Teradata Reports 2012 Fourth Quarter and Full-Year Results -- Revenue increased 10 percent in the fourth quarter, 11 percent in constant currency(1)

-- For the full-year, revenue increased 13 percent, 15 percent in constant currency(1)

-- Non-GAAP operating margin increased 100 basis points in the fourth quarter, 200 basis points for the year(2)

-- GAAP EPS of $0.66 in the quarter, $2.44 for the full-year period

-- Non-GAAP EPS of $0.79 in the quarter, up 20 percent from the fourth quarter of 2011(2)

-- Full-year Non-GAAP EPS was $2.85, an increase of 23 percent from full-year 2011(2)

ATLANTA, Feb. 7, 2013 /PRNewswire-FirstCall/ -- Teradata Corporation (NYSE: TDC) today reported revenue of $740 million for the quarter ended December 31, 2012, an increase of 10 percent from $673 million in the fourth quarter of 2011.  Revenue in the fourth quarter increased 11 percent when compared in constant currency.(1) For the full-year 2012, revenue was $2.665 billion, a 13 percent increase from $2.362 billion in 2011. In constant currency, revenue increased 15 percent for the full-year comparison.(1)

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Gross margin was 55.4 percent, as reported under U.S. Generally Accepted Accounting Principles (GAAP), versus 55.6 percent in the fourth quarter of 2011. On a non-GAAP basis, excluding stock-based compensation expense and the other special items described in footnote #2, gross margin was 56.4 percent, also about the same as the 56.5 percent gross margin in the fourth quarter of 2011.(2) Gross margin for full year 2012 was 55.9 percent, versus 54.7 percent in 2011. On a non-GAAP basis, excluding special items described in footnote #2, 2012 full-year non-GAAP gross margin was 56.9 percent, a 100 basis point improvement from 55.9 percent for the full-year 2011.(2) The increase in non-GAAP gross margin for the full year resulted from improved product margins and a greater portion of product revenue.

Stock-based compensation expense and other special items reduced Teradata's fourth quarter net income by $23 million (or 13 cents of EPS) and 2012 full-year net income by $70 million (or 41 cents of EPS) as reported under GAAP.(2)

Teradata reported fourth quarter GAAP net income of $112 million, or $0.66 per diluted share, which compared to GAAP net income of $98 million, or $0.57 per diluted share, in the fourth quarter of 2011. For the full year 2012, Teradata reported GAAP net income of $419 million, or $2.44 per diluted share, which compared to GAAP net income of $353 million, or $2.05 per diluted share, for the full year 2011. Excluding stock-based compensation expense and the other special items detailed in footnote #2, non-GAAP net income in the fourth quarter of 2012 was $135 million, or $0.79 per diluted share, versus $113 million, or $0.66 per diluted share in the fourth quarter of 2011.(2) Full-year non-GAAP net income was $489 million, or $2.85 per diluted share in 2012, compared to $399 million, or $2.32 per diluted share in 2011.(2)

"Teradata finished 2012 with a solid fourth quarter performance, resulting in 15 percent constant currency revenue growth and 23 percent non-GAAP earnings per share growth for the full year," said Mike Koehler, president and chief executive officer, Teradata Corporation. "The strength of our technology and the expertise of our people will continue to position Teradata as the trusted partner to the world's data-driven companies with our market-leading analytics and integrated marketing solutions."

Regional Revenue Performance
(in millions)


For the Three Months Ended December 31

By segment/region

2012



2011



% Chg. as

Reported



% Chg. in

Constant

Currency(1)

   Americas region

$449



$415



8%



9%

   EMEA region

176



145



21%



24%

   APJ region

115



113



2%



2%

Total revenue

$740



$673



10%



11%
















For the Twelve Months Ended December 31

By segment/region

2012



2011



% Chg. as

Reported



% Chg. in

Constant

Currency(1)

   Americas region

$1,619



$1,436



13%



13%

   EMEA region

636



548



16%



23%

   APJ region

410



378



8%



9%

Total revenue

$2,665



$2,362



13%



15%













Operating Income 
Fourth quarter operating income of $150 million increased from $133 million reported in the fourth quarter of 2011. On a non-GAAP basis, operating income of $177 million increased $22 million from the fourth quarter of 2011.(2) Full-year operating income was $580 million in 2012, versus $456 million in 2011. On a non-GAAP basis, full-year operating income was $678 million, a 22 percent increase from $557 million in 2011.(2) For both the fourth quarter and full-year 2012, higher revenue as well as favorable product margins more than offset the increased investment in direct sales resources.

