Teradata (TDC) came out with quarterly earnings of $0.66 per share, beating the Zacks Consensus Estimate of $0.57 per share. This compares to earnings of $0.57 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 15.79%. A quarter ago, it was expected that this data management company would post earnings of $0.42 per share when it actually produced earnings of $0.53, delivering a surprise of 26.19%.Over the last four quarters, the ...

Teradata (TDC) Q1 2025 Earnings Call May 06, 2025 04:30 PM ET Company Participants Chad Bennett - Senior VP, Investor Relations & Corporate DevelopmentSteve McMillan - President and CEOSumeet Arora - Chief Product OfficerCharles Smotherman - Interim CFOErik Woodring - Managing Director - Equity ResearchYitchuin Wong - Senior Equity Research AssociateChirag Ved - Vice PresidentMichael Richards - Equity Research Senior Associate Conference Call Participants Howard Ma - Director & Equity Research AnalystJared ...

Teradata (TDC) Q1 2025 Earnings Call May 06, 2025 04:30 PM ET Speaker0 would like to hand the conference over to your host today, Chad Bennett, Senior Vice President of Investor Relations and Corporate Development. You now may begin. Speaker1 Good afternoon, and welcome to Teradata's first quarter twenty twenty five earnings call. Steve McMillan, Teradata's President and Chief Executive Officer, will lead our call today followed by Sumit Arora, Teradata's Chief Product Officer and then Charles Smotherman, T ...

Revenue Performance - Total revenue for the first quarter was $418 million, a 10% decrease as reported and 8% in constant currency[5] - Total revenue for Q1 2025 was $418 million, a decrease of 10% compared to $465 million in Q1 2024[20] - Total ARR decreased to $1.442 billion, down 3% as reported and 2% in constant currency[5] - Recurring revenue was $358 million, an 8% decrease as reported and 6% in constant currency, representing 86% of total revenue[5] - Recurring revenue decreased by 8% to $358 million from $388 million year-over-year[20] - Consulting services revenue fell by 28% to $50 million from $69 million year-over-year[20] Profitability Metrics - GAAP operating margin improved to 15.8%, up 550 basis points year-over-year, while non-GAAP operating margin increased to 21.8%, up 270 basis points[4] - GAAP diluted EPS was $0.45, compared to $0.20 per share in the prior year, while non-GAAP diluted EPS was $0.66, up from $0.57[5] - The company reported a 15.8% operating income margin for Q1 2025, up from 10.3% in Q1 2024[20] - The tax rate for Q1 2025 was 24.1%, significantly lower than 37.5% in Q1 2024[20] Cash Flow and Liquidity - Cash flow from operations was $8 million, down from $27 million, and free cash flow was $7 million, down from $21 million[8] - Cash and cash equivalents decreased to $368 million from $420 million at the end of Q4 2024[22] Future Outlook - For full-year 2025, total revenue is expected to decline in the range of 4% to 7% year-over-year in constant currency[8] - Public cloud ARR growth is projected at 14% to 18% year-over-year in constant currency[8] - Non-GAAP diluted EPS guidance for 2025 is set at $2.15 to $2.25 per share[8] - The company plans to focus on product innovation and demand as part of its future outlook[18] Asset Management - Total assets increased to $1,752 million as of March 31, 2025, compared to $1,704 million at the end of 2024[22] Net Income - Net income for Q1 2025 was $44 million, up from $20 million in Q1 2024, representing a 120% increase[20] Gross Profit Margin - Gross profit margin for total revenue was 59.3% in Q1 2025, down from 61.1% in Q1 2024[20]

Core Viewpoint - The article emphasizes the importance of value investing and highlights Teradata (TDC) as a strong candidate for value investors due to its favorable financial metrics and Zacks Rank [1][3][7]. Group 1: Company Overview - Teradata (TDC) currently holds a Zacks Rank of 2 (Buy) and has an "A" grade for Value, indicating strong potential for value investors [4][7]. - The stock has a Forward P/E ratio of 8.94, significantly lower than the industry average of 14.98, suggesting it may be undervalued [4][6]. - TDC's Forward P/E has fluctuated between a high of 15.73 and a low of 8.41 over the past year, with a median of 13.16 [4]. Group 2: Financial Metrics - The Price-to-Sales (P/S) ratio for TDC is 1.14, compared to the industry average of 1.41, further indicating potential undervaluation [5]. - TDC's Price-to-Cash Flow (P/CF) ratio stands at 9.19, which is attractive relative to the industry's average P/CF of 13.69 [6]. - Over the past year, TDC's P/CF has ranged from a high of 24.20 to a low of 8.74, with a median of 15.91 [6]. Group 3: Investment Outlook - The combination of TDC's strong earnings outlook and favorable valuation metrics positions it as an impressive value stock at the moment [7].

