Teradata Reports Second Quarter 2023 Financial Results

Teradata (NYSE: TDC) today announced its second quarter 2023 financial results.

“Our broad-based momentum across the business generated strong financial results, including 77% Cloud ARR growth, 10% increase in Total ARR growth and EPS that exceeded our guidance,” said Steve McMillan, President and CEO, Teradata. “We are pleased with the strong adoption and growth of Teradata VantageCloud, as customers see that our complete cloud analytics and data platform is differentiated and generates value in this new world of AI.”

Second Quarter 2023 Financial Highlights Compared to Second Quarter 2022

• Public cloud ARR increased to $414 million from $234 million, an increase of 77% as reported and 76% in constant currency⁽¹⁾
• Total ARR increased to $1.523 billion from $1.390 billion, an increase of 10% as reported and 9% in constant currency⁽¹⁾
• Total revenue was $462 million versus $430 million, an increase of 7% as reported and 10% in constant currency⁽¹⁾
• Recurring revenue was $371 million versus $345 million, an increase of 8% as reported and 10% in constant currency⁽¹⁾
• Recurring revenue was 80% of total revenue in the second quarter, flat from the prior year period
• GAAP gross margin was 59.7% versus 60.0%
• Non-GAAP gross margin was 60.6% versus 61.2%⁽²⁾
• GAAP operating income was $33 million versus $14 million
• Non-GAAP operating income was $72 million versus $55 million⁽²⁾
• GAAP diluted EPS was $0.17 versus ($0.04) per share
• Non-GAAP diluted EPS was $0.48 versus $0.33⁽²⁾
• Cash flow from operations was $49 million compared to $105 million
• Free cash flow was $46 million compared to $102 million⁽³⁾

Outlook

For the third quarter of 2023:

• GAAP diluted EPS is expected to be in the range of $0.10 to $0.14
• Non-GAAP diluted EPS is expected to be in the range of $0.40 to $0.44⁽²⁾

Teradata updates the following outlook for full year 2023:

• GAAP diluted EPS is increased to now be in the range of $0.74 to $0.86 versus the range of $0.65 to $0.77 previously provided

For the full year 2023, Teradata re-affirms the following outlook elements:

• Public cloud ARR is expected to increase in the range of 53% to 57% year-over-year
• Total ARR is expected to increase in the range of 6% to 8% year-over-year
• Recurring revenue is expected to increase in the range of 4% to 7% year-over-year
• Total revenue is expected to increase in the range of 1% to 4% year-over-year
• Non-GAAP diluted EPS is expected to be in the range of $1.92 to $2.04⁽²⁾
• Cash flow from operations is expected to be in the range of $340 million to $380 million
• Free cash flow is expected to be in the range of $320 million to $360 million⁽³⁾

Earnings Conference Call

A conference call is scheduled for today at 2:00 p.m. PT to discuss the Company’s second quarter 2023 results and provide a business and financial update. Access to the conference call, as well as a replay of the conference call, is available on Teradata’s website at investor.teradata.com.

Supplemental Financial Information

Additional information regarding Teradata’s operating results is provided below as well as on Teradata’s website at investor.teradata.com.

1.

The impact of currency is determined by calculating the prior-period results using the current-year monthly average currency rates. See the foreign currency fluctuation schedule, which is used to determine revenue on a constant currency (“CC”) basis, on the Investor Relations page of the Company’s website at investor.teradata.com.

Revenue
(in millions)
	For the Three Months ended June 30
	2023		2022		% Change as Reported		% Change in CC
Recurring revenue	$371		$345		8%		10%
Perpetual software licenses, hardware and other	13		8		63%		61%
Consulting services	78		77		1%		5%
Total revenue	$462		$430		7%		10%
Americas	$268		$249		8%		10%
EMEA	118		103		15%		15%
APJ	76		78		(3%)		2%
Total revenue	$462		$430		7%		10%

Revenue
(in millions)
	For the Six Months ended June 30
	2023		2022		% Change as Reported		% Change in CC
Recurring revenue	$760		$731		4%		7%
Perpetual software licenses, hardware and other	26		34		(24%)		(18%)
Consulting services	152		161		(6%)		0%
Total revenue	$938		$926		1%		5%
Americas	$560		$539		4%		6%
EMEA	235		232		1%		7%
APJ	143		155		(8%)		(1%)
Total revenue	$938		$926		1%		5%
	As of June 30
	2023		2022		% Change as Reported		% Change in CC
Annual recurring revenue*	$1,523		$1,390		10%		9%
Public cloud ARR**	$414		$234		77%		76%

The impact of currency on ARR is determined by calculating the prior period ending ARR using the current period end currency rates.