Cash Flow 
During the fourth quarter of 2012, Teradata generated $124 million of cash from operating activities, compared to $126 million in the prior-year period. An increase in accounts receivable was offset by other working capital items. Teradata generated $85 million of free cash flow (cash from operating activities less capital expenditures and additions to capitalized software)(3) in the fourth quarter of 2012, versus $103 million in the same period in 2011. Since cash provided by operating activities in the fourth quarter was about the same as that generated in the prior year period, the decline in free cash flow was due to increased investments in property and equipment, and capitalized software development expenses.

For the full year, Teradata generated $575 million of cash from operating activities, versus $513 million generated in 2011. Teradata's free cash flow for the full year was $427 million, a $24 million increase from $403 million generated in 2011.

 


For the Periods Ended December 31



(in millions)



Three Months


Twelve Months



2012


2011


2012


2011


Net Income (GAAP)

$112


$98


$419


$353











Cash provided by operating activities (GAAP)

$124


$126


$575


$513


   Less capital expenditures for:









      Expenditures for property and equipment

(18)


(11)


(67)


(42)


      Additions to capitalized software

(21)


(12)


(81)


(68)


           Total capital expenditures

(39)


(23)


(148)


(110)


Free Cash Flow (non-GAAP measure)(3)

$85


$103


$427


$403





























Balance Sheet 
Teradata ended 2012 with $729 million in cash, a $180 million decrease from September 30, 2012, and a $43 million decrease from December 31, 2011. During the quarter, Teradata purchased 3.9 million shares of its stock for $241 million. During 2012, Teradata purchased a total of 4.5 million shares of its stock for $280 million, and used approximately $270 million of cash for acquisitions and equity investments. 

As of December 31, 2012, Teradata had total debt of $289 million outstanding under a term loan. Additionally, Teradata has $300 million available through a pre-arranged credit facility; however, no funds were drawn from the credit facility.

2013 Outlook 
In 2013, Teradata expects revenue to increase approximately 6 to 10 percent from the $2.665 billion of revenue reported in 2012. Based on currency rates on January 31, 2013, Teradata does not anticipate that currency translation will have a meaningful impact on the year-over-year revenue comparison in 2013.

GAAP earnings per share in 2013 is expected to be in the $2.64 to $2.79 range. Excluding stock-based compensation expense and other special items, non-GAAP earnings per share for 2013 is expected to be in the $3.05 to $3.20 range.(2)

2012 Fourth Quarter Earnings Conference Call 
A conference call is scheduled today at 8:30 a.m. (ET) to discuss the company's fourth quarter 2012 results. Access to the conference call, as well as a replay of the call, is available on Teradata's web site at www.teradata.com/investor.

Supplemental financial information regarding Teradata's operating results is also available on the Investor Relations page of Teradata's web site.

About Teradata

Teradata Corporation (NYSE: TDC) is the world's leading analytic data solutions company, focused on integrated data warehousing, big data analytics, and business applications. Teradata's innovative products and services deliver data integration and business insight to empower organizations to make the best decisions possible for competitive advantage. Visit teradata.com for details.

Teradata is a trademark or registered trademark of Teradata Corporation in the United States and other countries.

 

1.     The impact of currency is determined by calculating the prior-period results using the current-year monthly average currency rates. See the foreign currency fluctuation schedule on the Investor Relations page of the company's web site at www.teradata.com/investor, which is used to determine revenue on a constant currency basis.

 


For the Three Months Ended

December 31

For the Twelve Months Ended

December 31



(in millions)


(in millions)     



Revenue

2012


2011


% Chg

As Rpt'd


%
Chg
CC



2012


2011



 

% Chg

As
Rpt'd



%
Chg
CC






















 Products (software/hardware)

$362


$331


9%


10%



$1,297


$1,122



16%



17%






















 Consulting services

224


197


14%


15%



776


695



12%



14%


 Maintenance services

154


145


6%


7%



592


545



9%



10%


       Total services

378


342


11%


11%



1,368


1,240



10%



12%


Total revenue

$740


$673


10%


11%



$2,665


$2,362



13%



15%





For the Three Months Ended

December 31

For the Twelve Months Ended

December 31



(in millions)


(in millions)       



By segment/region

2012


2011


% Chg

As Rpt'd


%
Chg
CC




2012


2011


% Chg

As Rpt'd



%
Chg
CC


   Americas region

$449


$415


8%


9%




$1,619


$1,436


13%



13%


   EMEA region

176


145


21%


24%




636


548


16%



23%


   APJ region

115


113


2%


2%




410


378



8%



9%


Total revenue

$740


$673


10%


11%




$2,665


$2,362


13%



15%



 

2.     Teradata reports its results in accordance with Generally Accepted Accounting Principles in the United States, or GAAP.  However, as described below, the company believes that certain non-GAAP measures (such as non-GAAP gross margin, non-GAAP operating income, non-GAAP net income, and non-GAAP earnings per diluted share, or EPS, 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. 

