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Teradata Reports 2014 First Quarter Results
- Revenue increased 7 percent, 8 percent in constant currency(1)
- Product Revenue up 10 percent, 11 percent in constant currency(1)
- EPS of $0.37, versus $0.35 in first quarter 2013
- Non-GAAP EPS of $0.54, a 26 percent increase from first quarter 2013(2)
- Cash from operations increased $100 million, or 41 percent, from first quarter 2013
- Expects lower end of previous full-year guidance ranges for revenue and non-GAAP EPS
- Board of Directors increases share repurchase authorization to approximately $550 million
Teradata Corp. (NYSE: TDC) reported revenue of $628 million for the quarter ended March 31, 2014, an increase of 7 percent from $587 million in the first quarter of 2013. Revenue in the first quarter increased 8 percent when compared in constant currency.(1)
Gross margin was 53.0 percent, as reported under U.S. Generally Accepted Accounting Principles (GAAP), versus 52.0 percent in the first quarter of 2013. On a non-GAAP basis, excluding stock-based compensation expense and the other special items described in footnote #2, gross margin was 54.9 percent, an increase from 53.3 percent in the first quarter of 2013.(2)
Teradata reported first quarter net income of $59 million, or $0.37 per diluted share, which compared to net income of $59 million, or $0.35 per diluted share, in the first quarter of 2013. Stock-based compensation expense and other special items reduced Teradata's first quarter net income by $28 million (or 17 cents of EPS) as reported under GAAP.(2) Excluding stock-based compensation expense and the other special items detailed in footnote #2, non-GAAP net income in the first quarter of 2014 was $87 million, or $0.54 per diluted share, versus $73 million, or $0.43 per diluted share, in the first quarter of 2013.(2)
"Teradata had a good first quarter with 7 percent revenue growth and 26 percent non-GAAP EPS growth; and set records for first quarter new customer wins and free cash flow," said Mike Koehler, president and chief executive officer, Teradata Corporation.
"Teradata is leading the way as companies begin to build out their analytical data environments leveraging multiple workload-specific platforms. This is the focus of our Unified Data Architecture value proposition. Looking ahead, we will continue to increase our investments in Integrated Data Warehousing, Big Data Analytics, and Integrated Marketing Cloud, along with our Unified Data Architecture and services to help customers with the adoption of the evolving analytical ecosystem."
First quarter operating income of $89 million increased from $76 million reported in the first quarter of 2013. On a non-GAAP basis, operating income was $125 million versus $104 million in the first quarter of 2013.(2) The increase was primarily due to higher revenue and favorable revenue mix which generated higher product gross margin.
During the first quarter of 2014, Teradata generated $343 million of cash from operating activities, which compared to $243 million in the prior-year period. The increase was primarily driven by net changes in the components of working capital. Teradata generated $310 million of free cash flow (cash from operating activities less capital expenditures and additions to capitalized software)(3) in the first quarter of 2014, versus $216 million in the same period in 2013.
Balance Sheet and Share Repurchase Program
Teradata ended the quarter with $922 million in cash, a $227 million increase from December 31, 2013. The increase in cash in the first quarter was partially offset by Teradata's purchase of 2.0 million shares of its stock for approximately $86 million during the quarter.
On May 5, 2014, Teradata's Board of Directors authorized an additional $300 million to be utilized to repurchase Teradata common stock under its open market share repurchase program. Teradata now has a total of approximately $550 million authorized for share repurchases under its share repurchase program. The stock is anticipated to be repurchased periodically on an ongoing basis in open market transactions at management's discretion, in accordance with applicable securities rules regarding issuer repurchase. The increased share repurchase authorization is effective immediately and the program, which was extended three years, now expires on May 8, 2017.
As of March 31, 2014, Teradata had total debt of $270 million outstanding under a term loan. Additionally, Teradata has $300 million available through a pre-arranged credit facility; however, no funds were drawn from the credit facility.
Teradata now expects full-year 2014 revenue to grow at the lower end of its previous 3-7 percent guidance range.(1) Based on currency rates at the end of April 2014, currency translation is not expected to have a meaningful impact on full-year revenue comparison. Teradata also expects 2014 non-GAAP earnings per share (which excludes stock-based compensation expense and other special items) to be at the lower end of the $2.85-$3.00 range.(2)
2014 First Quarter Earnings Conference Call A conference call is scheduled today at 8:30 a.m. (ET) to discuss the company's first quarter 2014 results. Access to the conference call, as well as a replay of the call, is available on Teradata's web site at investor.teradata.com.
Supplemental financial information regarding Teradata's operating results is also available on the Investor Relations page of Teradata's web site.
(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 on the Investor Relations page of the company's web site at investor.teradata.com, which is used to determine revenue on a constant currency basis.
(2) Teradata reports its results in accordance with GAAP. However, as described below, the company believes that certain non-GAAP measures (such as non-GAAP gross margin, non-GAAP operating income, non-GAAP net income, and non-GAAP earnings per diluted share, or EPS, which exclude certain items as well as free cash flow) are useful for investors. Our non-GAAP measures are not meant to be considered in isolation or 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.
(3) 3. As described above, the company believes that free cash flow is a useful non-GAAP measure for investors. Teradata defines free cash flow as cash provided/used by operating activities less capital expenditures for property and equipment, and additions to capitalized software. Free cash flow does not have a uniform definition under GAAP and therefore, Teradata's definition may differ from other companies' definitions of this measure. 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 for, among other things, investment in the company's existing businesses, strategic acquisitions, strengthening the company's balance sheet, repurchase of the company's stock and repayment of the company's debt obligations, if any. Free cash flow does not represent the residual cash flow available for discretionary expenditures since there may be other nondiscretionary expenditures that are not deducted from the measure. This non-GAAP measure is not meant to be considered in isolation, as a substitute 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.
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