- Teradata continued to make progress on key Cloud, Vantage, and
Go-to-market efforts in the first quarter
- The Company’s technology is critical in supporting customers
during COVID-19 and Teradata used this opportunity to further
support customers and deepen relationships
- Teradata’s first-quarter results were negatively impacted by
COVID-19
- The Company is withdrawing its full-year 2020 guidance due to
uncertainties relating to COVID-19
Teradata Corp. (NYSE: TDC) today announced its first-quarter
2020 financial results. Business trends through the first
two-thirds of the quarter were normal, however the second half of
March saw a significant number of deals postponed which negatively
impacted first-quarter results. Recurring revenue increased 4
percent, 6 percent in constant currency(1), from the first quarter
of 2019. Annual recurring revenue (ARR) increased 6 percent, 8
percent in constant currency(1), from the first quarter of 2019.
Total first-quarter revenue was $434 million, compared to 2019
first-quarter total revenue of $468 million. As the company
continues to shift to a recurring revenue model and focuses its
consulting business on higher-margin engagements, both perpetual
and consulting revenues declined versus prior year as expected. In
addition, currency translation had a 1 percentage point negative
impact on the first-quarter total revenue comparison.
“Teradata is focused on supporting our customers and employees
through the COVID-19 pandemic. Our history of fostering strong
customer relationships and our long-standing position delivering
business essential analytics are foundational to our customers in
these challenging times,” said Vic Lund, Interim CEO, Teradata.
“Our resilience has been proven as we advance our key strategic
initiatives including accelerating our transition to the Cloud,
driving broader adoption of Vantage, and expanding our go-to-market
opportunities. Our extensive enterprise customer base, mission
critical technology, and strong financial condition position us
well to emerge stronger from the pandemic.”
Teradata reported 2020 first-quarter net income of $168 million
under U.S. Generally Accepted Accounting Principles (GAAP), or
$1.51 per diluted share, which compared to a net loss of $(10)
million, or $(0.09) per share, in the first quarter of 2019. As
previously disclosed, the company restructured certain of its
intellectual property (IP) and recognized a discrete tax benefit in
the quarter which contributed $1.41 per diluted share to EPS on a
GAAP basis. Non-GAAP 2020 first-quarter net income, which excludes
the IP restructuring tax benefit, stock-based compensation expense
and other special items, was $30 million, or $0.27 per diluted
share, as compared to $26 million, or $0.22 per diluted share, in
the first quarter of 2019(2).
Gross Margin
2020 first-quarter gross margin reported under GAAP was 51.8
percent versus 47.9 percent for the first quarter of 2019. On a
non-GAAP basis, excluding stock-based compensation expense and
other special items, 2020 first-quarter gross margin was 54.1
percent, versus 51.5 percent in the prior-year period(2). Gross
margin was higher year-over-year due primarily to continued mix
shift, away from perpetual hardware and consulting to higher margin
recurring revenue.
Operating Loss / Income
2020 first-quarter operating loss reported under GAAP was $(6)
million which compares to $(5) million in the first quarter of
2019. On a non-GAAP basis, excluding stock-based compensation
expense and other special items, 2020 first-quarter operating
income was $32 million versus $41 million in the first quarter of
2019(2). The decrease in non-GAAP operating income was primarily
driven by revenue-related headwinds due to the impact of COVID-19,
as well as ongoing investments related to our go-to-market and
Cloud initiatives.
Income Taxes
Teradata’s 2020 first-quarter tax rate under GAAP was 1,300.0
percent compared to 0.0 percent in the first quarter of 2019,
primarily driven by the recognition of a $157 million tax benefit
related to the IP restructuring previously disclosed. Excluding
special items, Teradata’s non-GAAP 2020 first-quarter tax rate was
negative 25.0 percent versus 27.8 percent in the first quarter of
2019(2).
