Teradata Reports Second Quarter 2021 Financial Results

August 05, 2021 at 16:05 PM EDT

Public cloud ARR of $139 million, an increase of 157% as reported from the prior year period⁽¹⁾
Recurring revenue of $376 million, an increase of 16% as reported from the prior year period
Cash from operations of $225 million, an increase of $95 million from the prior year period
Free cash flow of $219 million, an increase of $104 million from the prior year period⁽²⁾
GAAP earnings per diluted share of $0.39 above the previously provided outlook range of $0.17 to $0.19
Non-GAAP earnings per diluted share of $0.74 above the previously provided outlook range of $0.47 to $0.49⁽³⁾

Teradata (NYSE: TDC) today announced its second-quarter 2021 financial results.

“Teradata delivered year-over-year growth in Q2 ‘21 across key metrics including public cloud ARR, recurring revenue, profitability and free cash flow. We are executing on our cloud-first plan, winning new customers and expanding existing customers as we build on our position as the connected multi-cloud data platform for enterprise analytics,” said Steve McMillan, Teradata President and CEO. “Our unrivalled data management capabilities across multi-cloud and on-premises environments are what customers need today, and we are continuously innovating to address tomorrow’s needs. Taken together, we are confident in our strategy for profitable growth as we continue to generate significant shareholder value.”

Second-Quarter 2021 Financial Highlights compared to Second Quarter 2020

Public cloud ARR increased 157% as reported (153% in constant currency⁽¹⁾) to $139 million from $54 million
Total ARR increased 9% as reported (7% in constant currency⁽¹⁾) to $1.426 billion from $1.304 billion
Total revenue was $491 million versus $457 million, an increase of 7% as reported and 4% in constant currency⁽¹⁾
Recurring revenue was $376 million versus $323 million, an increase of 16% as reported and 13% in constant currency⁽¹⁾
GAAP gross margin was 63.1% versus 56.0%
Non-GAAP gross margin was 64.8% versus 58.9%⁽³⁾
GAAP operating income was $70 million versus $8 million
Non-GAAP operating income was $117 million versus $64 million⁽³⁾
GAAP earnings per diluted share was $0.39 versus GAAP loss of $0.40 per share
Non-GAAP earnings per diluted share was $0.74 versus $0.24⁽³⁾
Cash flow from operations was $225 million compared to $130 million
Free cash flow was $219 million compared to $115 million⁽²⁾

Outlook

For the third quarter of 2021:

Public cloud ARR is expected to increase by at least 90% year-over-year, or by at least $15 million sequentially
GAAP diluted EPS is expected to be in the range of $(0.01) to $0.03
Non-GAAP diluted EPS, excluding stock-based compensation expense, reorganization-related expenses, and other special items, is expected to be in the range of $0.30 to $0.34⁽³⁾

Affirming the following outlook for the full year 2021:

Public cloud ARR is expected to increase by at least 100% year-over-year
Total ARR is expected to grow at a mid-to-high-single-digit percentage year-over-year

Raising the following outlook for the full year 2021:

Recurring revenue is now expected to grow at a high-single-digit to low-double-digit percentage year-over-year, up from a mid-to-high-single-digit percentage year-over-year
Total revenue is now expected to grow at a low-single-digit to mid-single-digit percentage year-over-year, up from a low-single-digit percentage year-over-year
GAAP earnings per diluted share is now expected to be in the range of $0.78 to $0.82, up from our prior outlook range of $0.58 to $0.64
Non-GAAP earnings per diluted share, excluding stock-based compensation expense, reorganization-related expenses, and other special items, is now expected to be in the range of $1.92 to $1.96⁽³⁾, up from our prior outlook of $1.61 to $1.67
Cash flow from operations is now expected to be at least $440 million, up from our prior outlook range of at least $320 million
Free cash flow is now expected to be at least $400 million⁽²⁾, up from our prior outlook range of at least $275 million

Earnings Conference Call

A conference call is scheduled today at 2:00 p.m. PT to discuss the Company’s second-quarter 2021 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 the Investor Relations page of Teradata’s website at investor.teradata.com.

