Teradata Reports Third Quarter Results

-- Revenue increased 10 percent in constant currency(1)

-- Product gross margin increased 350 basis points

-- Non-GAAP operating margin increased 200 basis points

-- GAAP EPS of $0.60, an 18 percent increase from the prior-year period

-- Non-GAAP EPS of $0.69, versus $0.59 in the third quarter of 2011(2)

-- Year-to-date cash from operating activities increased $64 million from prior-year period

Nov 01, 2012, 06:55 ET from Teradata Corporation

ATLANTA, Nov. 1, 2012 /PRNewswire/ -- Teradata Corporation (NYSE: TDC) today reported revenue of $647 million for the quarter ended September 30, 2012, an increase of 7 percent from $602 million in the third quarter of 2011.  In constant currency, revenue increased 10 percent from the third quarter of 2011, in line with management's expectations.(1)

(Logo:  http://photos.prnewswire.com/prnh/20120412/CL86658LOGO )

Gross margin of 55.8 percent, as reported under U.S. Generally Accepted Accounting Principles (GAAP), improved 130 basis points from the third quarter of 2011. On a non-GAAP basis, excluding the special items and stock-based compensation expense described in footnote #2,(2) gross margin was 56.9 percent, a 150 basis point improvement from 55.4 percent in the third quarter of 2011. The increase in gross margin was driven by leverage from revenue growth as well as a favorable product revenue mix.  

Stock-based compensation expense and special items had a $15 million negative impact on Teradata's third quarter 2012 net income as reported under GAAP.(2) 

Teradata reported GAAP net income of $104 million, or $0.60 per diluted share, which compared to GAAP net income of $87 million, or $0.51 per diluted share, in the third quarter of 2011. Excluding stock-based compensation expense and the special items detailed in footnote #2,(2) non-GAAP net income in the third quarter of 2012 was $119 million, or $0.69 per diluted share, versus $101 million, or $0.59 per diluted share in the third quarter of 2011.(2) 

"In Q3, Teradata continued to deliver solutions that create value for our customers and solid financial results for Teradata, given the macro-economic environment," said Mike Koehler, president and chief executive officer of Teradata Corporation.  "Teradata's competitive position has never been stronger, and we are well positioned with our market-leading technology and solutions in three growing and strategic markets - data warehousing, big data analytics and integrated marketing management."

Regional Revenue Performance

(in millions)

For the Three Months Ended September 30

By segment/region

2012

2011

% Chg. as

Reported

% Chg. in

Constant

Currency(1)

   Americas region

$384

$375

2%

3%

   EMEA region

156

133

17%

28%

   APJ region

107

94

14%

16%

Total revenue

$647

$602

7%

10%

For the Nine Months Ended September 30

By segment/region

2012

2011

% Chg. as

Reported

% Chg. in

Constant

Currency(1)

   Americas region

$1,170

$1,021

15%

15%

   EMEA region

460

403

14%

23%

   APJ region

295

265

11%

12%

Total revenue

$1,925

$1,689

14%

17%

Operating Income

Third-quarter operating income of $143 million increased from $122 million reported in the third quarter of 2011. On a non-GAAP basis, operating income of $166 million increased 16 percent from the third quarter of 2011.(2) Higher revenue as well as favorable product revenue mix more than offset the increased investment in selling expense.

Cash Flow

Teradata generated $107 million of cash from operating activities, compared to $102 million in the prior-year period. Teradata generated $67 million of free cash flow (cash from operating activities less capital expenditures and additions to capitalized software)(3) in the third quarter of 2012, versus $75 million in the same period in 2011. The decline in free cash flow was due to increased investments in property and equipment, and capitalized software development expenses.

Year-to-date, Teradata generated $451 million of cash from operating activities, a $64 million increase from $387 million generated in the first nine months of 2011. Teradata generated $342 million of free cash flow(3) in the first nine months of 2012, a $42 million increase from the same period in 2011.

 

For the Periods Ended September 30

(in millions)

Three Months

Nine Months

2012

2011

2012

2011

Net Income (GAAP)

$104

$87

$307

$255

Cash provided by operating activities  (GAAP)       

$107

$102

$451

$387

   Less capital expenditures for:

      Expenditures for property and equipment

(18)

(9)

(49)

(31)

      Additions to capitalized software

(22)

(18)

(60)

(56)

           Total capital expenditures

(40)

(27)

(109)

(87)

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

$67

$75

$342

$300

 

Balance Sheet

Teradata ended the third quarter of 2012 with $909 million in cash, an $88 million increase from June 30, 2012.