Cash Flow
During the first quarter of 2020, Teradata generated $10 million
of cash from operating activities compared to $49 million in the
same period of 2019. During the quarter, Teradata used $12 million
for capital expenditures and additions to capitalized software
development costs, versus using $16 million in the first quarter of
2019. Teradata’s 2020 first-quarter free cash flow was $(2)
million, compared to $33 million in the first quarter of 2019(3).
The decline in free cash flow year-over-year was primarily driven
by over $30 million of delayed cash collections related to
COVID-19, the majority of which were collected in April.
Balance Sheet
Teradata ended the first quarter 2020 with $394 million in cash.
During the first quarter of 2020, Teradata repurchased 3.7 million
shares of the Company’s common stock for approximately $75 million.
At the end of the first quarter, Teradata had approximately $432
million of board authorization remaining for share repurchases and
108.3 million shares outstanding. However, as a precautionary
measure, the Company has suspended its share buyback program due to
the ongoing COVID-19 pandemic to help ensure it has appropriate
cash levels to support its customers and employees.
As of March 31, 2020, the Company had total debt of $610
million, including $135 million of outstanding finance lease
obligations. There were no funds drawn on the company’s $400
million revolving credit facility as of March 31, 2020.
Teradata’s Response to COVID-19
First and foremost, our thoughts are with those who has been
impacted by COVID-19, directly or indirectly. The health of our
employees, our customers and our communities is paramount in these
unprecedented times. As COVID-19 spread rapidly around the world
during the first quarter, Teradata took a number of measures to
support our customers and protect our employees, including, among
other things:
- To help limit the spread of the virus, our associates are
working from home, we are limiting company travel and have
transitioned our marketing events to be entirely virtual;
- Our focus is on helping our customers through this pandemic by
continuing to deliver the highest levels of performance,
availability and peace of mind;
- In support of the broader global community, we will also be
making some of our technology available for our customers,
partners, and communities - particularly in healthcare, government
and other verticals where collectively, we can positively impact
efforts in combating COVID-19; and
- Finally, because the situation is dynamic, we instituted a
Pandemic Response Team which will continue to monitor the guidance
from leading global health organizations and take the appropriate
steps to keep all of our stakeholders safe and healthy.
Guidance
Due to the evolving nature and uncertain impact of COVID-19 on
Teradata’s operating and financial results, the Company is
withdrawing its guidance for the full-year 2020, which was provided
on February 6, 2020.
For the second quarter of 2020, Teradata expects recurring
revenue in the range between $348 million and $352 million.
GAAP loss per share in the second quarter of 2020 is expected to
be in the $(0.09) to $(0.06) range. Non-GAAP earnings per share,
excluding stock-based compensation expense and other special items,
in the second quarter is expected to be in the $0.19 to $0.22
range(2).
Earnings Conference Call
A conference call is scheduled today at 2:00 p.m. PT to discuss
the Company’s 2020 first-quarter results and provide a business and
financial update. Access to the conference call, as well as a
replay of the conference call, is available on Teradata’s website
at investor.teradata.com.
Supplemental Financial Information
Additional information regarding Teradata’s operating results is
provided below as well as on Teradata’s website at
investor.teradata.com.
1.
The impact of currency is determined by
calculating the prior-period results using the current-year monthly
average currency rates (except for currency impact on ARR which is
calculated using month-end rates). See the foreign currency
fluctuation schedule on the Investor Relations page of the
Company’s web site at investor.teradata.com, which is used to
determine revenue on a constant currency (“CC”) basis.
Revenue
(in millions)
For the Three Months ended
March 31
2020
2019
% Change as Reported
% Change in Constant
Currency
Recurring revenue
$345
$331
4%
6%
Perpetual software licenses and
hardware
14
31
(55%)
(55%)
Consulting services
75
106
(29%)
(28%)
Total revenue
$434
$468
(7%)
(6%)
Americas
$244
$269
(9%)
(9%)
EMEA
118
113
4%
6%
APAC
72
86
(16%)
(13%)
Total revenue
$434
$468
(7%)
(6%)
As of March 31
2020
2019
% Change as Reported
% Change in Constant
Currency
Annual recurring revenue (ARR)*
$1,402
$1,319
6%
8%
* Annual recurring revenue is defined as
the annual value at a point in time of all recurring contracts,
including subscription, software upgrade rights, maintenance and
managed services.