* Total annual recurring revenue (“ARR”) is defined as the annual value at a point in time of all recurring contracts, including subscription, cloud, software upgrade rights, and maintenance. Total ARR does not include managed services and third-party software. The Company believes this is a useful metric to investors as it demonstrates progress toward achieving our strategic objectives as outlined in the Form 10-K and Form 10-Q.

** Public cloud ARR is defined as the annual value at a point in time of all contracts related to public cloud implementations of Teradata VantageCloud and does not include ARR related to private or managed cloud implementations. The Company believes this is a useful metric to investors as it demonstrates progress toward achieving our strategic objectives as outlined in the Form 10-K and Form 10-Q.

2.		Teradata reports its results in accordance with GAAP. However, as described below, the Company believes that certain non-GAAP measures such as free cash flow, non-GAAP gross profit, non-GAAP operating income, non-GAAP net income, and non-GAAP diluted earnings per share, all of which exclude certain items, and which may be reported on a constant currency basis, are useful for investors. Our non-GAAP measures are not meant to be considered in isolation to, as substitutes for, or superior to, results determined in accordance with GAAP, and should be read only in conjunction with our condensed consolidated financial statements prepared in accordance with GAAP. Each of our non-GAAP measures do not have a uniform definition under GAAP and therefore, Teradata’s definition may differ from other companies’ definitions of these measures.
		The following tables reconcile Teradata’s actual and projected results and EPS under GAAP to the Company’s actual and projected non-GAAP results and EPS for the periods presented, which exclude certain specified items. Our management internally uses supplemental non-GAAP financial measures, such as gross profit, operating income, net income, and EPS, excluding certain items, to understand, manage and evaluate our business and support operating decisions on a regular basis. The Company believes such non-GAAP financial measures (1) provide useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations, (2) are useful for period-over-period comparisons of such operations and results, that may be more easily compared to peer companies and allow investors a view of the Company’s operating results excluding stock-based compensation expense and special items, (3) provide useful information to management and investors regarding present and future business trends, and (4) provide consistency and comparability with past reports and projections of future results.

(in millions, except per share data)		For the Three Months ended June 30						For the Six Months ended June 30
Gross Profit:		2023		2022		% Chg.		2023		2022		% Chg.
GAAP Gross Profit		$276		$258		7%		$578		$559		3%
% of Revenue		59.7%		60.0%				61.6%		60.4%
Excluding:
Stock-based compensation expense		4		4				8		9
Reorganization and transformation cost		-		1				-		7
Non-GAAP Gross Profit		$280		$263		6%		$586		$575		2%
% of Revenue		60.6%		61.2%				62.5%		62.1%
Operating Income
GAAP Operating Income		$33		$14		136%		$112		$82		37%
% of Revenue		7.1%		3.3%				11.9%		8.9%
Excluding:
Stock-based compensation expense		35		32				63		63
Reorganization and transformation cost		4		9				5		25
Non-GAAP Operating Income		$72		$55		31%		$180		$170		6%
% of Revenue		15.6%		12.8%				19.2%		18.4%
Net Income
GAAP Net Income		$17		($4)		-		$57		$32		78%
% of Revenue		3.7%		(0.9%)				6.1%		3.5%
Excluding:
Stock-based compensation expense		35		32				63		63
Reorganization and transformation cost		4		9				5		25
Income tax adjustments(i)		(7)		(2)				(13)		(14)
Non-GAAP Net Income		$49		$35		40%		$112		$106		6%
% of Revenue		10.6%		8.1%				11.9%		11.4%