As of September 30, 2012, Teradata had total debt of $292 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.

2012 Outlook

Teradata now expects full-year 2012 revenue growth, on a reported basis, to be at the low end of its previous guidance range of 12-14 percent.  On a constant currency basis, Teradata expects revenue growth to be at the low end of its prior guidance range of 14-16 percent. 

Teradata expects full-year 2012 GAAP earnings per share to be in the middle to the higher end of its previous range of $2.34 to $2.44. Excluding stock-based compensation expense and special items, non-GAAP EPS for 2012 is expected to be in the middle to the higher end of its prior guidance range of $2.72 to $2.82.(2)     

2012 Third-Quarter Earnings Conference Call

A conference call is scheduled today at 8:30 a.m. (ET) to discuss the company's third-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

September 30

 For the Nine Months Ended September 30

(in millions)

(in millions)

Revenue

2012

2011

% Chg

As

Rpt'd

%

Chg CC

2012

2011

% Chg

As

Rpt'd

%

Chg

CC

 Products (software/hardware)

$306

$287

7%

9%

$935

$791

18%

21%

 Consulting services

194

176

10%

13%

552

498

11%

14%

 Maintenance services

147

139

6%

9%

438

400

10%

12%

       Total services

341

315

8%

12%

990

898

10%

13%

Total revenue

$647

$602

7%

10%

$1,925

$1,689

14%

17%

For the Three Months Ended

September 30

 For the Nine Months Ended September 30

(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

$384

$375

2%

3%

$1,170

$1,021

15%

15%

   EMEA region

156

133

17%

28%

460

403

14%

23%

   APJ region

107

94

14%

16%

295

265

11%

12%

Total revenue

$647

$602

7%

10%

$1,925

$1,689

14%

17%

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 third quarter GAAP operating income results as reported in this release included $11 million of amortization of acquisition-related intangible assets; $2 million of acquisition transaction and integration expenses; and $10 million of stock-based compensation expense.

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 September 30

(in millions)

For the Nine Months

Ended September 30

(in millions)

% chg

% chg

2012

2011

2012

2011

Gross Margin (GAAP)

$361

$328

10%

$1,081

$919

18%

  % of Revenue (GAAP)

55.8%

54.5%

56.2%

54.4%

  Excluding:

   Stock-based compensation expense

1

1

3

3

   Purchase accounting adjustments

-

3

2

15

   Amortization of acquisition-related intangible assets

7

4

16

11

   Transaction, integration and reorganization related costs

-

-

1

2

  Adjusted Gross Margin (non-GAAP)

$369

$336

10%

$1,103

$950

16%

    % of Revenue (non-GAAP)

56.9%

55.4%

57.2%

55.7%

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

For the Three Months

 Ended September 30

(in millions)

For the Nine Months

 Ended September 30

(in millions)

% chg

% chg

2012

2011

2012

2011

Operating Income (GAAP)

$143

$122

17%

$430

$323

33%

  % of Revenue (GAAP)

22.1%

20.3%

22.3%

19.1%

  Excluding:

   Stock-based compensation expense

10

8

31

25

   Purchase accounting adjustments

-

3

2

15

   Amortization of acquisition-related intangible assets

11

6

26

18

   Transaction, integration and reorganization related costs

2

4

12

21

  Adjusted Operating Income (non-GAAP)

$166

$143

16%

$501

$402

25%

    % of Revenue (non-GAAP)

25.6%

23.6%

26.0%

23.6%

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

For the Three Months

 Ended September 30

(in millions)

For the Nine Months

 Ended September 30

(in millions)

% chg

% chg

2012

2011

2012

2011

Net Income (GAAP)

$104

$87

20%

$307

$255

20%

  % of Revenue (GAAP)

16.1%

14.5%

15.9%

15.1%

  Excluding:

   Gain from equity investments

-

-

-

(22)

   Stock-based compensation expense

6

5

19

16

   Purchase accounting adjustments

-

2

1

10

   Amortization of acquisition-related intangible assets

7

5

17

12

   Transaction, integration and reorganization related costs

2

2

10

15

  Adjusted Net Income (non-GAAP)

$119

$101

18%

$354

$286

24%

    % of Revenue (non-GAAP)

18.4%

16.7%

18.3%

16.8%

 

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

For the periods ended September 30

Three Months

Nine Months

2012

2012

2011

2012

2011

Guidance

Diluted Earnings Per Share (GAAP)