2.
Teradata reports its results in accordance
with GAAP. However, as described below, the Company believes that
certain non-GAAP measures, such as non-GAAP gross profit, non-GAAP
operating income, non-GAAP net income, and non-GAAP earnings per
diluted share, or EPS, all of which exclude certain items (as well
as free cash flow) are useful for investors. Our non-GAAP measures
are not meant to be considered in isolation or as substitutes for,
or superior to, results determined in accordance with GAAP, and
should be read only in conjunction with our condensed consolidated
financial statements prepared in accordance with GAAP.
The following tables reconcile Teradata’s
actual and projected results and EPS under GAAP to the Company’s
actual and projected non-GAAP results and EPS for the periods
presented, which exclude certain specified items. Our management
internally uses supplemental non-GAAP financial measures, such as
gross profit, operating income, net income and EPS, excluding
certain items, to understand, manage and evaluate our business and
support operating decisions on a regular basis. The Company
believes such non-GAAP financial measures (1) provide useful
information to investors regarding the underlying business trends
and performance of the Company’s ongoing operations, (2) are useful
for period-over-period comparisons of such operations and results,
that may be more easily compared to peer companies and allow
investors a view of the Company’s operating results excluding
stock-based compensation expense and special items, (3) provide
useful information to management and investors regarding present
and future business trends, and (4) provide consistency and
comparability with past reports and projections of future
results.
Teradata’s reconciliation of GAAP to
non-GAAP results included in this release.
For the
Three Months
(in millions, except per share data)
ended March 31
Gross Profit:
2020
2019
% Chg.
GAAP Gross Profit
$225
$224
-%
% of Revenue
51.8%
47.9%
Excluding:
Stock-based compensation expense
4
3
Acquisition, integration,
reorganization-related, and other costs
-
3
Amortization of capitalized software
6
11
Non-GAAP Gross Profit
$235
$241
(2%)
% of Revenue
54.1%
51.5%
Operating (Loss)
GAAP Operating Loss
$(6)
$(5)
(20%)
% of Revenue
(1.4%)
(1.1%)
Excluding:
Stock-based compensation expense
21
15
Amortization of acquisition-related
intangible assets
1
2
Acquisition, integration,
reorganization-related, and other costs
10
18
Amortization of capitalized software
6
11
Non-GAAP Operating Income
$32
$41
(22%)
% of Revenue
7.4%
8.8%
Net Income / (Loss)
GAAP Net Income / (Loss)
$168
$(10)
1,780%
% of Revenue
38.7%
(2.1%)
Excluding:
Stock-based compensation expense
21
15
Amortization of acquisition-related
intangible assets
1
2
Acquisition, integration,
reorganization-related, and other costs
10
18
Amortization of capitalized software
6
11
IP Restructuring Tax Benefit(1)
(157)
-
Tax Contingency adjustment(2)
(18)
-
Income tax adjustments(3)
(1)
(10)
Non-GAAP Net Income
$30
$26
15%
% of Revenue
6.9%
5.6%
For the Three Months ended
March 31
Earnings Per Share:
2020
2019
2020 Q2
Guidance
GAAP Earnings / (Loss) Per Share
$1.51
$(0.09)
$(0.09) - $(0.06)
Excluding:
Stock-based compensation expense
0.19
0.13
0.25
Amortization of acquisition-related
intangible assets
0.01
0.02
0.01
Acquisition, integration,
reorganization-related, and other costs
0.09
0.15
0.03
Amortization of capitalized software
0.05
0.09
0.05
IP Restructuring tax benefit(1)
(1.41)
-
-
Tax Contingency adjustment(2)
(0.16)
-
-
Income tax adjustments(3)
(0.01)
(0.09)
(0.06)
Impact of dilution(4)
-
0.01
-
Non-GAAP Diluted Earnings Per Share
$0.27
$0.22
$0.19 – $0.22
(1)
The Company’s forecasted full-year 2020
GAAP effective tax rates include $157 million of discrete tax
benefit related to an intra-entity asset transfer of certain of its
intellectual property to one of its Irish subsidiaries, which
occurred on January 1, 2020. The one-time tax benefit for this
intra-entity asset transfer was recorded as a deferred tax asset
for GAAP reporting purposes in the first quarter of 2020 but was
excluded from Non-GAAP results.