Supplemental Financial Information

Additional information regarding Teradata’s operating results is provided below as well as on the Investor Relations page of 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 June 30
	2021		2020		% Change as Reported		% Change in CC
Recurring	$	376	$	323	16	%	13	%
Perpetual software licenses and hardware and other		17		25	(32	%)	(32	%)
Consulting services		98		109	(10	%)	(14	%)
Total revenue	$	491	$	457	7	%	4	%

Americas	$	274	$	259	6	%	6	%
EMEA		128		118	8	%	(1	%)
APJ		89		80	11	%	4	%
Total revenue	$	491	$	457	7	%	4	%
Revenue
(in millions)
	For the Six Months ended June 30
	2021		2020		% Change as Reported		% Change in CC
Recurring	$	748	$	634	18	%	15	%
Perpetual software licenses, hardware and other		40		48	(17	%)	(17	%)
Consulting services		194		209	(7	%)	(11	%)
Total revenue	$	982	$	891	10	%	7	%

Americas	$	537	$	503	7	%	7	%
EMEA		275		236	17	%	10	%
APJ		170		152	12	%	4	%
Total revenue	$	982	$	891	10	%	7	%


	As of June 30
	2021		2020		% Change as Reported		% Change in CC
Annual recurring revenue*	$	1,426	$	1,304	9	%	7	%
Public cloud ARR**	$	139	$	54	157	%	153	%

* 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. ARR does not include managed services and third-party software.

** Public cloud ARR is defined as the annual value at a point in time of all contracts related to public cloud implementations of Teradata Vantage and does not include ARR related to private or managed cloud implementations.

As described below, the Company believes that free cash flow is a useful non-GAAP measure for investors. 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. 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 to, 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.

(in millions)	For the Three Months						For the Six Months
	ended June 30						ended June 30						Outlook
	2021			2020			2021			2020			2021

Cash provided by operating activities (GAAP)	$	225		$	130		$	335		$	140		≥$440
Less capital expenditures for:
Expenditures for property and equipment		(5	)		(13	)		(9	)		(23	)	(≥35)
Additions to capitalized software		(1	)		(2	)		(2	)		(4	)	(≥5)
Total capital expenditures		(6	)		(15	)		(11	)		(27	)	(≥40)
Free Cash Flow (non-GAAP measure)	$	219		$	115		$	324		$	113		≥$400

In addition, GAAP to non-GAAP reconciliation of prior 2021 FY outlook free cash flow is included in the Company’s Q1 2021 Earnings Release dated May 6, 2021, which is available on the Investor Relations page of Teradata’s website at investor.teradata.com.

	3.		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 profit, non-GAAP operating income, non-GAAP net income, and non-GAAP earnings per diluted share, or EPS, all of 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 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								For the Six Months
(in millions, except per share data)	ended June 30								ended June 30
Gross Profit:	2021			2020			% Chg.		2021			2020			% Chg.
GAAP Gross Profit	$	310		$	256		21	%	$	617		$	481		28	%
% of Revenue		63.1	%		56.0	%				62.8	%		54.0	%

Excluding:
Stock-based compensation expense		5			4					8			8
Acquisition, integration, reorganization related, and other costs		3			4					8			4
Amortization of capitalized software		-			5					-			11
Non-GAAP Gross Profit	$	318		$	269		18	%	$	633		$	504		26	%
% of Revenue		64.8	%		58.9	%				64.5	%		56.6	%
Operating Income
GAAP Operating Income	$	70		$	8		775	%	$	151		$	2		7,450	%
% of Revenue		14.3	%		1.8	%				15.4	%		0.2	%