	For the Three Months ended June 30				For the Six Months ended June 30				2023 Outlook
Earnings Per Share:	2023		2022		2023		2022		2023 Q3 Guidance		2023 FY Guidance
GAAP Earnings Per Share	$0.17		($0.04)		$0.55		$0.30		$0.10 - $0.14		$0.74 - $0.86
Excluding:
Stock-based compensation expense	0.34		0.30		0.61		0.59		0.32		1.26
Reorganization and transformation cost	0.04		0.09		0.05		0.23		0.03		0.18
Income tax adjustments(i)	(0.07)		(0.02)		(0.13)		(0.13)		(0.05)		(0.26)
Non-GAAP Diluted Earnings Per Share	$0.48		$0.33		$1.08		$0.99		$0.40 - $0.44		$1.92 - $2.04

i.

Represents the income tax effect of the pre-tax adjustments to reconcile GAAP to Non-GAAP income based on the applicable jurisdictional statutory tax rate of the underlying item. Including the income tax effect assists investors in understanding the tax provision associated with those adjustments and the effective tax rate related to the underlying business and performance of the Company’s ongoing operations. As a result of these adjustments, the Company’s non-GAAP effective tax rate for the three months ended June 30, 2023 was 22.2% and June 30, 2022 was 14.6%. For the six months ended the non-GAAP effective tax rate was 25.3% for 2023 and 25.9% for 2022.

3.

As described below, the Company believes that free cash flow is a useful non-GAAP measure for investors. Free cash flow does not have a uniform definition under GAAP in the United States and therefore, Teradata's definition may differ from other companies' definitions of this measure. Teradata defines free cash flow as cash provided by/used in operating activities, less capital expenditures for property and equipment and additions to capitalized software. Teradata’s management uses free cash flow to assess the financial performance of the Company and believes it is useful for investors because it relates the operating cash flow of the Company to the capital that is spent to continue and improve business operations. In particular, free cash flow indicates the amount of cash generated after capital expenditures which can be used for among other things, investments in the Company's existing businesses, strategic acquisitions, strengthening the Company’s balance sheet, repurchase of Company stock and repay the Company’s debt obligations. Free cash flow does not represent the residual cash flow available for discretionary expenditures since there may be other non-discretionary expenditures that are not deducted from the measure. This non-GAAP measure should not be considered as a substitute for, or superior to, cash flows from operating activities under GAAP.

(in millions)	For the Three Months ended June 30				For the Six Months ended June 30				Outlook
	2023		2022		2023		2022		2023
Cash provided by operating activities (GAAP)	$49		$105		$158		$256		$340 to $380
Less capital expenditures	(3)		(3)		(7)		(4)		(~20)
Free Cash Flow (non-GAAP measure)	$46		$102		$151		$252		$320 to $360

Note to Investors

This release contains forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934. Forward-looking statements generally relate to opinions, beliefs, and projections of expected future financial and operating performance, business trends, liquidity, and market conditions, among other things. These forward-looking statements are based upon current expectations and assumptions and often can be identified by words such as “expect,” “strive,” “looking ahead,” “outlook,” “guidance,” “forecast,” “anticipate,” “continue,” “plan,” “estimate,” “believe,” “will,” “would,” “likely,” “intend,” “potential,” or similar expressions. Forward-looking statements in this release include our 2023 third quarter and full year financial guidance. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially, including those relating to: the global economic environment and business conditions in general, including inflation and/or recessionary conditions, the ability of our suppliers to meet their commitments to us, or the timing of purchases by our current and potential customers; the rapidly changing and intensely competitive nature of the information technology industry and the data analytics business; fluctuations in our operating, capital allocation, and cash flow results; our ability to execute and realize the anticipated benefits of our business transformation program or other restructuring and cost saving initiatives; risks inherent in operating in foreign countries, including sanctions, foreign currency fluctuations, and/or acts of war; risks associated with the ongoing and uncertain impact of the COVID-19 pandemic on our business, financial condition and operating results and on our customers and suppliers; risks associated with data privacy, cyberattacks and maintaining secure and effective products for our customers, as well as, internal information technology and control systems; the timely and successful development, production or acquisition, availability and/or market acceptance of new and existing products, product features and services; tax rates; turnover of our workforce and the ability to attract and retain skilled employees; protecting our intellectual property; availability and successful execution of new alliance and acquisition opportunities; subscription arrangements that may be cancelled or fail to be renewed; the impact on our business and financial reporting from changes in accounting rules; and other factors described from time to time in Teradata’s filings with the U.S. Securities and Exchange Commission, including its most recent annual report on Form 10-K, and subsequent quarterly reports on Forms 10-Q or current reports on Forms 8-K, as well as Teradata’s annual report to stockholders. Teradata does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