(2)
The Company’s forecasted full-year 2020
GAAP marginal effective tax rate includes $3 million of tax expense
related to tax contingencies pursuant to FIN 48. For GAAP purposes,
this is a component of the marginal rate and is recognized as tax
benefit or expense based on the Company’s reported GAAP pre-tax
income or loss for the quarter. To more accurately reflect the
impact of the expense on a quarterly basis for Non-GAAP purposes,
the $3 million of tax expense is being recognized ratably each
quarter instead of being included in the marginal effective
rate.
(3)
Represents the income tax effect of the
pre-tax adjustments to reconcile GAAP to Non-GAAP income based on
the applicable jurisdictional statutory tax rate of the underlying
item. Including the income tax effect assists investors in
understanding the tax provision associated with those adjustments
and the effective tax rate related to the underlying business and
performance of the Company’s ongoing operations.
As a result of these adjustments, the
Company’s non-GAAP effective tax rate for the first quarter of 2020
was (25.0%) and 27.8% in the first quarter of 2019.
(4)
Represents the impact to earnings per
share as a result of moving from basic to diluted shares.
3.
As described below, the Company believes
that free cash flow is a useful non-GAAP measure for investors.
Teradata defines free cash flow as cash provided by /used in
operating activities less capital expenditures for property and
equipment, and additions to capitalized software. Free cash flow
does not have a uniform definition under GAAP and therefore,
Teradata’s definition may differ from other companies’ definitions
of this measure. Teradata’s management uses free cash flow to
assess the financial performance of the Company and believes it is
useful for investors because it relates the operating cash flow of
the Company to the capital that is spent to continue and improve
business operations. In particular, free cash flow indicates the
amount of cash generated after capital expenditures for, among
other things, investment in the Company’s existing businesses,
strategic acquisitions, strengthening the Company’s balance sheet,
repurchase of the Company’s stock and repayment of the Company’s
debt obligations, if any. Free cash flow does not represent the
residual cash flow available for discretionary expenditures since
there may be other nondiscretionary expenditures that are not
deducted from the measure. This non-GAAP measure is not meant to be
considered in isolation, as a substitute for, or superior to,
results determined in accordance with GAAP, and should be read only
in conjunction with our condensed consolidated financial statements
prepared in accordance with GAAP.
(in millions)
For the Three Months
ended March 31
2020
2019
Cash provided by operating activities
(GAAP)
$10
$49
Less capital
expenditures for:
Expenditures for property and
equipment
(10)
(15)
Additions to capitalized software
(2)
(1)
Total capital expenditures
(12)
(16)
Free Cash Flow (non-GAAP measure)
$(2)
$33
Note to Investors
This news release contains forward-looking statements within the
meaning of Section 21E of the Securities and Exchange Act of 1934.
