A month has gone by since the last earnings report for Teradata (TDC Quick QuoteTDC - Free Report) . Shares have lost about 13.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Teradata due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Teradata Q4 Earnings Beat Estimates

Teradata reported fourth-quarter 2021 non-GAAP earnings of 57 cents per share, which beat the Zacks Consensus Estimate by 90%. The metric increased 50% year over year and 32.6% sequentially.

The figure comfortably came above Teradata’s guided range of 25-29 cents per share.

Revenues of $475 million increased 3.3% sequentially. Yet, it decreased 3% year over year. At constant currency (cc), revenues were down 2%. The year-over-year decline is due to a decrease in perpetual and consulting revenues.

Total annual recurring revenues (ARR) at fourth quarter-end increased 5% year over year (up 7% at cc) to $1.492 billion. Public cloud ARR surged 91% on a reported basis and 92% at cc year over year to $202 million. The growth was driven by customers’ migration to Vantage in the cloud.

In the fourth quarter, the company added more total new customer logos in both cloud and on-premises than any other quarter in several years. This remained a major positive.

Top-Line Details

Recurring revenues (accounting for 77% of revenues) increased 5% year over year (up 6% at cc) to $364 million. The growth was driven primarily by a higher mix.

Perpetual software license and hardware revenues (4% of revenues) were down 44% year over year (down 43% at cc) to $19 million.

Consulting services’ revenues (19% of revenues) declined 17% from the year-ago level (down 16% at cc) to $92 million.

Both perpetual and consulting revenues declined due to strategic shifts made to a higher-margin subscription model and greater collaboration with partners, which drove the adoption and consumption of Teradata.

Revenues in the Americas declined 1% year over year (down 1% at cc) to $258 million. Europe, the Middle East & Africa (EMEA) revenues rose 1% from the year-ago figure (up 3% at cc) to $135 million. Revenues from Asia Pacific and Japan (APJ) were down 15% from the year-ago level (down 13% at cc) to $82 million.

Operating Details

Gross margin on a non-GAAP basis was 63.2%, expanding 390 basis points (bps) year over year. The uptick was primarily driven by a higher mix of recurring revenues and improved cloud margins.

Americas non-GAAP gross margin came in at 64.3% for the fourth quarter, expanding 260 bps year over year. EMEA gross margin expanded 850 bps year over year to 65.2%. APJ gross margin contracted 20 bps from the year-ago quarter to 56.1%.

Recurring revenues’ gross margin on a non-GAAP basis expanded 140 bps on a year-over-year basis to 74.5%. It benefited from cost improvements in subscription and cloud business.

Non-GAAP Perpetual software licenses and hardware margin expanded 30 bps year over year to 47.4%.

Non-GAAP Consulting services’ gross margin expanded 170 bps year over year to 15.2%.

Selling, general & administrative — as a percentage of revenues — contracted 148 bps year over year to 35.8%.

Research & development expenses, as a percentage of revenues, declined 234 bps on a year-over-year basis to 15.6%.

Non-GAAP operating margin was 18.9%, up 530 bps from the year-ago quarter mainly due to cost discipline.

Balance Sheet & Other Details

As of Dec 31, 2021, Teradata had cash and cash equivalents of $592 million compared with $613 million on Sep 30, 2021.

Total debt (including current portion) as of Dec 31, 2021 was $412 million compared with $424 million on Sep 30, 2021.

In the fourth quarter, Teradata generated $95 million of cash from operating activities compared with the previous quarter’s $33 million.

The company’s quarterly free cash flow was $85 million compared with $23 million in the third quarter.

TDC repurchased 1.3 million shares worth $65 million in the fourth quarter.

Guidance

For first-quarter 2022, non-GAAP earnings are expected between 63 cents and 67 cents per share.

For 2022, non-GAAP earnings are expected between $1.82 and $1.92 per share (up from the previous guidance of $1.60-$1.70).

Public cloud ARR is now projected to increase 80% on a year-over-year basis, which was previously expected to be at least 70%.

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 low-single-digit to mid-single-digit range year over year.

The company projects total revenues to grow at a flat-to-low-single-digit percentage on a year-over-year basis.

Cash flow from operations is expected to be at least $430 million, while free cash flow is projected to be no less than $400 million.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.