Excluding:
Stock-based compensation expense		31			31					52			52
Amortization of acquisition-related intangible assets		1			1					2			2
Acquisition, integration, reorganization related, and other costs		15			19					27			29
Amortization of capitalized software		-			5					-			11
Non-GAAP Operating Income	$	117		$	64		83	%	$	232		$	96		142	%
% of Revenue		23.8	%		14.0	%				23.6	%		10.8	%

Net Income
GAAP Net Income / (Loss)	$	44		$	(43	)	202	%	$	97		$	125		(22	%)
% of Revenue		9	%		(9.4	%)				9.9	%		14.0	%

Excluding:
Stock-based compensation expense		31			31					52			52
Amortization of acquisition-related intangible assets		1			1					2			2
Acquisition, integration, reorganization related, and other costs		15			19					27			29
Amortization of capitalized software		-			5					-			11
IP restructuring tax expense (benefit)⁽¹⁾		-			1					-			(156	)
Tax contingency adjustment⁽²⁾		-			20					-			2
Income tax adjustments⁽³⁾		(8	)		(8	)				(17	)		(9	)
Non-GAAP Net Income	$	83		$	26		219	%	$	161		$	56		188	%
% of Revenue		16.9	%		5.7	%				16.4	%		6.3	%


	For the Three Months ended June 30						For the Six Months ended June 30
Earnings Per Share:	2021			2020			2021			2020			2021 Q3 Guidance		2021 FY Guidance
GAAP Earnings / (Loss)	$	0.39		$	(0.40	)	$	0.86		$	1.13		$(0.01) - $0.03		$0.78 - $0.82
Excluding:
Stock-based compensation expense		0.28			0.29			0.46			0.47		0.25		0.95
Amortization of acquisition-related intangible assets		0.01			0.01			0.02			0.02		0.01		0.03
Acquisition, integration, reorganization related, and other costs		0.13			0.18			0.24			0.26		0.11		0.42
Amortization of capitalized software		-			0.05			-			0.10		-		-
IP restructuring tax expense (benefit)⁽ⁱ⁾		-			0.01			-			(1.41	)	-		-
Tax contingency adjustment⁽ⁱⁱ⁾		-			0.18			-			0.02		-		-
Income tax adjustments⁽ⁱⁱⁱ⁾		(0.07	)		(0.08	)		(0.15	)		(0.08	)	(0.06	)	(0.26	)
Non-GAAP Diluted Earnings Per Share	$	0.74		$	0.24		$	1.43		$	0.51		$0.30 - $0.34		$1.92 - $1.96

	i.		The Company’s GAAP effective tax rate for the three and six months ended June 30, 2020 includes $156 million of discrete tax benefit related to an intra-entity asset transfer of certain of its intellectual property to one of its Irish subsidiaries, which occurred on January 1, 2020. The one-time tax benefit for this intra-entity asset transfer of $157 million was recorded as a deferred tax asset for GAAP reporting purposes in the first quarter of 2020 but was excluded from Non-GAAP results. This was offset by $1 million of tax expense related to withholding taxes associated with the same intra-entity transfer recorded in the second quarter of 2020.

	ii.		The Company’s forecasted full-year 2020 GAAP marginal effective tax rate included $3 million of tax expense related to tax contingencies pursuant to FIN 48. For GAAP purposes, this is a component of the marginal rate and is recognized as tax benefit or expense based on the Company’s reported GAAP pre-tax income or loss for the quarter. To more accurately reflect the impact of the expense on a quarterly basis for non-GAAP purposes, the $3 million of tax expense was recognized ratably each quarter in 2020 instead of being included in the marginal effective rate.

	iii.		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, 2021 was 21.7% and June 30, 2020 was 50.9%. For the six months ended June 30, the Company’s non-GAAP effective tax rate was 24.1% for 2021 and 27.3% for 2020.

In addition, GAAP to non-GAAP reconciliation of second quarter 2021 outlook non-GAAP diluted earnings per share and prior 2021 FY outlook non-GAAP diluted earnings per share is included in the Company’s Q1 2021 Earnings Release dated May 6, 2021, which is available on the Investor Relations page of Teradata’s website at investor.teradata.com.

