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Teradata (TDC) Q4 Earnings Beat Estimates, Revenues Fall Y/Y

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Teradata (TDC - Free Report) reported fourth-quarter 2020 adjusted earnings of 38 cents per share, which beat the Zacks Consensus Estimate by 52%. Moreover, the figure increased 72.7% year over year.

Revenues of $491 million beat the consensus mark by 2.4%. However, the top line declined 0.6% year over year. At constant currency (cc), revenues were down 2%.

Total backlog at the end of the fourth quarter was $2.921 billion, up 7% year over year and 13% sequentially.

Top-Line Details

Recurring revenues (78% of revenues) grew 9.4% year over year (up 8% at cc) to $383 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

 

Perpetual software license and hardware revenues (5.1% of revenues) declined 16.7% from the year-ago quarter (down 14% at cc) to $25 million.

Consulting services’ revenues (16.9% of revenues) dropped 27.2% from the year-ago quarter (down 30% at cc) to $83 million, primarily due to coronavirus-related impacts, especially on activities that are conducted on-site.

Revenues from the Americas decreased 0.8% year over year (flat at cc) to $261 million. Europe, the Middle East & Africa (“EMEA”) revenues declined 3.6% from the year-ago quarter (down 7% at cc) to $134 million. Revenues from the Asia-Pacific (“APAC”) were up 4.3% from the year-ago quarter (down 1% at cc) to $96 million.

Total annual recurring revenues (“ARR”) at the end of the fourth quarter increased 11.2% year over year (up 9% at cc) to $1.59 billion. Public cloud ARR increased 165% on a reported basis and 159% at cc to $106 million.

Operating Details

Gross margin on a non-GAAP basis expanded 600 basis points (bps) year over year to 59.3%, primarily driven by a higher mix of recurring revenues.

Americas gross margin expanded 350 bps to 61.7%. EMEA gross margin surged to 56.7% from 50.4% reported in the year-ago quarter. APAC gross margin soared to 56.3% from 43.5% reported in the year-ago quarter.

Recurring revenues’ gross margin expanded 320 bps on a year-over-year basis to 69.2%. The growth benefited from cost improvements in subscription and cloud business.

However, perpetual software license and hardware margin soared to 52% from 20% reported in the year-ago quarter.

Consulting services’ gross profit was $6 million compared with $11 million in the year-ago quarter.

Selling, general & administrative (SG&A), and research & development (R&D) expenses, as a percentage of revenues, increased 270 bps and 130 bps, respectively, on a year-over-year basis.

Non-GAAP operating margin expanded 390 bps on a year-over-year basis to 13.6%.

Balance Sheet & Other Details

As of Dec 31, 2020, Teradata had cash and cash equivalents of $529 million compared with $533 million as of Sep 30, 2020.

Total debt (including current portion) as of Dec 31, 2020, was $455 million compared with $461 million as of Sep 30, 2020. Including financial lease obligations, total debt was $600 million.

In the fourth quarter, Teradata generated $56 million of cash from operating activities compared with the previous quarter’s $71 million. Cash used in operating activities was $54 million in the year-ago quarter.

The company’s quarterly free cash flow was $45 million compared with $58 million in the previous quarter. Teradata had posted free cash outflow of $41 million in the year-ago quarter.

Guidance

For first-quarter 2021, non-GAAP earnings are expected between 38 cents and 40 cents per share. Public cloud ARR is expected to increase by at least 165% year-over-year.

For 2021, non-GAAP earnings are expected between $1.50 and $1.58 per share.

Public cloud ARR is expected 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.

Recurring revenues are expected to grow at a mid- to high-single digit percentage year over year. Total revenues are expected to grow at a low-single-digit percentage year over year.

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the broader technology sector are CDW Corporation (CDW - Free Report) , Vishay Intertechnology (VSH - Free Report) and Marvell Technology (MRVL - Free Report) . All the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Vishay and CDW are set to report quarterly earnings on Feb 9 and 10, respectively. Marvell is set to report the same on Mar 3.

 

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