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Teradata (TDC) Q3 Earnings Beat Estimates, Revenues Up Y/Y

·5 min read

Teradata TDC reported third-quarter 2021 non-GAAP earnings of 43 cents per share, which beat the Zacks Consensus Estimate by 34.4% but was unchanged on a year-over-year basis.

The figure comfortably beat Teradata’s guidance of 30-34 cents per share.

Revenues of $460 million increased 1% year over year. At constant currency (cc), revenues were up 1%.

Total annual recurring revenues (ARR), at the end of the third quarter, increased 7% year over year (up 6% at cc) to $1.437 billion. Public cloud ARR surged 83% on a reported basis and 82% at cc to $148 million. The growth rate was lower than management’s expectation of at least 90% year over year. Management cited that a few large deals slipped in to the fourth quarter, thereby affecting Public cloud ARR growth.

Shares of Teradata were down 7.8% in the pre-market trading on Nov 5, following the announcement of third-quarter 2021 results.

Teradata Corporation Price, Consensus and EPS Surprise

Teradata Corporation Price, Consensus and EPS Surprise
Teradata Corporation Price, Consensus and EPS Surprise

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

Top-Line Details

Recurring revenues (76.5% of revenues) increased 7% year over year (up 6% at cc) to $352 million.

Perpetual software license and hardware revenues (3.9% of revenues) were down 28% year over year (down 29% at cc) to $18 million.

Consulting services’ revenues (19.6% of revenues) declined 10% from the year-ago quarter’s levels (down 10% at cc) to $90 million.

Revenues in the Americas declined 5% year over year (down 5% at cc) to $249 million. Europe, the Middle East & Africa (EMEA) revenues rose 16% from the year-ago quarter’s figures (up 15% at cc) to $133 million. Revenues from APJ were unchanged from the year-ago quarter’s levels (down 2% at cc) to $78 million.

Operating Details

Gross margin on a non-GAAP basis was 61.3%, up from 61% reported in the year-ago quarter. The uptick was primarily driven by a higher mix of recurring revenues.

Americas gross margin came in at 63.1% in the third quarter form 63.2% reported in the year ago quarter. EMEA gross margin surged to 60.9% from 60% reported in the year-ago quarter. APJ gross margin soared to 56.4% from 55.1% reported in the year-ago quarter.

Recurring revenues’ gross margin expanded 220 bps on a year-over-year basis to 73%. The upside benefited from cost improvements in subscription and cloud business.

Perpetual software license and hardware margin contracted 910 bps to 38.9%.

Non-GAAP Consulting services’ gross margin expanded 320 bps year over year to 12.2%.

Selling, general & administrative (SG&A), as a percentage of revenues, expanded 20 bps to year over year to 36.1%.

Research & development (R&D) expenses, as a percentage of revenues, declined 260 bps on a year-over-year basis to 17.2%.

Non-GAAP operating margin was 15.4%, up 60 bps reported in the year-ago quarter mainly due to cost discipline.

Balance Sheet & Other Details

As of Sep 30, 2021, Teradata had cash and cash equivalents of $613 million compared with $683 million as of Jun 30, 2021.

Total debt (including current portion) as of Sep 30, 2021, was $424 million compared with $436 million as of Jun 30, 2021.

In the third quarter, Teradata generated $33 million of cash from operating activities compared with the previous quarter’s $225 million.

The company’s quarterly free cash flow was $23 million compared with $219 million in the previous quarter.

The company repurchased 1.1 million shares worth $58 million in the third quarter.

On Nov 1, 2021, the company announced a new $1-billion share repurchase authorization with the expiry set on Dec 31, 2025. The company had $1.3 billion shares under its existing repurchase authorization.

Guidance

For fourth-quarter 2021, non-GAAP earnings are expected between 25 cents and 29 cents per share.

For 2021, non-GAAP earnings are expected between $2.11 and $2.15 per share (up from the previous guidance of $1.92-$1.96 per share.)

Public cloud ARR is now projected to increase approximately 90%. Earlier, Public cloud ARR is projected to increase by at least 100% year over year. Total ARR is expected to grow at a mid- to high-single-digit percentage year over year.

Teradata expects recurring revenues to grow at a high-single-digit to low-double-digit range year over year.

The company projects total revenues to increase at a low-single-digit to mid-single-digit percentage on a year-over-year basis.

Cash flow from operations are now expected to be at least $440 million, while free cash flow is now projected to be at least $400 million.

Zacks Rank & Stocks to Consider

Currently, Teradata carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the broader technology sector include Advanced Micro Devices AMD, Synaptics Incorporated SYNA and Broadcom AVGO. All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Long-term earnings growth rate of AMD, Synaptics and Broadcom is pegged at 46.2%, 10% and 15%, respectively.


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