Cloud and AI Innovations - Teradata's hybrid cloud platform, Teradata Vantage, is designed to support both cloud and on-premises environments, enabling organizations to leverage data at scale for AI applications[16]. - In 2024, Teradata introduced innovations such as Open Table Formats and Teradata VantageCloud Lake, enhancing capabilities for AI and analytics across multiple cloud platforms including Google Cloud, AWS, and Microsoft Azure[23]. - The company reported a commitment to integrating with partners like Nvidia and AWS to accelerate AI workloads and deliver generative AI use cases, enhancing the platform's capabilities[27]. - Teradata's ClearScape Analytics has been enhanced with features like AutoML and Spark integration, aimed at improving data science productivity and reducing complexity in model training[23]. - Teradata's AI Unlimited, integrated with Microsoft Fabric, allows customers to utilize over 150 ClearScape Analytics functions without the need for extensive data movement, optimizing operational efficiency[23]. - The company emphasizes the importance of managing uncontrolled data growth, providing a platform designed to harmonize data across organizations for effective AI implementation[28]. Business Strategy and Market Position - Teradata's business transformation strategy focuses on cloud modernization and seamless migration for customers transitioning from other vendors[22]. - The company is positioned to compete effectively in the rapidly changing IT industry, leveraging its patented workload management optimization technology[16]. - Teradata's market strategy targets large-scale data users, emphasizing the integration of multi-cloud and on-premises environments to derive significant business value[26]. - Total revenues for the calendar year ended December 31, 2024, were $1.750 billion[31]. - The data management and analytics market is expected to grow at a double-digit rate year-over-year for the next few years[33]. - The majority of customers utilize subscription-based purchasing options, leading to a substantial portion of recurring revenue[40]. Partnerships and Intellectual Property - The company has established partnerships with top global public cloud service providers: AWS, Microsoft Azure, and Google Cloud[44]. - Teradata owns 565 patents in the United States, reflecting its commitment to innovation[51]. - The company aims to deepen relationships with strategic public cloud service providers and systems integrators[39]. Workforce and Corporate Culture - As of December 31, 2024, Teradata had approximately 5,700 employees globally, with 30% in the United States and 70% in other countries[57]. - The company emphasizes a flexible work environment and competitive compensation to attract and retain talent[56]. - Teradata's workforce is critical to its business strategy, and the overall headcount decreased during fiscal 2024 to align with cloud and profitable growth strategies[57]. - The company supports local STEM education programs and provides employees with four paid volunteer days per year[63]. - Teradata emphasizes a culture of empowerment, accountability, and inclusivity, aiming to create a workplace free from discrimination[58]. Financial and Operational Challenges - The company faces challenges in accurately estimating Total Annual Recurring Revenue (ARR) and Public Cloud ARR due to variability in sales cycles and customer purchasing behavior[82]. - Customer cancellations and non-renewals of subscription agreements could adversely affect the company's business, especially as customers migrate to competitors' cloud offerings[97]. - The company has experienced significant fluctuations in quarterly operating results due to delays in sales and the long sales cycle for its products[83]. - The company's profit margins are adversely impacted by rising costs of components and cloud services, which are expected to continue until the cloud business is effectively scaled[103]. - The company has implemented programs to mitigate potential supply chain risks due to inflation and component shortages[54]. Regulatory and Compliance Risks - The evolving regulatory environment for AI/ML technologies presents risks, including compliance challenges and potential reputational harm[119]. - Increased scrutiny regarding environmental, social, and governance (ESG) practices may impose additional costs and affect the company's reputation if goals are not met[118]. - The company is subject to evolving privacy laws and regulations that may impact the adoption of its solutions, potentially increasing compliance costs and liabilities[122]. - The company is required to maintain certifications and standards established by third parties, such as ISO standards, to meet customer expectations[124]. Supply Chain and Economic Factors - The company has established preferred supplier relationships to ensure consistent quality and delivery of components[54]. - The company relies on single-source suppliers for key components, which poses risks if these suppliers terminate agreements or face operational issues[100]. - The company is exposed to economic conditions that could impact customer spending and purchasing decisions, particularly in sectors like retail and manufacturing[112]. - The company has operations in approximately 40 countries, exposing it to foreign currency exchange rate risks, which have impacted its revenue and net earnings[137]. Leadership and Governance - Teradata's Chief Financial Officer, Claire Bramley, announced her resignation effective March 31, 2025[66]. - The company has implemented internal controls over financial reporting, but weaknesses could lead to errors and affect investor confidence[116]. - The company's indebtedness could limit its financial flexibility and may require actions such as reducing capital expenditures or seeking additional equity capital to avoid default[136].

