Teradata Corp. (NYSE:TDC) reported third-quarter 2016 results wherein adjusted earnings per share of 60 cents easily topped the Zacks Consensus Estimate of 52 cents and the year-ago quarter earnings of 48 cents.
The company reported non-GAAP earnings of 69 cents in the quarter compared with 60 cents in the year-ago quarter.
Revenue Details
Revenues of $552 million fell short of the Zacks Consensus Estimate of $557 million and also declined 9% year over year. The company stated “As part of Teradata's business transformation, the company is now offering subscription pricing programs. As a result, some of Teradata's largest customers have begun to shift to the new subscription pricing alternative which had an impact on reported revenue in the third quarter.”
Products revenues decreased 13% year over year to $208 million. Services revenues fell 6% on a year-over-year basis to $344 million. Revenues from Americas Data and Analytics declined 9% year over year while that from International Data and Analytics jumped 6% from the prior-year quarter.
Margin
Non GAAP gross margin improved 100 basis points (bps) from the year-ago quarter to 54% on the back of favorable product and deal mix.
The company reported non-GAAP operating income of $122 million, up from $117 million reported in the prior-year quarter. Non-GAAP operating margin was 22.1% in the quarter.
Balance Sheet
Teradata exited the quarter with $988 million in cash and cash equivalents compared with $839 million as on Dec 31, 2015. Teradata had a long-term debt of $545 million at the end of the quarter compared with $567 million as on Dec 31, 2015.
In the quarter, Teradata generated cash flow from operations of $45 million compared with $68 million in the comparable year-ago period. Free cash flow generated was $12 million compared with $33 million in the comparable year-ago period.
Guidance
Revenues for the fourth quarter of 2016 are expected to be in a range of $620 million to $640 million. Non-GAAP earnings per share are expected in a range of 57 cents – 62 cents.
To Conclude
Teradata is undergoing a restructuring to enhance its product portfolio and streamline its operations. This is directed toward strengthening its position in the data and analytics market.
In line with its growth strategy, the company in the past divested its Marketing Application business for $75 million.
However, restructuring related costs, a sluggish spending environment in the domestic market and increasing competition from peers like Oracle (NYSE:ORCL) , IBM Corporation (NYSE:IBM) Microsoft (NASDAQ:MSFT) , Dell and others can weigh on its financials.
Currently, Teradata has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank stocks here.
TERADATA CORP Price, Consensus and EPS Surprise
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