Teradata Reports First Quarter 2023 Financial Results

May 04, 2023 at 16:05 PM EDT

Public cloud ARR of $388 million, an increase of 86% as reported and 89% in constant currency from the prior year period⁽¹⁾
Total ARR of $1.506 billion, an increase of 6% as reported and 7% in constant currency from the prior year period⁽¹⁾
First quarter total revenue of $476 million, a decrease of 4% as reported and flat in constant currency⁽¹⁾
First quarter recurring revenue of $389 million, an increase of 1% as reported and 4% in constant currency from the prior year period⁽¹⁾
First quarter GAAP diluted earnings per share of $0.39
First quarter Non-GAAP diluted earnings per share of $0.61⁽²⁾
First quarter cash from operations of $109 million and free cash flow of $105 million⁽³⁾

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

“Teradata is off to a strong start in 2023 with sequential growth in total ARR, and we closed one of the largest deals in Teradata’s history…tangible proof points of our cloud-first strategy in action,” said Steve McMillan, President and CEO, Teradata. “Customers are expanding their cloud environments, underscoring the power of the Teradata platform, and driving demand for our differentiated analytics. We are excited for the year ahead and are on track to achieve all elements of our annual outlook.”

First Quarter 2023 Financial Highlights Compared to First Quarter 2022

Public cloud ARR increased to $388 million from $209 million, an increase of 86% as reported and 89% in constant currency⁽¹⁾
Total ARR increased to $1.506 billion from $1.427 billion, an increase of 6% as reported and 7% in constant currency⁽¹⁾
Total revenue was $476 million versus $496 million, a decrease of 4% as reported and flat in constant currency⁽¹⁾
Recurring revenue was $389 million versus $386 million, an increase of 1% as reported and 4% in constant currency⁽¹⁾
Recurring revenue was 82% of total revenue in the first quarter, up from 78% the prior year period
GAAP gross margin was 63.4% versus 60.7%
Non-GAAP gross margin was 64.3% versus 62.9%⁽²⁾
GAAP operating income was $79 million versus $68 million
Non-GAAP operating income was $108 million versus $115 million⁽²⁾
GAAP diluted EPS was $0.39 versus $0.33 per share
Non-GAAP diluted EPS was $0.61 versus $0.65⁽²⁾
Cash flow from operations was $109 million compared to $151 million
Free cash flow was $105 million compared to $150 million⁽³⁾

Outlook

For the second quarter of 2023:

GAAP diluted EPS is expected to be in the range of $0.14 to $0.18
Non-GAAP diluted EPS is expected to be in the range of $0.43 to $0.47⁽²⁾

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
Free cash flow is expected to be in the range of $320 million to $360 million⁽³⁾

Teradata updates the following outlook for full year 2023:

GAAP diluted EPS is narrowed to be in the range of $0.65 to $0.77 versus the range of $0.63 to $0.79 previously provided
Non-GAAP diluted EPS is narrowed to be in the range of $1.92 to $2.04 versus the range of $1.90 to $2.06 previously provided⁽²⁾
Cash flow from operations is now expected to be in the range $340 million to $380 million versus the range of $345 million to $385 million previously provided

Earnings Conference Call

A conference call is scheduled for today at 2:00 p.m. PT to discuss the Company’s first 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.

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 March 31
		2023		2022	% Change as Reported		% Change in CC
Recurring revenue	$	389	$	386	1	%	4	%
Perpetual software licenses, hardware and other		13		26	(50	%)	(43	%)
Consulting services		74		84	(12	%)	(5	%)
Total revenue	$	476	$	496	(4	%)	0	%

Americas	$	292	$	290	1	%	2	%
EMEA		117		129	(9	%)	(1	%)
APJ		67		77	(13	%)	(5	%)
Total revenue	$	476	$	496	(4	%)	0	%


	As of March 31
		2023		2022	% Change as Reported		% Change in CC
Annual recurring revenue*	$	1,506	$	1,427	6	%	7	%
Public cloud ARR**	$	388	$	209	86	%	89	%

*	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.

