Teradata ( TDC Quick Quote 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.
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 Quick Quote LOGI - Free Report) , Grid Dynamics ( GDYN Quick Quote GDYN - Free Report) and Plantronics . 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. Biggest Tech Breakthrough in a Generation Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity. A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time. See 8 breakthrough stocks now>>