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Teradata Corporation TDC reported adjusted earnings of 26 cents per share, which increased 18% year over year. The figure also beat the Zacks Consensus Estimate of 19 cents.
Total revenues of $544 million beat the Zacks Consensus Estimate of $524 million and increased 6% from the year-ago quarter.
Recurring revenues increased 11% year over year to $312 million backed by a rise in subscription-based transactions. Perpetual software license and hardware revenues increased 7% from the year-ago quarter to $97 million due to the company’s ongoing transition to a subscription-based business model. Consulting services revenues declined 4% to $135 million.
Revenues from Americas increased 6% year over year (6% at constant currency) to $287 million, while that from International revenues increased 6% (2% at constant currency) to $257 million.
Management is optimistic about the performance of the Teradata Everywhere and Teradata Analytics Platform. The platform, which has been designed to suit today’s dynamic market environment, is helping users to analyze customer behavior in a simplified manner. The wide acceptance of the platform is expected to be beneficial for the company’s top line going forward.
Operating Details
Non-GAAP gross margin contracted 300 basis points (bps) from the year-ago quarter to 48.9%. The company’s shift toward subscription-based transactions and higher percentage of lower margin hardware revenues impacted the gross margin negatively.
Gross margin for Recurring contracted 260 bps to 71.8% due to lower margins from subscription-based revenues. Perpetual software license and hardware margins declined to 24.7% from 37.4% due to lower margins of hardware. Consulting services gross margin was 1.5% against negative 0.7% in the year-ago quarter.
Non-GAAP operating income declined 6% from the year-ago period due to a shift toward subscription-based transactions and other strategic investments. As a result, non-GAAP operating margin contracted 510 bps on a year-over-year basis to 6.9%.
Balance Sheet & Other Details
As of Jun 30, 2018, Teradata had cash and cash equivalents of $882 million compared with $939 million as of Mar 31, 2018. The company exited the quarter with total debt (including current portion) of $497 million compared with $524 million at the end of the previous quarter.
Teradata generated $106 million of cash from operating activities. Payment from a government customer positively impacted the figure, which was partially muted by the customer’s shift toward a subscription-based model where payments are made over time rather than upfront.
The company repurchased around 2.1 million shares worth approximately $81 million in the second quarter.