	For the Three Months
(in millions, except per share data)	ended March 31
Gross Profit:		2023			2022		% Chg.
GAAP Gross Profit	$	302		$	301
% of Revenue		63.4	%		60.7	%

Excluding:
Stock-based compensation expense		4			5
Reorganization and transformation cost		-			6
Non-GAAP Gross Profit	$	306		$	312		-2	%
% of Revenue		64.3	%		62.9	%
Operating Income
GAAP Operating Income	$	79		$	68
% of Revenue		16.6	%		13.7	%

Excluding:
Stock-based compensation expense		28			31
Reorganization and transformation cost		1			16
Non-GAAP Operating Income	$	108		$	115		-6	%
% of Revenue		22.7	%		23.2	%

Net Income
GAAP Net Income	$	40		$	36
% of Revenue		8.4	%		7.3	%

Excluding:
Stock-based compensation expense		28			31
Reorganization and transformation cost		1			16
Income tax adjustments⁽ⁱ⁾		(6	)		(12	)
Non-GAAP Net Income	$	63		$	71		-11	%
% of Revenue		13.2	%		14.3	%

	For the Three Months ended March 31		2023 Outlook
Earnings Per Share:	2023	2022	Q2	FY
GAAP Earnings Per Share	$0.39	$0.33	$0.14 - $0.18	$0.65 - $0.77
Excluding:
Stock-based compensation expense	0.27	0.28	0.33	1.30
Reorganization and transformation cost	0.01	0.15	0.01	0.20
Income tax adjustments⁽ⁱ⁾	(0.06)	(0.11)	(0.05)	(0.23)
Non-GAAP Diluted Earnings Per Share	$0.61	$0.65	$0.43 - $0.47	$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 March 31, 2023 was 27.6% and March 31, 2022 was 30.4%.


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 March 31						Outlook
		2023			2022		2023

Cash provided by operating activities (GAAP)	$	109		$	151		$340 to $380
Less total capital expenditures		(4	)		(1	)	(~20)
Free Cash Flow (non-GAAP measure)	$	105		$	150		$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 second 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 March 31
	Three Months
		2023			2022		% Chg
Revenue

Recurring	$	389		$	386		1	%
Perpetual software licenses, hardware and other		13			26		(50	%)
Consulting services		74			84		(12	%)
Total revenue		476			496		(4	%)

Gross profit

Recurring		291			281
% of Revenue		74.8	%		72.8	%
Perpetual software licenses, hardware and other		2			8
% of Revenue		15.4	%		30.8	%
Consulting services		9			12
% of Revenue		12.2	%		14.3	%

Total gross profit		302			301
% of Revenue		63.4	%		60.7	%

Selling, general and administrative expenses		153			157
Research and development expenses		70			76

Income from operations		79			68
% of Revenue		16.6	%		13.7	%

Other expense, net		(21	)		(13	)

Income before income taxes		58			55
% of Revenue		12.2	%		11.1	%

Income tax expense		18			19
% Tax rate		31.0	%		34.5	%

Net income	$	40		$	36
% of Revenue		8.4	%		7.3	%

Net income per common share
Basic	$	0.39		$	0.34
Diluted	$	0.39		$	0.33

Weighted average common shares outstanding
Basic		101.4			105.0
Diluted		103.8			108.6

							Schedule B

TERADATA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions - unaudited)


	March 31,			December 31,				March 31,
		2023			2022				2022
Assets

Current assets
Cash and cash equivalents	$	551		$	569			$	404
Accounts receivable, net		341			364				330
Inventories		7			8				16
Other current assets		107			87				113
Total current assets		1,006			1,028				863