Core Viewpoint - Teradata (TDC) reported mixed financial results for the fourth quarter of 2024, with non-GAAP earnings exceeding estimates but revenues declining significantly year over year, leading to a sharp drop in share price [1][3]. Financial Performance - Non-GAAP earnings for Q4 2024 were 53 cents per share, beating the Zacks Consensus Estimate by 26.19%, but down 5.4% year over year [1]. - Revenues totaled $409 million, missing the Zacks Consensus Estimate by 0.43%, and declined 11% year over year on a reported basis and 9% on a constant-currency basis [2]. - Total annual recurring revenues (ARR) at the end of Q4 decreased 6% year over year to $1.474 billion, with a 4% decline at constant currency [2]. Revenue Breakdown - Recurring revenues, which account for 85.8% of total revenues, fell 6% year over year to $351 million [4]. - Perpetual software license and hardware revenues plummeted 75% year over year to $3 million [4]. - Consulting services revenues decreased 24.7% year over year to $55 million [4]. - Product sales revenues decreased 8% year over year to $354 million [5]. Operating Metrics - Non-GAAP gross margin was 60.9%, down 100 basis points year over year [6]. - Selling, general and administrative (SG&A) expenses decreased 10.7% year over year to $117 million, while research and development (R&D) expenses were $60 million, down 4.8% year over year [6]. - Non-GAAP operating margin was 17.6%, a decline of 190 basis points year over year [6]. Balance Sheet and Cash Flow - As of December 31, 2024, cash and cash equivalents were $420 million, up from $348 million as of September 30, 2024 [7]. - Long-term debt remained stable at $455 million as of September 30, 2024 [7]. - Cash generated from operating activities was $156 million in Q4, compared to $77 million in the previous quarter [7]. - Free cash flow for the quarter was $148 million [7]. Guidance - For Q1 2025, non-GAAP earnings are expected to be between 55 and 59 cents per share, with total revenues projected to decline 6-8% year over year [8]. - For the full year 2025, non-GAAP earnings are anticipated to be between $2.15 and $2.25 per share [8]. - Public cloud ARR growth is projected between 14% and 18% year over year, while total ARR is expected to be flat to 2% growth [8]. - Recurring revenues are anticipated to decline 3-5% year over year [8]. Market Reaction - Following the earnings report, TDC shares fell 26.88% in pre-market trading to $22.65, reflecting concerns over revenue decline [3].