About Teradata

Teradata is the connected multi-cloud data platform for enterprise analytics company. Our enterprise analytics solve business challenges from start to scale. Only Teradata gives you the flexibility to handle the massive and mixed data workloads of the future, today. Learn more at Teradata.com.

The Teradata logo is a trademark, and Teradata is a registered trademark of Teradata Corporation and/or its affiliates in the U.S. and worldwide.

																			Schedule A
TERADATA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share amounts - unaudited)
	For the Period Ended June 30
	Three Months										Six Months
	2023				2022				% Chg		2023				2022				% Chg
Revenue
Recurring	$	371			$	345			8%		$	760			$	731			4%
Perpetual software licenses, hardware and other		13				8			63%			26				34			(24%)
Consulting services		78				77			1%			152				161			(6%)
Total revenue		462				430			7%			938				926			1%
Gross profit
Recurring		264				249						555				530
% of Revenue		71.2	%			72.2	%					73.0	%			72.5	%
Perpetual software licenses, hardware and other		1				2						3				10
% of Revenue		7.7	%			25.0	%					11.5	%			29.4	%
Consulting services		11				7						20				19
% of Revenue		14.1	%			9.1	%					13.2	%			11.8	%
Total gross profit		276				258						578				559
% of Revenue		59.7	%			60.0	%					61.6	%			60.4	%
Selling, general and administrative expenses		167				163						320				320
Research and development expenses		76				81						146				157
Income from operations		33				14						112				82
% of Revenue		7.1	%			3.3	%					11.9	%			8.9	%
Other expense, net		(9	)			(14	)					(30	)			(27	)
Income before income taxes		24				-						82				55
% of Revenue		5.2	%			-						8.7	%			5.9	%
Income tax expense		7				4						25				23
% Tax rate		29.2	%			972.0	%					30.5	%			41.8	%
Net income (loss)	$	17			$	(4	)				$	57			$	32
% of Revenue		3.7	%			(0.9	%)					6.1	%			3.5	%
Net income (loss) per common share
Basic	$	0.17			$	(0.04	)				$	0.56			$	0.31
Diluted	$	0.17			$	(0.04	)				$	0.55			$	0.30
Weighted average common shares outstanding
Basic		101.0				103.5						101.2				104.2
Diluted		102.9				103.5						103.3				107.1

									Schedule B
TERADATA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions - unaudited)
	June 30,				December 31,				June 30,
	2023				2022				2022
Assets
Current assets
Cash and cash equivalents	$	504			$	569			$	545
Accounts receivable, net		265				364				266
Inventories		9				8				17
Other current assets		102				87				93
Total current assets		880				1,028				921
Property and equipment, net		250				244				249
Right of use assets - operating lease, net		11				13				17
Goodwill		390				390				390
Capitalized contract costs, net		76				92				95
Deferred income taxes		205				213				194
Other assets		57				42				29
Total assets	$	1,869			$	2,022			$	1,895
Liabilities and stockholders' equity
Current liabilities
Current portion of long-term debt	$	6			$	-			$	-
Current portion of finance lease liability		70				67				70
Current portion of operating lease liability		7				8				8
Accounts payable		113				94				83
Payroll and benefits liabilities		100				137				108
Deferred revenue		526				589				530
Other current liabilities		88				112				79
Total current liabilities		910				1,007				878
Long-term debt		492				498				497
Finance lease liability		70				54				48
Operating lease liability		8				10				13
Pension and other postemployment plan liabilities		96				101				129
Long-term deferred revenue		7				8				11
Deferred tax liabilities		6				7				7
Other liabilities		62				79				90
Total liabilities		1,651				1,764				1,673
Stockholders' equity
Common stock		1				1				1
Paid-in capital		2,002				1,941				1,874
Accumulated deficit		(1,668	)			(1,565	)			(1,496	)
Accumulated other comprehensive loss		(117	)			(119	)			(157	)
Total stockholders' equity		218				258				222
Total liabilities and stockholders' equity	$	1,869			$	2,022			$	1,895

