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Teradata (TDC) Q2 Earnings Match Estimates, Revenues Down Y/Y

Zacks Equity Research

Teradata TDC reported second-quarter 2019 adjusted earnings of 29 cents per share, which increased 11.5% year over year and was in line with the Zacks Consensus Estimate.

However, revenues of $478 million lagged the Zacks Consensus Estimate of $483 million and declined 12.1% year over year. At constant currency (cc), revenues declined 10%.

Top-Line Details

Recurring revenues (70.7% of revenues) increased 8.3% year over year (up 11% at cc) to $338 million. The segment includes revenues from subscription-based transaction, and perpetual license-related maintenance and upgrade rights.

Subscription-based transactions comprised 90% of bookings in the reported quarter.

Perpetual software license and hardware revenues (6.1% of revenues) plunged 70.1% from the year-ago quarter (down 69% at cc) to $29 million.

Consulting services revenues (23.2% of revenues) declined 17.8% from the year-ago quarter (down 15% at cc) to $111 million.
Revenues from Americas decreased 6.3% year over year (down 5% at cc) to $269 million.

Teradata Corporation Price, Consensus and EPS Surprise

 

Teradata Corporation Price, Consensus and EPS Surprise

Teradata Corporation price-consensus-eps-surprise-chart | Teradata Corporation Quote

Europe, Middle East & Africa (EMEA) revenues declined 3.9% from the year-ago quarter (flat at cc) to $122 million.

Revenues from Asia-Pacific (APAC) declined 33.1% from the year-ago quarter (down 29% at cc) to $87 million.

Total Annual Recurring Revenues (ARR) at the end of the quarter increased 11.5% year over year (up 12% at cc).

Operating Details

Non-GAAP gross margin expanded 380 basis points (bps) year over year to 52.7%. Americas and EMEA gross margin expanded 510 bps and 420 bps, respectively.

Gross margin for recurring revenues contracted 350 bps to 68.3% due to lower margins from subscription-based revenues.

Perpetual software license and hardware margins declined from 24.7% in the year-ago quarter to 10.3%.

Consulting services operating income was $2 million, flat year over year.

Non-GAAP operating margin expanded 240 bps on a year-over-year basis to 10.7%.

Balance Sheet & Other Details

As of Jun 30, 2019, Teradata had cash and cash equivalents of $635 million compared with $723 million as of Mar 31, 2019. The company exited the quarter with total debt (including current portion) of $580 million.

In the second quarter, Teradata generated $55 million of cash from operating activities compared with $49 million in the previous quarter. Free cash flow was $42 million compared with $33 million in the previous quarter

Moreover, Teradata repurchased around 3.1 million shares worth approximately $117 million. The company’s board of directors increased the authorization for share repurchases by $500 million to $620 million.

Guidance

For 2019, Teradata expects ARR to increase 11-12% and recurring revenues to grow 10-11%.

The company expects a perpetual year-over-year revenue decline at the high end of its previously provided range of $150-$200 million.

Teradata expects 2019 consulting revenues to decline 20% year over year.

Non-GAAP earnings are still projected between $1.45 and $1.55 per share.

For third-quarter 2019, recurring revenues are expected between $340 million and $344 million.

Non-GAAP earnings are expected between 38 cents and 42 cents per share.

Zacks Rank and Stocks to Consider

Teradata currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector include Digital Turbine APPS, CACI International CACI and Cisco Systems CSCO. All three stocks have a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

While Digital Turbine is set to release quarterly results on Aug 5, both CACI International and Cisco Systems are scheduled to report on Aug 14.

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