Forward-looking statements generally relate to opinions, beliefs
and projections of expected future financial and operating
performance, business trends, and market conditions, among other
things. These forward-looking statements are based upon current
expectations and assumptions and involve risks and uncertainties
that could cause actual results to differ materially, including the
factors discussed in this release and those relating to: the global
economic environment and business conditions in general or on the
ability of our suppliers to meet their commitments to us, or the
timing of purchases by our current and potential customers; the
rapidly changing and intensely competitive nature of the
information technology industry and the data analytics business;
fluctuations in our operating results, including as a result of the
pace and extent to which customers shift from perpetual to
subscription-based licenses; our ability to realize the anticipated
benefits of our business transformation program or other
restructuring and cost saving initiatives; risks inherent in
operating in foreign countries, including foreign currency
fluctuations; risks associated with the evolving nature and
uncertain impact of COVID-19 on our business, financial condition
and operating results, including the impact of COVID-19 on our
customers and suppliers; risks associated with data privacy,
cyberattacks and maintaining secure and effective internal
information technology and control systems; the timely and
successful development, production or acquisition and market
acceptance of new and existing products and services; tax rates;
turnover of workforce and the ability to attract and retain skilled
employees; protecting our intellectual property; availability and
successful exploitation of new alliance and acquisition
opportunities; recurring revenue may decline or fail to be renewed;
the impact on our business and financial reporting from changes in
accounting rules; and other factors described from time to time in
Teradata’s filings with the U.S. Securities and Exchange
Commission, including its annual report on Form 10-K and subsequent
quarterly reports on Forms 10-Q, as well as the Company’s annual
report to stockholders. Teradata does not undertake any obligation
to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise,
except as required by law.
About Teradata
Teradata transforms how businesses work and people live through
the power of data. Teradata leverages all of the data, all of the
time, so you can analyze anything, deploy anywhere, and deliver
analytics that matter. We call this pervasive data intelligence.
And it’s the answer to the complexity, cost, and inadequacy of
today’s approach to analytics. Get the answer at teradata.com.
Teradata and the Teradata logo are trademarks
or registered trademarks of Teradata Corporation and/or its
affiliates in the U.S. and worldwide.
Schedule A
TERADATA CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF
(LOSS) INCOME (in millions, except per share amounts -
unaudited) For the Period Ended March 31 Three
Months
2020
2019
% Chg
Revenue Recurring
$
345
$
331
4
%
Perpetual software licenses and hardware
14
31
(55
%)
Consulting services
75
106
(29
%)
Total revenue
434
468
(7
%)
Gross profit Recurring
225
225
% of Revenue
65.2
%
68.0
%
Perpetual software licenses and hardware
5
6
% of Revenue
35.7
%
19.4
%
Consulting services
(5
)
(7
)
% of Revenue
(6.7
%)
(6.6
%)
Total gross profit
225
224
% of Revenue
51.8
%
47.9
%
Selling, general and administrative expenses
158
151
Research and development expenses
73
78
Loss from operations
(6
)
(5
)
% of Revenue
(1.4
%)
(1.1
%)
Other expense, net
(8
)
(5
)
Loss before income taxes
(14
)
(10
)
% of Revenue
(3.2
%)
(2.1
%)
Income tax benefit
(182
)
-
% Tax rate
1,300.0
%
-
Net income (loss)
$
168
$
(10
)
% of Revenue
38.7
%
(2.1
%)
Net income (loss) per common share Basic
$
1.52
$
(0.09
)
Diluted
$
1.51
$
(0.09
)
Weighted average common shares outstanding Basic
110.3
117.1
Diluted
111.3
117.1
Schedule B
TERADATA CORPORATION CONDENSED CONSOLIDATED
BALANCE SHEETS (in millions - unaudited)
March 31,
December 31,