Property and equipment, net		252			244				274
Right of use assets - operating lease, net		11			13				22
Goodwill		391			390				395
Capitalized contract costs, net		84			92				109
Deferred income taxes		204			213				200
Other assets		38			42				32
Total assets	$	1,986		$	2,022			$	1,895

Liabilities and stockholders' equity

Current liabilities
Current portion of long-term debt	$	-		$	-			$	75
Current portion of finance lease liability		70			67				76
Current portion of operating lease liability		8			8				11
Accounts payable		92			94				78
Payroll and benefits liabilities		95			137				91
Deferred revenue		634			589				580
Other current liabilities		100			112				82
Total current liabilities		999			1,007				993

Long-term debt		498			498				324
Finance lease liability		62			54				56
Operating lease liability		8			10				15
Pension and other postemployment plan liabilities		96			101				133
Long-term deferred revenue		4			8				19
Deferred tax liabilities		7			7				16
Other liabilities		82			79				102
Total liabilities		1,756			1,764				1,658

Stockholders' equity
Common stock		1			1				1
Paid-in capital		1,962			1,941				1,792
Accumulated deficit		(1,613	)		(1,565	)			(1,425	)
Accumulated other comprehensive loss		(120	)		(119	)			(131	)

Total stockholders' equity		230			258				237

Total liabilities and stockholders' equity	$	1,986		$	2,022			$	1,895

				Schedule C

TERADATA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions - unaudited)

	For the Period Ended March 31
	Three Months
		2023				2022
Operating activities
Net (loss) income	$	40			$	36

Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		28				40
Stock-based compensation expense		28				31
Deferred income taxes		7				8
Changes in assets and liabilities:
Receivables		23				6
Inventories		1				10
Current payables and accrued expenses		(41	)			(49	)
Deferred revenue		41				20
Other assets and liabilities		(18	)			49

Net cash provided by operating activities		109				151

Investing activities
Expenditures for property and equipment		(4	)			(1	)
Additions to capitalized software		-				-
Other investing activities		-				-

Net cash used in investing activities		(4	)			(1	)

Financing activities
Repurchases of common stock		(84	)			(300	)
Proceeds from long-term borrowings		-				-
Repayments of long-term borrowings		-				(13	)
Payments of finance leases		(20	)			(22	)
Other financing activities, net		(7	)			4

Net cash used in financing activities		(111	)			(331	)

Effect of exchange rate changes on cash and cash equivalents		(10	)			(6	)

Increase (decrease) in cash, cash equivalents and restricted cash		(16	)			(187	)
Cash, cash equivalents and restricted cash at beginning of period		571				595

Cash, cash equivalents and restricted cash at end of period	$	555			$	408

Supplemental cash flow disclosure:
Non-cash investing and financing activities:
Assets acquired by finance leases	$	30			$	24
Assets acquired by operating leases	$	1			$	1



							Schedule D

TERADATA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions - unaudited)

	For the Three Months Ended March 31
		2023			2022		% Change As Reported		% Change Constant Currency⁽²⁾
Segment Revenue

Americas	$	292		$	290		1	%	2	%
EMEA		117			129		(9	%)	(1	%)
APJ		67			77		(13	%)	(5	%)

Total segment revenue		476			496		(4	%)	0	%

Segment gross profit

Americas		193			189
% of Revenue		66.1	%		65.2	%
EMEA		74			78
% of Revenue		63.2	%		60.5	%
APJ		39			45
% of Revenue		58.2	%		58.4	%

Total segment gross profit		306			312
% of Revenue		64.3	%		62.9	%

Reconciling items⁽¹⁾		(4	)		(11	)

Total gross profit	$	302		$	301
% of Revenue		63.4	%		60.7	%


⁽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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230502006266/en/

Contacts

INVESTOR CONTACT

Christopher T. Lee

858-485-2523 office

christopher.lee@teradata.com

MEDIA CONTACT

Jennifer Donahue

858-485-3029 office

jennifer.donahue@teradata.com

Teradata Reports First Quarter 2023 Financial Results

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