Teradata (NYSE: TDC) today announced its second quarter 2023 financial results.
“Our broad-based momentum across the business generated strong financial results, including 77% Cloud ARR growth, 10% increase in Total ARR growth and EPS that exceeded our guidance,” said Steve McMillan, President and CEO, Teradata. “We are pleased with the strong adoption and growth of Teradata VantageCloud, as customers see that our complete cloud analytics and data platform is differentiated and generates value in this new world of AI.”
Second Quarter 2023 Financial Highlights Compared to Second Quarter 2022
- Public cloud ARR increased to $414 million from $234 million, an increase of 77% as reported and 76% in constant currency(1)
- Total ARR increased to $1.523 billion from $1.390 billion, an increase of 10% as reported and 9% in constant currency(1)
- Total revenue was $462 million versus $430 million, an increase of 7% as reported and 10% in constant currency(1)
- Recurring revenue was $371 million versus $345 million, an increase of 8% as reported and 10% in constant currency(1)
- Recurring revenue was 80% of total revenue in the second quarter, flat from the prior year period
- GAAP gross margin was 59.7% versus 60.0%
- Non-GAAP gross margin was 60.6% versus 61.2%(2)
- GAAP operating income was $33 million versus $14 million
- Non-GAAP operating income was $72 million versus $55 million(2)
- GAAP diluted EPS was $0.17 versus ($0.04) per share
- Non-GAAP diluted EPS was $0.48 versus $0.33(2)
- Cash flow from operations was $49 million compared to $105 million
- Free cash flow was $46 million compared to $102 million(3)
Outlook
For the third quarter of 2023:
- GAAP diluted EPS is expected to be in the range of $0.10 to $0.14
- Non-GAAP diluted EPS is expected to be in the range of $0.40 to $0.44(2)
Teradata updates the following outlook for full year 2023:
- GAAP diluted EPS is increased to now be in the range of $0.74 to $0.86 versus the range of $0.65 to $0.77 previously provided
For the full year 2023, Teradata re-affirms the following outlook elements:
- Public cloud ARR is expected to increase in the range of 53% to 57% year-over-year
- Total ARR is expected to increase in the range of 6% to 8% year-over-year
- Recurring revenue is expected to increase in the range of 4% to 7% year-over-year
- Total revenue is expected to increase in the range of 1% to 4% year-over-year
- Non-GAAP diluted EPS is expected to be in the range of $1.92 to $2.04(2)
- Cash flow from operations is expected to be in the range of $340 million to $380 million
- Free cash flow is expected to be in the range of $320 million to $360 million(3)
Earnings Conference Call
A conference call is scheduled for today at 2:00 p.m. PT to discuss the Company’s second quarter 2023 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 Teradata’s website at investor.teradata.com.
Supplemental Financial Information
Additional information regarding Teradata’s operating results is provided below as well as on Teradata’s website at investor.teradata.com.
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, 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 | |||||||
2023 | 2022 | % Change as
| % Change in CC | ||||
Recurring revenue | $371 | $345 | 8% | 10% | |||
Perpetual software licenses, hardware and other | 13 | 8 | 63% | 61% | |||
Consulting services | 78 | 77 | 1% | 5% | |||
Total revenue | $462 | $430 | 7% | 10% | |||
Americas | $268 | $249 | 8% | 10% | |||
EMEA | 118 | 103 | 15% | 15% | |||
APJ | 76 | 78 | (3%) | 2% | |||
Total revenue | $462 | $430 | 7% | 10% | |||
Revenue | |||||||
(in millions) | |||||||
For the Six Months ended June 30 | |||||||
2023 | 2022 | % Change as
| % Change in CC | ||||
Recurring revenue | $760 | $731 | 4% | 7% | |||