March 31,
2020
2019
2019
Assets Current assets
Cash and cash equivalents
$
394
$
494
$
723
Accounts receivable, net
448
398
445
Inventories
28
31
52
Other current assets
104
91
82
Total current assets
974
1,014
1,302
Property and equipment, net
334
350
303
Capitalized software, net
30
36
60
Right of use assets - operating lease, net
49
51
60
Goodwill
394
396
396
Capitalized contract costs
87
91
57
Deferred income taxes
253
87
66
Other assets
30
32
42
Total assets
$
2,151
$
2,057
$
2,286
Liabilities and stockholders'
equity Current liabilities Current portion of
long-term debt
$
25
$
25
$
25
Current portion of finance lease liability
60
55
21
Current portion of operating lease liability
17
20
17
Accounts payable
96
66
99
Payroll and benefits liabilities
86
157
103
Deferred revenue
555
472
569
Other current liabilities
67
91
80
Total current liabilities
906
886
914
Long-term debt
448
454
472
Finance lease liability
75
75
38
Operating lease liability
37
38
48
Pension and other postemployment plan liabilities
133
137
104
Long-term deferred revenue
44
61
100
Deferred tax liabilities
6
6
4
Other liabilities
153
138
139
Total liabilities
1,802
1,795
1,819
Stockholders' equity Common stock
1
1
1
Paid-in capital
1,567
1,545
1,466
Accumulated deficit
(1,050
)
(1,143
)
(891
)
Accumulated other comprehensive loss
(169
)
(141
)
(109
)
Total stockholders' equity
349
262
467
Total liabilities and stockholders' equity
$
2,151
$
2,057
$
2,286
Schedule C
TERADATA CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (in millions - unaudited) For the
Period Ended March 31 Three Months
2020
2019
Operating activities Net income (loss)
$
168
$
(10
)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities: Depreciation and amortization
42
37
Stock-based compensation expense
21
15
Deferred income taxes
(149
)
2
Changes in assets and liabilities: Receivables
(50
)
143
Inventories
3
(24
)
Current payables and accrued expenses
(43
)
(171
)
Deferred revenue
66
74
Other assets and liabilities
(48
)
(17
)
Net cash provided by operating activities
10
49
Investing activities Expenditures for property and
equipment
(10
)
(15
)
Additions to capitalized software
(2
)
(1
)
Net cash used in investing activities
(12
)
(16
)
Financing activities Repurchases of common stock
(73
)
(56
)
Repayments of long-term borrowings
(6
)
-
Payments of finance leases
(9
)
(3
)
Other financing activities, net
-
33
Net cash used in financing activities
(88
)
(26
)
Effect of exchange rate changes on cash and cash equivalents
(10
)
1
(Decrease) increase in cash, cash equivalents and
restricted cash
(100
)
8
Cash, cash equivalents and restricted cash at beginning of
period
496
716
Cash, cash equivalents and restricted cash at end of
period
$
396
$
724
Supplemental cash flow disclosure: Non-cash
investing and financing activities: Assets acquired by finance
leases
$
15
$
15
Assets acquired by operating leases
$
3
$
3
Schedule D
TERADATA CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (in millions - unaudited) For the
Three Months Ended March 31
2020
2019
% Change As Reported
% Change Constant Currency
(2)
Segment Revenue Americas
$
244
$
269
(9
%)
(9
%)
EMEA
118
113
4
%
6
%
APAC
72
86
(16
%)
(13
%)
Total segment revenue
434
468
(7
%)
(6
%)
Segment gross profit Americas
144
157
% of Revenue
59.0
%
58.4
%
EMEA
61
50
% of Revenue
51.7
%
44.2
%
APAC
30
34
% of Revenue
41.7
%
39.5
%
Total segment gross profit
235
241
% of Revenue
54.1
%
51.5
%
Reconciling items(1)
(10
)
(17
)
Total gross profit
$
225
$
224
% of Revenue
51.8
%
47.9
%
(1) Reconciling items include stock-based
compensation, capitalized software, amortization of
acquisition-related intangible assets and acquisition, integration
and reorganization-related items. (2) The impact of currency
is determined by calculating the prior period results using the
current-year monthly average currency rates.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200507006097/en/
INVESTOR CONTACT Nabil Elsheshai 858-485-2125 office
nabil.elsheshai@teradata.com MEDIA CONTACT Jennifer
Donahue 858-485-3029 office jennifer.donahue@teradata.com
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