Teradata Reports Third Quarter 2020 Financial Results
Nov. 6, 2020 — Teradata (NYSE: TDC) announced its third-quarter 2020 financial results.
“Our strong third quarter performance reflects the progress we are making across our business, particularly as customers increasingly adopt Vantage, our cloud data analytics platform. We remain laser focused on our Cloud-First initiatives, while also intensifying our execution and optimizing our business model for the future,” said Steve McMillan, President and CEO, Teradata. “Throughout the global pandemic, it has become abundantly clear that enterprises must adapt with agility and speed to unpredictable situations. To do that, they require real-time data and analytics, and there is no better cloud data analytics platform than Teradata, built for today’s hybrid multi-cloud reality. With strong recurring revenue and free cash flow in the quarter that exceeded expectations, we look forward to continue executing on our strategic priorities and carrying this momentum into the fourth quarter and 2021.”
Third Quarter 2020 Financial Highlights compared to Third Quarter 2019
- Recurring revenue was $365 million, an increase of 6% and exceeded the Company’s guidance range of $359 million – $361 million
- ARR increased 8% to $1.501 billion and increased $47 million sequentially
- GAAP gross margin was 55.9% versus 53.8%
- Non-GAAP gross margin was 61.0% versus 56.0%(3)
- GAAP operating income was $1 million versus $10 million
- Non-GAAP operating income was $67 million versus $43 million(3)
- GAAP loss per share was $0.01 versus earnings per share (EPS) of $0.09 per diluted share
- Non-GAAP EPS was $0.43 versus $0.32, exceeding guidance range of $0.28 to $0.31(3)
- Cash flow from operations was $71 million compared to using $10 million
- Free cash flow was $58 million compared to negative $27 million(2)
Cloud-First Initiatives and Realignment Activities
During the quarter, the Company continued to make progress on its Cloud-First initiatives including:
- Releasing Teradata Vantage on Google Cloud; and
- Introducing Consumption-based pricing or Pay for What is Used on AWS & Azure
Also, during the quarter, Teradata offered a voluntary separation program (VSP) to certain employees. The cost of the program in the third quarter was $27 million. The Company expects to incur costs related to this program of $5 million in the fourth quarter of 2020.
Additionally, the Company approved a plan to reduce both its workforce and real estate footprint. Teradata expects that it will incur charges from these actions of approximately $38 million to $48 million which are incremental to the VSP described above. Combined, the cash expenditures from these programs are expected to be approximately $75 million with the majority of the cash expenditures recorded in the fourth quarter of 2020. The Company intends to reallocate some of the future savings from these programs to Cloud-First initiatives.
For the fourth quarter of 2020, Teradata expects recurring revenue between $371 million and $373 million.
GAAP loss per share in the fourth quarter of 2020 is expected to be in the range of $(0.26) and $(0.24). GAAP results in the fourth quarter of 2020 will be impacted by the realignment activities described above. Non-GAAP earnings per share, excluding stock-based compensation expense, realignment expenses and other special items, in the fourth quarter is expected to be in the $0.23 to $0.25 range(3).