Financial Data and Key Metrics Changes - In 2024, the company delivered $609 million in Cloud ARR and $1.474 billion in total ARR, with Cloud ARR growing 18% year-over-year and total ARR declining 4% year-over-year in constant currency [8][30] - The cloud net expansion rate was 117% in Q4 2024, while total recurring revenue for Q4 was $351 million, down 6% year-over-year [30][35] - Fiscal year 2024 free cash flow was $277 million, representing a 16% margin, with 78% of free cash flow returned to investors through share repurchases [32][38] Business Line Data and Key Metrics Changes - Recurring revenue as a percentage of total revenue increased to 86%, up from 81% in the prior-year period [35] - Fourth quarter total revenue was $409 million, down 11% year-over-year as reported, and down 9% in constant currency [35] - For the full year, recurring revenue was $1.479 billion, a decrease of 1% as reported and an increase of 1% in constant currency [36] Market Data and Key Metrics Changes - The company anticipates Cloud ARR growth of 14% to 18% and flat to 2% growth in total ARR for 2025 [29][44] - The company expects a negative currency impact year-over-year of 150 to 200 basis points on 2025 revenue outlook [40] - The company is seeing increasing interest in its Hybrid AI differentiation, which should lead to higher on-prem expansion [34] Company Strategy and Development Direction - The company is focused on returning to total ARR growth in 2025, with a disciplined approach to managing its financial plan while investing in technology strengths [12][17] - The company has restructured its go-to-market organization and introduced innovations to strengthen its hybrid trusted AI platform [11][12] - The company is emphasizing the importance of operating effectively across both cloud and on-prem environments to meet diverse business needs [15][16] Management's Comments on Operating Environment and Future Outlook - Management noted that despite a challenging year, significant actions were taken in 2024 to position the company for growth in 2025 [11][28] - Management expressed confidence in returning to total ARR growth, citing improved retention rates and the impact of go-to-market changes [33][50] - The company is optimistic about the potential of its AI and GenAI solutions, which are expected to open new market opportunities [67][78] Other Important Information - Claire Bramley, the Chief Financial Officer, is transitioning to a new role outside the industry, with Charles Smotherman assuming the interim CFO position [9][10] - The company has launched new partnerships, including with Nvidia, to enhance its AI capabilities [12][18] Q&A Session Summary Question: Customer perspectives on cloud migrations - Management noted that customers are balancing their on-prem and cloud footprints, with around 30 different GenAI proof-of-concepts currently in execution [55][56] Question: Confidence in ARR guidance - Management explained that the guidance was set with a different approach, limiting reliance on large deals and factoring in deal timing and stage migrations [59][60] Question: Dynamics of the pipeline for 2025 - Management anticipates a 50-50 mix of migrations and expansions, with new logos contributing less to overall growth [65][66] Question: Need for more decisive actions for growth - Management emphasized the importance of continuing the transformation journey and leveraging new AI capabilities to capture market opportunities [78][79] Question: Factors affecting EPS and free cash flow - Management highlighted FX impacts and the decline in revenue due to negative ARR as key factors affecting EPS and free cash flow guidance [82][84] Question: Expectations for ARR and cloud ARR improvement - Management expects improvements in retention rates and visibility into sales productivity to drive ARR growth in 2025 [91][92] Question: Open table format and its relationship with structured data - Management sees open table format as an opportunity to enhance performance and integrate AI capabilities across various data types [116][118]

Core Insights - Teradata reported $409 million in revenue for Q4 2024, a year-over-year decline of 10.5% and an EPS of $0.53, down from $0.56 a year ago [1] - The revenue fell short of the Zacks Consensus Estimate of $410.76 million by 0.43%, while the EPS exceeded the consensus estimate of $0.42 by 26.19% [1] Financial Performance Metrics - Annual recurring revenue (ARR) totaled $1.47 billion, below the average estimate of $1.52 billion [4] - Public Cloud ARR was $609 million, compared to the average estimate of $633.39 million [4] - Revenue from perpetual software licenses and hardware was $3 million, significantly lower than the average estimate of $7.51 million, representing a 75% year-over-year decline [4] - Recurring revenue was $351 million, slightly above the estimated $343.30 million, but down 5.7% from the previous year [4] - Consulting services revenue was $55 million, below the average estimate of $60.30 million [4] - Gross profit from recurring revenue was $243 million, slightly below the average estimate of $244.72 million [4] - Gross profit from consulting services was $2 million, compared to the average estimate of $6.85 million [4] - Gross profit from perpetual software licenses and hardware was -$2 million, better than the estimated -$6.19 million [4] Stock Performance - Teradata shares returned +2% over the past month, while the Zacks S&P 500 composite increased by +4.2% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market [3]

Core Viewpoint - Teradata reported quarterly earnings of $0.53 per share, exceeding the Zacks Consensus Estimate of $0.42 per share, but down from $0.56 per share a year ago, indicating a 26.19% earnings surprise [1][2] Financial Performance - Teradata's revenues for the quarter ended December 2024 were $409 million, missing the Zacks Consensus Estimate by 0.43% and down from $457 million year-over-year [2] - The company has surpassed consensus EPS estimates four times over the last four quarters [2] Stock Performance - Teradata shares have decreased by approximately 0.7% since the beginning of the year, while the S&P 500 has gained 3.1% [3] - The current Zacks Rank for Teradata is 3 (Hold), indicating expected performance in line with the market in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.55 on revenues of $426.01 million, and for the current fiscal year, it is $2.35 on revenues of $1.65 billion [7] - The trend of estimate revisions for Teradata is mixed, which could change following the recent earnings report [6] Industry Context - The Computer-Storage Devices industry, to which Teradata belongs, is currently in the top 16% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8]