Special items included in Teradata's fourth quarter GAAP operating income results as reported in this release included $12 million of stock-based compensation expense; $10 million of amortization of acquisition-related intangible assets; and $5 million of acquisition transaction and integration expenses. For the full year, special items included in Teradata's GAAP operating income included $43 million of stock-based compensation expense; $36 million of amortization of acquisition-related intangible assets; $17 million of acquisition transaction and integration expenses; and $2 million of acquisition-related purchase accounting adjustments.

Special items included in Teradata's fourth quarter and full-year 2012 non-GAAP net income as reported in this release included $4 million of income tax benefit related to the 2012 U.S. Research & Development tax credit. This benefit was excluded from the GAAP net income results in the fourth quarter and full-year 2012 results due to the American Taxpayer Relief Act of 2012 not being enacted until 2013.

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 items. Our management regularly uses supplemental non-GAAP financial measures, such as gross margin, operating income, net income and EPS, excluding certain items internally, to understand, manage and evaluate our business and support operating decisions. 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 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.

 


 

(a) Gross Margin Reconciliation of GAAP to Non-GAAP Measures












For the Three Months

Ended December 31

(in millions)


For the Twelve Months

Ended December 31

(in millions)





% chg





% chg

2012

2011


2012

2011


Gross Margin (GAAP)

$410


$374

10%


$1,491


$1,293

15%

  % of Revenue (GAAP)

55.4%


55.6%



55.9%


54.7%












  Excluding:










   Stock-based compensation expense

1


1



4


4


   Purchase accounting adjustments

-


2



2


17


   Amortization of acquisition-related intangible assets

6


3



22


14


   Transaction, integration and reorganization related costs

1


2



2


4


  Adjusted Gross Margin (non-GAAP)

$418


$382

9%


$1,521


$1,332

14%

    % of Revenue (non-GAAP)

56.4%


56.5%



56.9%


55.9%






















(b) Operating Income Reconciliation of GAAP to Non-GAAP Measures











For the Three Months

 Ended December 31

(in millions)


For the Twelve Months

 Ended December 31

(in millions)





% chg





% chg

2012

2011


2012

2011


Operating Income (GAAP)

$150


$133

13%


$580


$456

27%

  % of Revenue (GAAP)

20.3%


19.8%



21.8%


19.3%












  Excluding:










   Stock-based compensation expense

12


10



43


35


   Purchase accounting adjustments

-


2



2


17


   Amortization of acquisition-related intangible assets

10


6



36


24


   Transaction, integration and reorganization related costs

5


4



17


25


  Adjusted Operating Income (non-GAAP)

$177


$155

14%


$678


$557

22%

    % of Revenue (non-GAAP)

23.9%


22.9%



25.4%


23.4%






















(c) Net Income Reconciliation of GAAP to Non-GAAP Measures














For the Three Months

 Ended December 31

(in millions)


For the Twelve Months

 Ended December 31

(in millions)





% chg





% chg

2012

2011


2012

2011


Net Income (GAAP)

$112


$98

14%


$419


$353

19%

  % of Revenue (GAAP)

15.1%


14.6%



15.7%


14.9%












  Excluding:










   Gain from equity investments

-


-



-


(22)


   Stock-based compensation expense

10


6



29


22


   Purchase accounting adjustments

-


1



1


11


   Amortization of acquisition-related intangible assets

6


3



23


15


   Transaction, integration and reorganization related costs

3


5



13


20


   R&D tax credit for 2012, enacted in 2013

4


-



4


-


  Adjusted Net Income (non-GAAP)

$135


$113

19%


$489


$399

23%

    % of Revenue (non-GAAP)

18.2%


16.7%



18.3%


16.7%


 

(d) Earnings Per Share Reconciliation of GAAP to Non-GAAP Measures






For the periods ended December 31




Three Months


Twelve Months


2013


2012


2011


2012


2011


   Guidance











Diluted Earnings Per Share (GAAP)

$0.66


$0.57


$2.44


$2.05


$2.64 - $2.79

  Excluding:










   Gain from equity investments

-


-


-


($0.13)



   Stock-based compensation expense

$0.06


$0.04


$0.17


$0.13


$0.22

   Purchase accounting adjustments

-


-

 


$0.01


$0.06


-

   Amortization of acquisition-related intangible assets

$0.03


$0.02


$0.13


$0.09


$0.16

   Transaction, integration and reorganization related costs

$0.02


$0.03


$0.08


$0.12


$0.05

   2012 R&D Tax Credit, enacted in 2013

$0.02


-


$0.02


-


($0.02)

Adjusted Diluted Earnings Per Share (Non-GAAP)

$0.79


$0.66


$2.85


$2.32


$3.05- $3.20


















3.     As described above, the company believes that free cash flow is a useful non-GAAP measure for investors. Teradata defines free cash flow as cash provided/used by 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.

Note to Investors