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Teradata (TDC) Q1 Earnings Beat Estimates, Revenues Up Y/Y

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Teradata (TDC - Free Report) reported first-quarter 2021 adjusted earnings of 69 cents per share, which beat the Zacks Consensus Estimate by 11.3% and were significantly up from 27 cents reported in the year-ago quarter.

The earnings figure comfortably beat Teradata’s guidance range of 38-40 cents per share.

Revenues of $491 million were in line with the consensus mark. The top line increased 13.1% year over year. At constant currency (cc), revenues were up 10%.

Top-Line Details

Recurring revenues (75.8% of revenues) grew 19.6% year over year (up 17% at cc) to $372 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 (4.7% of revenues) were unchanged year over year (down 2% at cc) to $23 million.

Consulting services’ revenues (19.6% of revenues) dropped 4% from the year-ago quarter (down 8% at cc) to $96 million.

Revenues from the Americas increased 7.8% year over year (up 8% at cc) to $263 million. Europe, the Middle East & Africa (“EMEA”) revenues jumped 24.6% from the year-ago quarter (up 17% at cc) to $147 million. Revenues from APJ  were up 12.5% from the year-ago quarter (up 4% at cc) to $81 million.

Total annual recurring revenues (“ARR”) at the end of the first quarter increased 12% year over year (up 9% at cc) to $1.40 billion. Public cloud ARR surged 176% on a reported basis and 170% at cc to $124 million. The growth rate was higher than management’s expectation of 165% year over year.

Teradata gained from high Vantage adoption. For instance, Sirius XM Holdings (SIRI - Free Report) is transitioning to Vantage on AWS as the company modernizes its data and analytics ecosystem. In partnership with Accenture (ACN - Free Report) , Teradata won the Sirius XM deal beating competitors, Snowflake (SNOW - Free Report) and Amazon Redshift.

Moreover, a global retailer selected Vantage instead of Snowflake and Azure Synapse Analytics during the reported quarter. Moreover, Teradata’s Vantage on AWS also got selected by one of the largest auto manufacturers headquartered in Asia-Pacific.

Operating Details

Gross margin on a non-GAAP basis was 64.2%, significantly up from 54.1% reported in the year-ago quarter, primarily driven by a higher mix of recurring revenues.

Americas gross margin surged from the year-ago quarter’s reported figure of 59% to 69.2% in the first quarter. EMEA gross margin surged to 59.9% from 51.7% reported in the year-ago quarter. APAC gross margin soared to 55.6% from 41.7% reported in the year-ago quarter.

Recurring revenues’ gross margin expanded 420 bps on a year-over-year basis to 76.9%.The growth benefited from cost improvements in subscription and cloud business.

Moreover, perpetual software license and hardware margin soared to 52.2% from 30.4% reported in the year-ago quarter.

Consulting services’ gross profit was $17 million compared with $2 million in the year-ago quarter.

Selling, general & administrative (SG&A), and research & development (R&D) expenses, as a percentage of revenues, decreased 560 bps and 50 bps, respectively, on a year-over-year basis.

Non-GAAP operating margin was 23.4%, significantly up from 7.4% reported in the year-ago quarter.

Balance Sheet & Other Details

As of Mar 31, 2021, Teradata had cash and cash equivalents of $538 million compared with $529 million as of Dec 31, 2020.

Total debt (including current portion) as of Mar 31, 2021, was $449 million compared with $455 million as ofDec 31, 2020.

In the first quarter, Teradata generated $110 million of cash from operating activities compared with the previous quarter’s $56 million.

The company’s quarterly free cash flow was $105 million compared with $45 million in the previous quarter.

Guidance

For second-quarter 2021, non-GAAP earnings are expected between 47 cents and 49 cents per share. Public cloud ARR is expected to increase by at least 155% year over year.

For 2021, non-GAAP earnings are now expected between $1.61 and $1.67 per share (up from the previous guidance range of $1.50-$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.

Teradata expects recurring revenues to grow at a mid- to high-single digit percentage year over year. Moreover, this Zacks Rank #2 (Buy) company expects total revenues to grow at a low-single-digit percentage year over year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cash flow from operations are now expected between $320 million and $350 million (up from the previous guidance of at least $295 million). Free cash flow is now expected between $275 million and $300 million (up from the previous guidance of at least $250 million)

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