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Teradata (TDC) Q3 Earnings Beat Estimates, Revenues Fall Y/Y
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Teradata (TDC - Free Report) reported third-quarter 2022 non-GAAP earnings of 31 cents per share, which beat the Zacks Consensus Estimate by 10.7%. The metric declined 27.9% year over year and 6.1%, sequentially.
Revenues of $417 million were down 3%, sequentially. The same also decreased 9% year over year on a reported basis and 4% on a constant currency (cc) basis. The year-over-year decline is due to a decrease in recurring, perpetual and consulting revenues.
Total annual recurring revenues (ARR) at the third quarter-end decreased 4% year over year to $1.37 billion. The figure was flat on a cc basis. The decline was a result of closing its business operations in Russia.
Public cloud ARR surged 89% on a reported basis and 99% at cc year over year to $279 million. Growth was driven by rising cloud deals. Strong momentum in all three geographical regions also drove the public cloud ARR.
However, the ongoing macroeconomic challenges and constant currency headwinds affected the quarterly performance.
Teradata Corporation Price, Consensus and EPS Surprise
Recurring revenues (accounting for 79% of revenues) decreased 6% year over year (down 2% at cc) to $331 million.
Perpetual software license and hardware revenues (3% of revenues) were down 22% year over year (down 22% at cc) to $14 million.
Consulting services’ revenues (17% of revenues) declined 20% from the year-ago level (down 12% at cc) to $72 million.
Revenues from the Americas declined 3% year over year (down 1% at cc) to $242 million. Europe, the Middle East & Africa (EMEA) revenues fell 21% from the year-ago figure (down 13% at cc) to $105 million. Revenues from the Asia Pacific and Japan (APJ) were down 10% from the year-ago level (0% at cc) to $70 million.
Operating Details
Gross margin on a non-GAAP basis was 62.6%, expanding 130 basis points (bps) year over year.
Selling, general & administrative (SG&A) expenses decreased 6.6% year over year to $155 million. Research & development (R&D) expenses were $79 million, in line with the year-ago quarter’s level. As a percentage of revenues, SG&A expanded 108 bps year over year to 37.2%, while R&D expanded 177 bps to 18.9%.
Non-GAAP operating margin was 12.9%, down 250 bps from the year-ago quarter’s level.
Balance Sheet & Other Details
As of Sep 30, 2022, Teradata had cash and cash equivalents of $506 million compared with $545 million as of Jun 30, 2022.
Total debt (including current portion) as of Sep 30, 2022, was $498 million compared with $497 million as of Jun 30, 2022.
In the third quarter, Teradata generated $34 million cash from operating activities compared with the previous quarter’s $105 million.
In the reported quarter, Teradata’s free cash flow was $31 million.
Guidance
For fourth-quarter 2022, non-GAAP earnings are expected between 28 cents and 32 cents per share. The Zacks Consensus Estimate for earnings is currently pegged at 31 cents per share.
For 2022, non-GAAP earnings are expected between $1.58 and $1.62 per share. The Zacks Consensus Estimate for earnings is currently pegged at $1.61 per share.
Public cloud ARR is projected to increase 80% on a year-over-year basis.
Total ARR is expected to decline year over year in the low-to-mid-single-digit range.
Teradata expects recurring revenues to decline to a low-single-digit-to-mid-single-digit range from the 2021 level.
TDC projects total revenues to fall from the year-ago actuals in the mid-to-high-single-digit range on a reported basis. The metric is expected to decline in the low-single-digit range at CC from the 2021 level.
Cash flow from operations is expected to be $420 million, while free cash flow is projected at $400 million.
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Teradata (TDC) Q3 Earnings Beat Estimates, Revenues Fall Y/Y
Teradata (TDC - Free Report) reported third-quarter 2022 non-GAAP earnings of 31 cents per share, which beat the Zacks Consensus Estimate by 10.7%. The metric declined 27.9% year over year and 6.1%, sequentially.
Revenues of $417 million were down 3%, sequentially. The same also decreased 9% year over year on a reported basis and 4% on a constant currency (cc) basis. The year-over-year decline is due to a decrease in recurring, perpetual and consulting revenues.
Total annual recurring revenues (ARR) at the third quarter-end decreased 4% year over year to $1.37 billion. The figure was flat on a cc basis. The decline was a result of closing its business operations in Russia.
Public cloud ARR surged 89% on a reported basis and 99% at cc year over year to $279 million. Growth was driven by rising cloud deals. Strong momentum in all three geographical regions also drove the public cloud ARR.
However, the ongoing macroeconomic challenges and constant currency headwinds affected the quarterly performance.
Teradata Corporation Price, Consensus and EPS Surprise
Teradata Corporation price-consensus-eps-surprise-chart | Teradata Corporation Quote
Top-Line Details
Recurring revenues (accounting for 79% of revenues) decreased 6% year over year (down 2% at cc) to $331 million.
Perpetual software license and hardware revenues (3% of revenues) were down 22% year over year (down 22% at cc) to $14 million.
Consulting services’ revenues (17% of revenues) declined 20% from the year-ago level (down 12% at cc) to $72 million.
Revenues from the Americas declined 3% year over year (down 1% at cc) to $242 million. Europe, the Middle East & Africa (EMEA) revenues fell 21% from the year-ago figure (down 13% at cc) to $105 million. Revenues from the Asia Pacific and Japan (APJ) were down 10% from the year-ago level (0% at cc) to $70 million.
Operating Details
Gross margin on a non-GAAP basis was 62.6%, expanding 130 basis points (bps) year over year.
Selling, general & administrative (SG&A) expenses decreased 6.6% year over year to $155 million. Research & development (R&D) expenses were $79 million, in line with the year-ago quarter’s level. As a percentage of revenues, SG&A expanded 108 bps year over year to 37.2%, while R&D expanded 177 bps to 18.9%.
Non-GAAP operating margin was 12.9%, down 250 bps from the year-ago quarter’s level.
Balance Sheet & Other Details
As of Sep 30, 2022, Teradata had cash and cash equivalents of $506 million compared with $545 million as of Jun 30, 2022.
Total debt (including current portion) as of Sep 30, 2022, was $498 million compared with $497 million as of Jun 30, 2022.
In the third quarter, Teradata generated $34 million cash from operating activities compared with the previous quarter’s $105 million.
In the reported quarter, Teradata’s free cash flow was $31 million.
Guidance
For fourth-quarter 2022, non-GAAP earnings are expected between 28 cents and 32 cents per share. The Zacks Consensus Estimate for earnings is currently pegged at 31 cents per share.
For 2022, non-GAAP earnings are expected between $1.58 and $1.62 per share. The Zacks Consensus Estimate for earnings is currently pegged at $1.61 per share.
Public cloud ARR is projected to increase 80% on a year-over-year basis.
Total ARR is expected to decline year over year in the low-to-mid-single-digit range.
Teradata expects recurring revenues to decline to a low-single-digit-to-mid-single-digit range from the 2021 level.
TDC projects total revenues to fall from the year-ago actuals in the mid-to-high-single-digit range on a reported basis. The metric is expected to decline in the low-single-digit range at CC from the 2021 level.
Cash flow from operations is expected to be $420 million, while free cash flow is projected at $400 million.
Zacks Rank & Stocks to Consider
Currently, Teradata carries a Zacks Rank #3 (Hold). Investors interested in the broader Zacks Computer & Technology sector can consider some better-ranked stocks like Agilent Technologies (A - Free Report) , Arista Networks (ANET - Free Report) and Asure Software (ASUR - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Agilent Technologies has lost 13.6% in the year-to-date period. A’s long-term earnings growth rate is currently projected at 10%.
Arista Networks has lost 9.2% in the year-to-date period. The long-term earnings growth rate for ANET is currently projected at 15.7%.
Asure Software has lost 14.9% in the year-to-date period. The long-term earnings growth rate for ASUR is currently projected at 14%.