$0.60

$0.51

$1.78

$1.48

$2.34 - $2.44

  Excluding:

   Gain from equity investments

-

-

-

($0.13)

   Stock-based compensation expense

$0.04

$0.03

$0.11

$0.09

$0.16

   Purchase accounting adjustments

-

$0.01

$0.01

$0.06

$0.01

   Amortization of acquisition-related intangible assets

$0.04

$0.03

$0.10

$0.07

$0.14

   Transaction, integration and reorganization related costs

$0.01

$0.01

$0.06

$0.09

$0.07

Adjusted Diluted Earnings Per Share (Non-GAAP)

$0.69

$0.59

$2.06

$1.66

$2.72 - $2.82

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 or 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

This news release contains forward-looking statements, including statements as to anticipated or expected results, beliefs, opinions and future financial performance, within the meaning of Section 21E of the Securities and Exchange Act of 1934.  Forward-looking statements include projections of revenue, profit growth and other financial items, future economic performance and statements concerning analysts' earnings estimates, among other things. These forward-looking statements are based on current expectations and assumptions and involve risks and uncertainties that could cause Teradata's actual results to differ materially. In addition to the factors discussed in this release, other risks and uncertainties could affect our future results, and could cause actual results to differ materially from those expressed in such forward-looking statements.  Such factors include those relating to: the global economic environment 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, and other general economic and business conditions; the rapidly changing and intensely competitive nature of the information technology industry and the data warehousing business, including the increased pressure on price/performance for data warehousing solutions; fluctuations in our operating results, unanticipated delays or accelerations in our sales cycles and the difficulty of accurately estimating revenues; risks inherent in operating in foreign countries, including the impact of economic, political, legal, regulatory, compliance, cultural, foreign currency fluctuations and other conditions abroad; the timely and successful development, production or acquisition and market acceptance of new and existing products and services, including our ability to accelerate market acceptance of new products and services as well as the reliability, quality and operability of new products because of the difficulty and complexity associated with their testing and production; tax rates; turnover of workforce and the ability to attract and retain skilled employees; availability and successful exploitation of new acquisition and alliance opportunities; our ability to execute integration plans for newly acquired entities, including the possibility that expected synergies and operating efficiencies may not be achieved, that such integration efforts may be more difficult, time-consuming or costly than expected, and that operating costs, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, customers, clients or suppliers) may be greater than expected following the transaction; recurring revenue may decline or fail to be renewed; changes in Generally Accepted Accounting Principles (GAAP) and the resulting impact, if any, on the company's accounting policies; continued efforts to establish and maintain best-in-class internal information technology and control systems; and other factors described from time-to-time in the company'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 reports to stockholders.  The company 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.

 

Schedule A

TERADATA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(in millions, except per share amounts)

For the Period Ended September 30

Three Months

Nine Months

2012

2011

% Chg

2012

2011

% Chg

Revenue

Products

$        306

$        287

7%

$        935

$        791

18%

Services

341

315

8%

990

898

10%

Total revenue

647

602

7%

1,925

1,689

14%

Product gross margin

211

188

638

520

% of Revenue

69.0%

65.5%

68.2%

65.7%

Services gross margin

150

140

443

399

% of Revenue

44.0%

44.4%

44.7%

44.4%

Total gross margin

361

328

1,081

919

% of Revenue

55.8%

54.5%

56.2%

54.4%

Selling, general and administrative expenses

174

163

518

478

Research and development expenses

44

43

133

118

Income from operations

143

122

430

323

% of Revenue

22.1%

20.3%

22.3%

19.1%

Other (expense) income, net

-

(1)

(1)

25

Income before income taxes

143

121

429

348

% of Revenue

22.1%

20.1%

22.3%

20.6%

Income tax expense

39

34

122

93

% Tax rate

27.3%

28.1%

28.4%

26.7%

Net income

$        104

$          87

$        307

$        255

% of Revenue

16.1%

14.5%

15.9%

15.1%

Net income per common share

Basic

$       0.62

$       0.52

$       1.82

$       1.52

Diluted

$       0.60

$       0.51

$       1.78

$       1.48

Weighted average common

 shares outstanding

Basic

168.8

167.9

168.4

168.3

Diluted

172.4

171.7

172.1

172.1

 

 

Schedule B

TERADATA CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in millions)