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, and market conditions, among other things. These forward-looking statements are based upon current expectations and assumptions and involve risks and uncertainties that could cause actual results to differ materially, including the factors discussed in this release and those relating to: the global economic environment and business conditions in general or on 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 results; our ability to realize the anticipated benefits of our business transformation program or other restructuring and cost saving initiatives; risks inherent in operating in foreign countries, including foreign currency fluctuations; risks associated with the ongoing and uncertain impact of the COVID-19 pandemic on our business, financial condition and operating results, including the impact of the COVID-19 pandemic on our customers and suppliers; risks associated with data privacy, cyberattacks and maintaining secure and effective 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 workforce and the ability to attract and retain skilled employees; protecting our intellectual property; the availability and successful exploitation of new alliance and acquisition opportunities; subscription arrangements 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 annual report on Form 10-K for the year ended December 31, 2020 and subsequent quarterly reports on Forms 10-Q, as well as the Company’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
	2021			2020			% Chg		2021			2020			% Chg
Revenue

Recurring	$	376		$	323		16	%	$	748		$	634		18	%
Perpetual software licenses, hardware and other		17			25		(32	%)		40			48		(17	%)
Consulting services		98			109		(10	%)		194			209		(7	%)

Total revenue		491			457		7	%		982			891		10	%

Gross profit

Recurring		289			234					571			452
% of Revenue		76.9	%		72.4	%				76.3	%		71.3	%
Perpetual software licenses, hardware and other		6			7					18			15
% of Revenue		35.3	%		28.0	%				45.0	%		31.3	%
Consulting services		15			15					28			14
% of Revenue		15.3	%		13.8	%				14.4	%		6.7	%

Total gross profit		310			256					617			481
% of Revenue		63.1	%		56.0	%				62.8	%		54.0	%

Selling, general and administrative expenses		161			165					310			323
Research and development expenses		79			83					156			156

Income from operations		70			8					151			2
% of Revenue		14.3	%		1.8	%				15.4	%		0.2	%

Other expense, net		(11	)		(11	)				(20	)		(19	)

Income (loss) before income taxes		59			(3	)				131			(17	)
% of Revenue		12.0	%		(0.7	%)				13.3	%		(1.9	%)

Income tax expense (benefit)		15			40					34			(142	)
% Tax rate		25.4	%		(1,333.3	%)				26.0	%		835.3	%

Net income (loss)	$	44		$	(43	)			$	97		$	125
% of Revenue		9.0	%		(9.4	%)				9.9	%		14.0	%

Net income (loss) per common share
Basic	$	0.40		$	(0.40	)			$	0.89		$	1.14
Diluted	$	0.39		$	(0.40	)			$	0.86		$	1.13

Weighted average common shares outstanding
Basic		109.0			108.5					108.9			109.4
Diluted		112.7			108.5					112.7			110.6

							Schedule B

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


	June 30,			December 31,			June 30,
	2021			2020			2020
Assets

Current assets
Cash and cash equivalents	$	684		$	529		$	494
Accounts receivable, net		299			331			339
Inventories		20			29			26
Other current assets		143			155			89

Total current assets		1,146			1,044			948

Property and equipment, net		325			339			337
Right of use assets - operating lease, net		27			38			46
Goodwill		399			401			395
Capitalized contract costs, net		97			98			88
Deferred income taxes		208			222			236
Other assets		43			51			52

Total assets	$	2,245		$	2,193		$	2,102

Liabilities and stockholders' equity

Current liabilities
Current portion of long-term debt	$	62		$	44		$	31
Current portion of finance lease liability		87			75			69
Current portion of operating lease liability		13			15			18
Accounts payable		91			50			62
Payroll and benefits liabilities		119			170			119
Deferred revenue		544			499			518
Other current liabilities		82			99			76

