Teradata Announces 2010 Second Quarter Results

ATLANTA, Aug. 5 /PRNewswire-FirstCall/ -- Teradata Corporation (NYSE: TDC), the world's largest company solely focused on data warehousing and enterprise analytics, today reported revenue of $470 million for the quarter ended June 30, 2010, an increase of 12 percent from $421 million in 2009.  Overall, the company's second quarter year-over-year revenue comparison was not impacted by currency translation, when compared to the second quarter of 2009. (2)  

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Gross margin in the second quarter was 57.0 percent versus 55.3 percent in the second quarter of 2009.  Higher product gross margin and a more favorable mix of product revenue versus service revenue more than offset lower service gross margin in the quarter.  

Teradata reported second-quarter net income under Generally Accepted Accounting Principles (GAAP) of $74 million, or $0.44 per diluted share, which compared to GAAP net income of $62 million, or $0.36 per diluted share, in the second quarter of 2009.  Excluding non-cash stock-based compensation expense, non-GAAP EPS was $0.46 in the second quarter of 2010, versus $0.38 in the second quarter of 2009.(1)

"Teradata turned in its best second quarter ever, with solid revenue and EPS growth.  Operating income, operating margin and gross margin rate were at the highest levels of any quarter in Teradata's history," said Mike Koehler, president and chief executive officer of Teradata Corporation.

"First half revenue growth of 14 percent, product revenue growth of 24 percent, and the highest number of new customer wins in five years are evidence of our leadership in the marketplace. In addition, the investments we have been making in our platform family, partners and sales territories were key contributors to our growth," said Koehler.  "Given our first half performance, we now expect our revenue and EPS to be at the high end of our previous guidance ranges."

Regional Operating Segment Results

Teradata reports its results in three regional operating segments.

Americas

Teradata generated $281 million of revenue in its Americas region in the second quarter of 2010, up 23 percent from $229 million in the second quarter of 2009.  Currency translation benefited the year-over-year revenue comparison in the Americas by 1 percentage point in the second quarter. (2)

Gross margin in the Americas region in the second quarter of 2010 improved to 60.9 percent, compared to 58.1 percent in the second quarter of 2009.  Gross margin in the quarter improved largely due to higher product gross margin, as well as a higher mix of product revenue versus services revenue, compared to the prior-year period.  

Europe, Middle East and Africa (EMEA)

Revenue in Teradata's EMEA region in the second quarter of 2010 was $108 million, down 8 percent from $118 million generated in the second quarter of 2009.  Currency translation negatively impacted the revenue comparison in the EMEA region by 5 percentage points. (2)    

Gross margin in the EMEA region in the second quarter of 2010 was 52.8 percent, down from 54.2 percent in the second quarter of 2009, due to the impact of a lower proportion of product revenue (compared to services revenue), as well as lower services margins.

Asia Pacific / Japan (APJ)

Teradata generated $81 million of revenue in its APJ region in the second quarter of 2010, a 9 percent increase from $74 million in the second quarter of 2009.  The revenue comparison in the APJ region was benefited by 6 percentage points from currency translation.(2)  

Gross margin in the APJ region in the second quarter of 2010 was 49.4 percent, up from 48.6 percent in the second quarter of 2009.  The increase was driven by higher product margins and a greater proportion of product revenue (compared to services revenue).

Operating Income

Second-quarter operating income of $106 million improved from $84 million reported in the second quarter of 2009.  The increase in operating income was largely due to revenue growth, particularly product revenue, as well as improved product margins, offset by higher research and development and selling expenses.

Operating margin reported in the second quarter was 22.6 percent, versus 20.0 percent in the second quarter of 2009.

Other Items

The effective income tax rate in the second quarter of 2010 was 30 percent, which compared to a 26 percent tax rate in the prior-year period, driven by an overall proportional increase in U.S. pre-tax earnings.

Due to the expectation that a higher portion of Teradata's pre-tax income will be generated in the United States and the uncertainty surrounding the retroactive reinstatement in 2010 of the U.S. Federal Research & Development Tax Credit, we anticipate a potentially higher full-year effective tax rate for 2010 in the 27–28% range.

Cash Flow

During the second quarter of 2010, Teradata generated $62 million of cash from operating activities, compared to $103 million in the prior-year period.  Capital expenditures in the second quarter were $23 million compared to $20 million in the second quarter of 2009.  Teradata generated $39 million of free cash flow (cash from operations less capital expenditures for property and equipment and additions to capitalized software) (3) in the second quarter of 2010, versus generating $83 million in the same period in 2009. In comparison to the prior-year period, the decrease in cash provided by operating activities was principally due to expected lower collections of receivables.

During the first six months of 2010, Teradata generated $200 million of cash from operating activities, compared to $268 million in the prior-year period.  Capital expenditures in the first half of 2010 were $44 million, compared to $40 million in the same period in 2009.  During the first two quarters of 2010, Teradata generated $156 million of free cash flow, versus $228 million in the same period in 2009.

Balance Sheet

Teradata ended the second quarter of 2010 with $724 million in cash and short-term investments, a $12 million increase from March 31, 2010. Although Teradata has $300 million of funds available through a pre-arranged credit facility, there was no short- or long-term debt outstanding as of June 30, 2010.

2010 Outlook

Teradata now expects full-year 2010 revenue growth to be at the "high-end" of its previous guidance range of 8 to 10 percent.   Currency is not expected to materially impact the full-year, year-over-year revenue comparison.  

Earnings per diluted share (EPS) is also expected at the "high-end" of the previous $1.60 to $1.70 guidance range.  Excluding stock-based compensation expense for the year, non-GAAP EPS is expected to be at the "high-end" of the $1.69 to $1.79 range.(1)

2010 Second-Quarter Earnings Conference Call

A conference call is scheduled today at 8:30 a.m. (EDT) to discuss the company's second-quarter 2010 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 www.teradata.com/investor.

About Teradata

Teradata Corporation (NYSE: TDC) is the world's largest company solely focused on raising intelligence and achieving enterprise agility through its database software, enterprise data warehousing, data warehouse appliances, consulting, and enterprise analytics.   Visit Teradata on the web at www.teradata.com.

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

1. 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 free cash flow, non-GAAP EPS and non-GAAP operating income, both of which exclude certain items) 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.  

The following table reconciles Teradata's actual and projected earnings per diluted share, or EPS, under GAAP to the company's actual and projected non-GAAP EPS for the periods presented, which exclude certain items.  Our management regularly uses supplemental non-GAAP financial measures, such as EPS excluding certain items, internally to understand, manage and evaluate our business and make operating decisions.  The company believes such non-GAAP financial measures provide useful information to investors regarding the underlying business trends and performance of the company's ongoing operations and are useful for period-over-period comparisons of such operations and results.  The company also believes this information is useful for investors because it can provide consistency and comparability with past reports and projections of future results.  

2. The impact of currency is determined by calculating the prior period results using the current-year monthly average currency rates.  See the foreign currency schedule on the Investor Relations page of the company's web site www.teradata.com/investor.

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 company 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 enterprise 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; 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.

SOURCE Teradata Corporation

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