 September 30,

 June 30,

 December 31,

2012

2012

2011

Assets

Current assets

Cash and cash equivalents

$                909

$                  821

$                  772

Accounts receivable, net

524

505

494

Inventories

41

35

61

Other current assets

79

79

85

Total current assets

1,553

1,440

1,412

Property and equipment, net

143

134

120

Capitalized software, net

162

152

140

Goodwill

933

925

742

Acquired intangible assets

193

200

163

Deferred income taxes

34

33

28

Other assets

33

31

11

Total assets

$             3,051

$               2,915

$               2,616

Liabilities and stockholders' equity

Current liabilities

Accounts payable

$                107

$                  100

$                    97

Payroll and benefits liabilities

136

121

169

Deferred revenue

352

410

339

Other current liabilities

99

88

90

Total current liabilities

694

719

695

Long-term debt

278

282

290

Pension and other postemployment plan liabilities

80

76

77

Long-term deferred revenue

30

24

24

Other liabilities

91

79

36

Total liabilities

1,173

1,180

1,122

Stockholders' equity

Preferred stock

-

-

-

Common stock

2

2

2

Paid-in capital

875

844

765

Treasury Stock

(565)

(562)

(526)

Retained earnings

1,544

1,440

1,237

Accumulated other comprehensive income

22

11

16

Total stockholders' equity

1,878

1,735

1,494

Total liabilities and stockholders' equity

$             3,051

$               2,915

$               2,616

 

Schedule C

TERADATA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in millions)

For the Period Ended September 30

Three Months

Nine Months

2012

2011

2012

2011

Operating activities

Net income

$                      104

$                        87

$                      307

$                      255

Adjustments to reconcile net income to net cash provided

  by operating activities:

Depreciation and amortization

32

25

93

74

Stock-based compensation expense

10

8

31

25

Excess tax benefit from stock-based compensation

(9)

(1)

(33)

(10)

Deferred income taxes

6

20

28

31

Gain on investments

-

-

-

(28)

Changes in assets and liabilities:

Receivables

(19)

(25)

(20)

(12)

Inventories

(5)

(5)

21

-

Current payables and accrued expenses

45

30

23

-

Deferred revenue

(53)

(38)

19

57

Other assets and liabilities

(4)

1

(18)

(5)

Net cash provided by operating activities

107

102

451

387

Investing activities

Expenditures for property and equipment

(18)

(9)

(49)

(31)

Additions to capitalized software

(22)

(18)

(60)

(56)

Business acquisitions and other investing activities, net

(1)

(3)

(239)

(722)

Net cash used in investing activities

(41)

(30)

(348)

(809)

Financing activities

Repurchases of common stock

(2)

(57)

(39)

(95)

Proceeds from long-term borrowings

-

-

-

600

Repayments of long-term borrowings

(4)

-

(8)

(300)

Excess tax benefit from stock-based compensation

9

1

33

10

Other financing activities, net

12

3

48

19

Net cash provided by (used in) financing activities

15

(53)

34

234

Effect of exchange rate changes on cash and cash equivalents

7

(10)

-

(4)

Increase (Decrease) in cash and cash equivalents

88

9

137

(192)

Cash and cash equivalents at beginning of period

821

682

772

883

Cash and cash equivalents at end of period

$                      909

$                      691

$                      909

$                      691

 

Schedule D

TERADATA CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in millions)

For the Period Ended September 30

Three Months

Nine Months

2012

2011

% Change

As Reported

% Change

Constant

Currency

2012

2011

% Change

As Reported

% Change

Constant

Currency

Segment Revenue

Americas

$    384

$    375

2%

3%

$ 1,170

$ 1,021

15%

15%

EMEA

156

133

17%

28%

460

403

14%

23%

APJ

107

94

14%

16%

295

265

11%

12%

Total revenue

647

602

7%

10%

1,925

1,689

14%

17%

Segment gross margin

Americas

229

223

703

592

% of Revenue

59.6%

59.5%

60.1%

58.0%

EMEA

81

62

240

208

% of Revenue

51.9%

46.6%

52.2%

51.6%

APJ

51

43

138

119

% of Revenue

47.7%

45.7%

46.8%

44.9%

Total gross margin

361

328

1,081

919

% of Revenue

55.8%

54.5%

56.2%

54.4%

Selling, general and administrative expenses

174

163

518

478

Research and development expenses

44

43

133

118

Income from operations

$    143

$    122

$    430

$    323

% of Revenue

22.1%

20.3%

22.3%

19.1%

 

SOURCE Teradata Corporation



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