Total current liabilities		998			952			893

Long-term debt		374			411			436
Finance lease liability		73			70			75
Operating lease liability		20			28			33
Pension and other postemployment plan liabilities		143			152			135
Long-term deferred revenue		41			38			41
Deferred tax liabilities		6			6			6
Other liabilities		119			136			137

Total liabilities		1,774			1,793			1,756

Stockholders' equity
Common stock		1			1			1
Paid-in capital		1,743			1,656			1,603
Accumulated deficit		(1,138	)		(1,114	)		(1,093	)
Accumulated other comprehensive loss		(135	)		(143	)		(165	)

Total stockholders' equity		471			400			346

Total liabilities and stockholders' equity	$	2,245		$	2,193		$	2,102

										Schedule C

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

	For the Period Ended June 30
	Three Months						Six Months
	2021			2020			2021			2020
Operating activities
Net income	$	44		$	(43	)	$	97		$	125

Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization		37			43			76			85
Stock-based compensation expense		31			31			52			52
Deferred income taxes		(1	)		-			9			(149	)
Changes in assets and liabilities:
Receivables		68			109			32			59
Inventories		(4	)		2			9			5
Current payables and accrued expenses		59			11			15			(32	)
Deferred revenue		(15	)		(40	)		48			26
Other assets and liabilities		6			17			(3	)		(31	)

Net cash provided by operating activities		225			130			335			140

Investing activities
Expenditures for property and equipment		(5	)		(13	)		(9	)		(23	)
Additions to capitalized software		(1	)		(2	)		(2	)		(4	)

Net cash used in investing activities		(6	)		(15	)		(11	)		(27	)

Financing activities
Repurchases of common stock		(38	)		(2	)		(121	)		(75	)
Repayments of long-term borrowings		(13	)		(7	)		(19	)		(13	)
Payments of finance leases		(29	)		(16	)		(44	)		(25	)
Other financing activities, net		5			6			18			6

Net cash used in financing activities		(75	)		(19	)		(166	)		(107	)

Effect of exchange rate changes on cash and cash equivalents		1			3			(4	)		(7	)

Increase (decrease) in cash, cash equivalents and restricted cash		145			99			154			(1	)
Cash, cash equivalents and restricted cash at beginning of period		542			396			533			496

Cash, cash equivalents and restricted cash at end of period	$	687		$	495		$	687		$	495

Supplemental cash flow disclosure:
Non-cash investing and financing activities:
Assets acquired by finance leases	$	13		$	24		$	58		$	39
Assets acquired by operating leases	$	1		$	2		$	3		$	5

																			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
	2021			2020			% Change As Reported		% Change Constant Currency ⁽²⁾		2021			2020			% Change As Reported		% Change Constant Currency ⁽²⁾
Segment Revenue

Americas	$	274		$	259		6	%	6	%	$	537		$	503		7	%	7	%
EMEA		128			118		8	%	(1	%)		275			236		17	%	10	%
APJ		89			80		11	%	4	%		170			152		12	%	4	%


Total segment revenue		491			457		7	%	4	%		982			891		10	%	7	%

Segment gross profit

Americas		185			161							367			305
% of Revenue		67.5	%		62.2	%						68.3	%		60.6	%
EMEA		80			67							168			128
% of Revenue		62.5	%		56.8	%						61.1	%		54.2	%
APJ		53			41							98			71
% of Revenue		59.6	%		51.3	%						57.6	%		46.7	%

Total segment gross profit		318			269							633			504
% of Revenue		64.8	%		58.9	%						64.5	%		56.6	%

Reconciling items⁽¹⁾		(8	)		(13	)						(16	)		(23	)

Total gross profit	$	310		$	256						$	617		$	481
% of Revenue		63.1	%		56.0	%						62.8	%		54.0	%

⁽¹⁾		Reconciling items include stock-based compensation, capitalized software, 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/20210805005992/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