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

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Teradata (TDC - Free Report) reported first-quarter 2020 adjusted earnings of 27 cents per share, which beat the Zacks Consensus Estimate by 22.7% and also increased year over year by the same percentage.

Revenues of $434 million, however, missed the consensus mark by 4%. The top line also declined 7.3% year over year. At constant currency (cc), revenues were down 6%.

Coronavirus negatively impacted Teradata’s quarterly results. The company withdrew its full-year guidance due to uncertainties emanating from the pandemic.

Top-Line Details

Recurring revenues (79.5% of revenues) increased 4.2% year over year (up 6% at cc) to $345 million.

Perpetual software license and hardware revenues (3.2% of revenues) plummeted 54.8% from the year-ago quarter (down 55% at cc) to $14 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

 

Consulting services revenues (17.8% of revenues) dropped 29.2% from the year-ago quarter (down 28% at cc) to $75 million.
 
Revenues from Americas decreased 9.3% year over year (down 9% at cc) to $244 million. Europe, Middle East & Africa (EMEA) revenues rose 4.4% from the year-ago quarter (up 6% at cc) to $139 million. Revenues from the Asia-Pacific (APAC) were down 16.3% from the year-ago quarter (down 13% at cc) to $72 million.

Total annual recurring revenues (ARR) at the end of the first quarter increased 6.3% year over year (up 8% at cc) to $1.40 billion.

Operating Details

Non-GAAP segment’s gross margin expanded 270 basis points (bps) year over year to 54.1%. Americas, EMEA and APAC gross margins expanded 70 bps, 740 bps and 210 bps, respectively.

Recurring revenues gross margin expanded 380 bps on a year-over-year basis to 3.8%.

However, perpetual software license and hardware margin declined 10 bps to 1.2%.

Consulting services operating loss was $5 million compared with loss of $7 million in the year-ago quarter.

Selling, general & administrative (SG&A) as well as research & development (R&D) expenses, as a percentage of revenues, increased 410 bps and 20 bps, on a year-over-year basis.

Non-GAAP operating margin contracted 140 bps on a year-over-year basis to 7.4%.

Balance Sheet & Other Details

As of Mar 31, 2020, Teradata had cash and cash equivalents of $394 million compared with $494 million as of Dec 31, 2019.

Total debt (including current portion) as of Mar 31, 2020 was $610 million compared with $479 million as of Dec 31, 2019.

In the first quarter, Teradata generated $10 million of cash from operating activities compared with the year-ago quarter’s $49 million. The company’s quarterly free cash outflow came in at $2 million against the free cash flow of $33 million in the year-ago quarter.

Moreover, Teradata repurchased 3.7 million shares for $75 million. At the end of the first quarter, the company had approximately $432 million remaining under its share buyback authorization. However, due to coronavirus-induced uncertainties, the company suspended its share buyback program.

Guidance

For second-quarter 2020, recurring revenues are expected between $348 million and $352 million. The Zacks Consensus Estimate for the ongoing quarter’s revenues is currently pegged at $468.7 million, indicating a decline of 2% from the figure reported in the year-ago quarter.

Non-GAAP earnings are expected between 19 cents and 22 cents per share. The Zacks Consensus Estimate for current-quarter earnings is pegged at 28 cents, suggesting a 3.5% fall from the figure reported in the year-ago quarter.

Zacks Rank & Stocks to Consider

Teradata currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector are Logitech (LOGI - Free Report) , Grid Dynamics (GDYN - Free Report) and Plantronics (PLT - Free Report) . While Logitech sports a Zacks Rank #1 (Strong Buy), both Plantronics and Grid Dynamics carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

While both Logitech and Grid Dynamics are set to report quarterly results on May 11, Plantronics will release earnings on May 21.

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