of June 30, 2018 and plans to repatriate a total of $800 million by the end of 2018. Teradata anticipates using a portion of these repatriated funds for share repurchases and expects to retain the remainder for general corporate purposes.

During the second quarter of 2018, Teradata repurchased 2.1 million shares of the Company’s common stock for approximately $81 million. Year to date, the Company has repurchased 4.1 million shares for approximately $157 million. Teradata currently has approximately $379 million of Board authorization remaining for share repurchases.

On June 11, 2018, the Company refinanced its existing term loan and revolving credit facility into a new $500 millionterm loan and $400 million revolving credit facility, which will expire on June 11, 2023. In connection with the refinancing of the credit facilities, the Company executed a 5-year interest rate swap to fix the interest rate at 4.36% (based on the Company’s current leverage tier) on the $500 million term loan. Total debt balance as of June 30, 2018was $500 million, all of which was outstanding on the term loan.  There were no funds drawn on the new $400 millionrevolving credit facility at June 30, 2018.

Guidance

As a result of the faster than expected shift to subscription-based transactions, Teradata now expects its 2018 full year bookings mix to be 65% – 70% subscription-based versus previous guidance of 50% – 60%. Due to recent negative currency movement and Teradata’s bookings mix shifting faster to subscription-based transactions than previously expected, where revenue is recognized over time rather than up front in the current period, Teradata now expects 2018 full-year revenue to be approximately $2.130 billion to $2.150 billion.  Correspondingly, Teradata now expects revenue in the third quarter of 2018 to be in the $530 million to $540 million range.

As a result, Teradata also now expects full-year 2018 GAAP earnings per share to be $0.22 to $0.26. On a non-GAAP basis, which excludes stock-based compensation expense and special items, earnings per share is now expected to be in the $1.20 to $1.24 range. GAAP earnings per share in the third quarter of 2018 is expected to be in the $0.04 to $0.06 range. Non-GAAP earnings per share in the third quarter is expected to be in the $0.30 to $0.32 range.

About Teradata           

Teradata helps companies achieve high-impact business outcomes. With a portfolio of cloud-based business analytics solutions, architecture consulting, and industry leading big data and analytics technology, Teradata unleashes the potential of great companies. Visit teradata.com.


Source: Teradata

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