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Teradata (TDC) Q1 Earnings Beat Estimates, Revenues Rise Y/Y

Teradata TDC reported first-quarter 2022 non-GAAP earnings of 65 cents per share, which beat the Zacks Consensus Estimate by 1.6%. Further, the figure was within the company’s guidance of 63-67 cents.

However, the bottom line decreased 5.8% year over year.

Revenues of $496 million increased 1% and 4% year over year on a reported and constant-currency (cc) basis, respectively.

Top-line growth was driven by increasing recurring and perpetual revenues. Further, the strong performance delivered by the company in the Americas region was a positive.

Total annual recurring revenues (ARR) at the first-quarter end increased 2% year over year (up 3% at cc) to $1.43 billion. Public cloud ARR surged 69% year over year on a reported basis and 70% at cc to $209 million.

We note that the company ceased its operations in Russia as a result of the ongoing Russia-Ukraine war.

Shares of Teradata have plunged 13.5% following the release of its first-quarter results, which can be primarily attributed to the weak outlook for 2022 bottom and top lines. The company anticipates 8 cents of headwind in each of the remaining quarters of this year due to its latest step in Russia.

Also, it expects unfavorable foreign currency fluctuations, which is a negative.

Teradata Corporation Price, Consensus and EPS Surprise

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 78% of the total revenues) increased 4% year over year (up 6% at cc) to $386 million. This was driven primarily by a higher mix.

Perpetual software license and hardware revenues (5% of revenues) of $26 million were up 13% year over year (up 17% at cc).

Consulting services’ revenues (17% of revenues) declined 13% from the year-ago level (down 9% at cc) to $84 million.

Revenues in the Americas (AMS) (58.5% of revenues) increased 10% year over year (up 11% at cc) to $290 million.

Europe, the Middle East & Africa (EMEA) revenues (26% of revenues) fell 12% from the year-ago figure (down 6% at cc) to $129 million.

Revenues from the Asia Pacific and Japan (APJ) (15.5% of revenues) declined 5% from the year-ago level to $77 million.

Operating Details

The gross margin on a non-GAAP basis was 62.9%, contracting 130 basis points (bps) year over year.

AMS’s non-GAAP gross margin was 65.2% for the first quarter, contracting 400 bps year over year. EMEA’s gross margin expanded 60 bps year over year to 60.5%. APJ’s gross margin expanded 280 bps from the year-ago quarter to 58.4%.

Selling, general & administrative, as a percentage of revenues, expanded 140 bps year over year to 31.7%.

Research & development expenses, as a percentage of revenues, contracted 40 bps on a year-over-year basis to 15.3%.

Non-GAAP operating margin was 23.2%, contracted 20 bps from the year-ago quarter.

Balance Sheet & Other Details

As of Mar 31, 2022, Teradata had cash and cash equivalents of $404 million compared with $592 million as of Dec 31, 2021.

Total debt (including current portion) as of Mar 31, 2022, was $399 million compared with $412 million as of Dec 31, 2021.

In the first quarter, Teradata generated $151 million of cash from operating activities compared with the previous quarter’s $95 million.

The company’s quarterly free cash flow was $150 million compared with $85 million in the fourth quarter.

TDC repurchased 5.1 million shares worth $250 million in the reported quarter.

Guidance

For second-quarter 2022, non-GAAP earnings are expected between 26 cents per share and 30 cents. The Zacks Consensus Estimate for the same is pegged at 52 cents.

For 2022, non-GAAP earnings are expected between $1.55 per share and $1.65 (down from the aforementioned $1.82-$1.92). The Zacks Consensus Estimate for earnings is pegged at $1.90 per share.

Public cloud ARR is projected to increase 80% on a year-over-year basis.

Total ARR is expected to fall year over year in the low-single-digit range.

Teradata expects recurring revenues to decline in a low-single-digit to mid-single-digit range from 2021.

The company projects total revenues to fall year over year in the low to mid-single-digit range on a reported basis. Further, it is expected to grow in the low-single-digit range at CC from 2021. The consensus mark for revenues is currently pegged at $1.93 billion.

Cash flow from operations is expected to be at least $425 million, while free cash flow is projected to be no less than $400 million.

Zacks Rank & Stocks to Consider

Currently, Teradata carries a Zacks Rank #3 (Hold).

Investors interested in the broader technology sector can consider stocks like Jabil JBL, Jack Henry & Associates JKHY and Broadcom AVGO. While Jabil currently sports a Zacks Rank #1 (Strong Buy), Jack Henry & Associates and Broadcom carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Jabil has gained 6.9% over a year. The long-term earnings growth rate for JBL is currently projected at 12%.

Jack Henry & Associates has gained 18.6% over a year. The long-term earnings growth rate for JKHY is currently projected at 17%.

Broadcom has gained 28.9% over a year. The long-term earnings growth rate for AVGO is currently projected at 15.6%.


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