Teradata Corp. TDC reported second quarter adjusted earnings per share (including stock-based compensation expense but excluding other items) of 47 cents, missing the Zacks Consensus Estimate of 51 cents and remaining in line with the year-ago figure.
Excluding stock-based compensation, earnings per share were 53 cents, down 35.8% on a year-over-year basis.
Quarterly revenues of $623 million missed the Zacks Consensus Estimate of $655 million and also dropped 8% year over year.
Quarterly Segment Details
Services revenues dipped 2% from the year-ago quarter to $367 million. Consulting revenues were down 4% from the year-ago quarter to $194 million while Maintenance services remained flat year over year at $173 million.
Products revenues decreased 15% year over year to $256 million.
Margin
Adjusted gross margin contracted 180 basis points (bps) from the year-ago quarter to 54.3%, primarily due to an unfavorable business mix.
Operating income decreased 32.7% year over year to $107 million.
Balance Sheet
Teradata exited the year with $921 million in cash and cash equivalents compared with $881 million in the previous quarter. As of Jun 30, 2014, Teradata had total long-term debt of $585 million compared with $593 million in the previous quarter.
Teradata generated cash flow from operations of $80 million in the quarter compared with $138 million in the previous quarter. