Teradata (TDC) Q2 Earnings Match Estimates, Revenues Fall Y/Y

Teradata TDC reported second-quarter 2022 non-GAAP earnings of 33 cents per share, in line with the Zacks Consensus Estimate. The metric declined 55.4% year over year and 49.2%, sequentially.

The figure comfortably came above Teradata’s guided range of 26-30 cents per share.

Revenues of $430 million were down 13.3%, sequentially. The same also decreased 12% year over year on a reported basis and 8% 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 second quarter-end increased 1% on a cc basis but declined 3% year over year to $1.39 billion. The decline was a result of closing its business operations in Russia.

Public cloud ARR surged 68% on a reported basis and 75% at cc year over year to $234 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 and EPS Surprise

Teradata Corporation price-consensus-eps-surprise-chart | Teradata Corporation Quote

Top-Line Details

Recurring revenues (accounting for 80% of revenues) decreased 8% year over year (down 5% at cc) to $345 million.

Perpetual software license and hardware revenues (2% of revenues) were down 53% year over year (down 50% at cc) to $8 million.

Consulting services’ revenues (18% of revenues) declined 21% from the year-ago level (down 16% at cc) to $77 million.

Recurring, perpetual software license and hardware, and consulting services’ revenues missed the Zacks Consensus Estimate of $383.4 million, $9.9 million and $88.2 million, respectively.

Revenues from the Americas declined 9% year over year (down 8% at cc) to $249 million. Europe, the Middle East & Africa (EMEA) revenues fell 20% from the year-ago figure (down 13% at cc) to $103 million. Revenues from the Asia Pacific and Japan (APJ) were down 12% from the year-ago level (down 3% at cc) to $78 million.

Operating Details

Gross margin on a non-GAAP basis was 61.2%, contracting 360 basis points (bps) year over year.

Selling, general & administrative (SG&A) expenses increased 1.2% year over year to $163 million. Research & development (R&D) expenses were $81 million, up 2.5% from the year-ago quarter’s level. As a percentage of revenues, SG&A expanded 512 bps year over year to 37.9%, while R&D expanded 275 bps to 18.8%.

Non-GAAP operating margin was 12.8%, down 1100 bps from the year-ago quarter’s level.

Balance Sheet & Other Details

As of Jun 30, 2022, Teradata had cash and cash equivalents of $545 million compared with $404 million as of Mar 31, 2022.

Total debt (including current portion) as of Jun 30, 2022, was $497 million compared with $399 million as of Mar 31, 2022.

In the second quarter, Teradata generated $105 million of cash from operating activities compared with the previous quarter’s $151 million.

Teradata’s quarterly free cash flow was $102 million compared with $150 million in the first quarter.

TDC repurchased 2.1 million shares worth $67 million in the reported quarter.

Guidance

For third-quarter 2022, non-GAAP earnings are expected between 27 cents and 31 cents per share.

For 2022, non-GAAP earnings are expected between $1.55 and $1.65 per share. The Zacks Consensus Estimate for earnings is currently pegged at $1.58 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 year over year 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 $425 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 Keysight Technologies KEYS, ASE Technology ASX and Asure Software ASUR, 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.

Keysight Technologies has lost 19.9% in the year-to-date period. KEYS’ long-term earnings growth rate is currently projected at 9.1%.

ASE technology has lost 23.2% in the year-to-date period. The long-term earnings growth rate for ASX is currently projected at 23.1%.

Asure Software has lost 32.1% in the year-to-date period. The long-term earnings growth rate for ASUR is currently projected at 14%.

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