Perpetual software licenses, hardware and other | 26 | 34 | (24%) | (18%) | |||
Consulting services | 152 | 161 | (6%) | 0% | |||
Total revenue | $938 | $926 | 1% | 5% | |||
Americas | $560 | $539 | 4% | 6% | |||
EMEA | 235 | 232 | 1% | 7% | |||
APJ | 143 | 155 | (8%) | (1%) | |||
Total revenue | $938 | $926 | 1% | 5% | |||
As of June 30 | |||||||
2023 | 2022 | % Change as
| % Change in CC | ||||
Annual recurring revenue* | $1,523 | $1,390 | 10% | 9% | |||
Public cloud ARR** | $414 | $234 | 77% | 76% | |||
The impact of currency on ARR is determined by calculating the prior period ending ARR using the current period end currency rates. |
* Total 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. Total ARR does not include managed services and third-party software. The Company believes this is a useful metric to investors as it demonstrates progress toward achieving our strategic objectives as outlined in the Form 10-K and Form 10-Q. |
** Public cloud ARR is defined as the annual value at a point in time of all contracts related to public cloud implementations of Teradata VantageCloud and does not include ARR related to private or managed cloud implementations. The Company believes this is a useful metric to investors as it demonstrates progress toward achieving our strategic objectives as outlined in the Form 10-K and Form 10-Q. |
2. | Teradata reports its results in accordance with GAAP. However, as described below, the Company believes that certain non-GAAP measures such as free cash flow, non-GAAP gross profit, non-GAAP operating income, non-GAAP net income, and non-GAAP diluted earnings per share, all of which exclude certain items, and which may be reported on a constant currency basis, 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. |
| (in millions, except per share data) | For the
| For the
| ||||||||||
Gross Profit: | 2023 | 2022 | % Chg. | 2023 | 2022 | % Chg. | ||||||
GAAP Gross Profit | $276 | $258 | 7% | $578 | $559 | 3% | ||||||
% of Revenue | 59.7% | 60.0% | 61.6% | 60.4% | ||||||||
Excluding: | ||||||||||||
Stock-based compensation expense | 4 | 4 | 8 | 9 | ||||||||
Reorganization and transformation cost | - | 1 | - | 7 | ||||||||
Non-GAAP Gross Profit | $280 | $263 | 6% | $586 | $575 | 2% | ||||||
% of Revenue | 60.6% | 61.2% | 62.5% | 62.1% | ||||||||
Operating Income | ||||||||||||
GAAP Operating Income | $33 | $14 | 136% | $112 | $82 | 37% | ||||||
% of Revenue | 7.1% | 3.3% | 11.9% | 8.9% | ||||||||
Excluding: | ||||||||||||
Stock-based compensation expense | 35 | 32 | 63 | 63 | ||||||||
Reorganization and transformation cost | 4 | 9 | 5 | 25 | ||||||||
Non-GAAP Operating Income | $72 | $55 | 31% | $180 | $170 | 6% | ||||||
% of Revenue | 15.6% | 12.8% | 19.2% | 18.4% | ||||||||
Net Income | ||||||||||||
GAAP Net Income | $17 | ($4) | - | $57 | $32 | 78% | ||||||
% of Revenue | 3.7% | (0.9%) | 6.1% | 3.5% | ||||||||
Excluding: | ||||||||||||
Stock-based compensation expense | 35 | 32 | 63 | 63 | ||||||||
Reorganization and transformation cost | 4 | 9 | 5 | 25 | ||||||||
Income tax adjustments(i) | (7) | (2) | (13) | (14) | ||||||||
Non-GAAP Net Income | $49 | $35 | 40% | $112 | $106 | 6% | ||||||
% of Revenue | 10.6% | 8.1% | 11.9% | 11.4% | ||||||||
For the Three Months
| For the Six Months
| 2023 Outlook | |||||||||
Earnings Per Share: | 2023 | 2022 | 2023 | 2022 | 2023 Q3
| 2023 FY
| |||||
GAAP Earnings Per Share | $0.17 | ($0.04) | $0.55 | $0.30 | $0.10 - $0.14 | $0.74 - $0.86 | |||||
Excluding: | |||||||||||
Stock-based compensation expense | 0.34 | 0.30 | 0.61 | 0.59 | 0.32 | 1.26 | |||||
Reorganization and transformation cost | 0.04 | 0.09 | 0.05 | 0.23 | 0.03 | 0.18 | |||||
Income tax adjustments(i) | (0.07) | < | |||||||||