													Schedule C
TERADATA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions - unaudited)
	For the Period Ended June 30
	Three Months								Six Months
	2023				2022				2023				2022
Operating activities
Net income (loss)	$	17			$	(4	)		$	57			$	32
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		31				33				59				73
Stock-based compensation expense		35				32				63				63
Deferred income taxes		(5	)			(6	)			2				2
Changes in assets and liabilities:
Receivables		76				64				99				70
Inventories		(2	)			(1	)			(1	)			9
Current payables and accrued expenses		11				23				(30	)			(26	)
Deferred revenue		(105	)			(58	)			(64	)			(38	)
Other assets and liabilities		(9	)			22				(27	)			71
Net cash provided by operating activities		49				105				158				256
Investing activities
Expenditures for property and equipment		(2	)			(2	)			(6	)			(3	)
Additions to capitalized software		(1	)			(1	)			(1	)			(1	)
Net cash used in investing activities		(3	)			(3	)			(7	)			(4	)
Financing activities
Repurchases of common stock		(70	)			(17	)			(154	)			(317	)
Proceeds from long-term borrowings		-				500				-				500
Repayments of long-term borrowings		-				(400	)			-				(413	)
Payments of finance leases		(21	)			(23	)			(41	)			(45	)
Other financing activities, net		6				(3	)			(1	)			1
Net cash (used in) provided by financing activities		(85	)			57				(196	)			(274	)
Effect of exchange rate changes on cash and cash equivalents		(10	)			(19	)			(20	)			(25	)
(Decrease) increase in cash, cash equivalents and restricted cash		(49	)			140				(65	)			(47	)
Cash, cash equivalents and restricted cash at beginning of period		555				408				571				595
Cash, cash equivalents and restricted cash at end of period	$	506			$	548			$	506			$	548
Supplemental cash flow disclosure:
Non-cash investing and financing activities:
Assets acquired by finance leases	$	29			$	10			$	59			$	34
Assets acquired by operating leases	$	3			$	-			$	4			$	1

																							Schedule D
TERADATA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions - unaudited)
	For the Three Months Ended June 30												For the Six Months Ended June 30
	2023				2022				% Change As Reported		% Change Constant Currency (2)		2023				2022				% Change As Reported		% Change Constant Currency (2)
Segment Revenue
Americas	$	268			$	249			8%		10%		$	560			$	539			4%		6%
EMEA		118				103			15%		15%			235				232			1%		7%
APJ		76				78			(3%)		2%			143				155			(8%)		(1%)
Total segment revenue		462				430			7%		10%			938				926			1%		5%
Segment gross profit
Americas		164				153								357				342
% of Revenue		61.2	%			61.4	%							63.8	%			63.5	%
EMEA		73				63								147				141
% of Revenue		61.9	%			61.2	%							62.6	%			60.8	%
APJ		43				47								82				92
% of Revenue		56.6	%			60.3	%							57.3	%			59.4	%
Total segment gross profit		280				263								586				575
% of Revenue		60.6	%			61.2	%							62.5	%			62.1	%
Reconciling items(1)		(4	)			(5	)							(8	)			(16	)
Total gross profit	$	276			$	258							$	578			$	559
% of Revenue		59.7	%			60.0	%							61.6	%			60.4	%

(1)		Reconciling items include stock-based compensation, amortization of acquisition-related intangible assets and acquisition, integration and reorganization-related items.
(2)		The impact of currency is determined by calculating the prior period results using the current-year monthly average currency rates.

 

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The Teradata Stock at the time of publication of the news with a fall of -0,50 % to 50,25USD on Lang & Schwarz stock exchange (07. August 2023, 22:12 Uhr).