Teradata (TDC) Q1 Earnings Beat Estimates, Revenues Fall Y/Y
Teradata TDC reported first-quarter 2020 adjusted earnings of 27 cents per share, which beat the Zacks Consensus Estimate by 22.7% and also increased year over year by the same percentage.
Revenues of $434 million, however, missed the consensus mark by 4%. The top line also declined 7.3% year over year. At constant currency (cc), revenues were down 6%.
Coronavirus negatively impacted Teradata’s quarterly results. The company withdrew its full-year guidance due to uncertainties emanating from the pandemic.
Top-Line Details
Recurring revenues (79.5% of revenues) increased 4.2% year over year (up 6% at cc) to $345 million.
Perpetual software license and hardware revenues (3.2% of revenues) plummeted 54.8% from the year-ago quarter (down 55% at cc) to $14 million.
Teradata Corporation Price, Consensus and EPS Surprise
Teradata Corporation price-consensus-eps-surprise-chart | Teradata Corporation Quote
Consulting services revenues (17.8% of revenues) dropped 29.2% from the year-ago quarter (down 28% at cc) to $75 million.
Revenues from Americas decreased 9.3% year over year (down 9% at cc) to $244 million. Europe, Middle East & Africa (EMEA) revenues rose 4.4% from the year-ago quarter (up 6% at cc) to $139 million. Revenues from the Asia-Pacific (APAC) were down 16.3% from the year-ago quarter (down 13% at cc) to $72 million.
Total annual recurring revenues (ARR) at the end of the first quarter increased 6.3% year over year (up 8% at cc) to $1.40 billion.
Operating Details
Non-GAAP segment’s gross margin expanded 270 basis points (bps) year over year to 54.1%. Americas, EMEA and APAC gross margins expanded 70 bps, 740 bps and 210 bps, respectively.
Recurring revenues gross margin expanded 380 bps on a year-over-year basis to 3.8%.
However, perpetual software license and hardware margin declined 10 bps to 1.2%.
Consulting services operating loss was $5 million compared with loss of $7 million in the year-ago quarter.
Selling, general & administrative (SG&A) as well as research & development (R&D) expenses, as a percentage of revenues, increased 410 bps and 20 bps, on a year-over-year basis.
Non-GAAP operating margin contracted 140 bps on a year-over-year basis to 7.4%.
Balance Sheet & Other Details
As of Mar 31, 2020, Teradata had cash and cash equivalents of $394 million compared with $494 million as of Dec 31, 2019.
Total debt (including current portion) as of Mar 31, 2020 was $610 million compared with $479 million as of Dec 31, 2019.
In the first quarter, Teradata generated $10 million of cash from operating activities compared with the year-ago quarter’s $49 million. The company’s quarterly free cash outflow came in at $2 million against the free cash flow of $33 million in the year-ago quarter.
Moreover, Teradata repurchased 3.7 million shares for $75 million. At the end of the first quarter, the company had approximately $432 million remaining under its share buyback authorization. However, due to coronavirus-induced uncertainties, the company suspended its share buyback program.
Guidance
For second-quarter 2020, recurring revenues are expected between $348 million and $352 million. The Zacks Consensus Estimate for the ongoing quarter’s revenues is currently pegged at $468.7 million, indicating a decline of 2% from the figure reported in the year-ago quarter.
Non-GAAP earnings are expected between 19 cents and 22 cents per share. The Zacks Consensus Estimate for current-quarter earnings is pegged at 28 cents, suggesting a 3.5% fall from the figure reported in the year-ago quarter.
Zacks Rank & Stocks to Consider
Teradata currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector are Logitech LOGI, Grid Dynamics GDYN and Plantronics PLT. While Logitech sports a Zacks Rank #1 (Strong Buy), both Plantronics and Grid Dynamics carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
While both Logitech and Grid Dynamics are set to report quarterly results on May 11, Plantronics will release earnings on May 21.
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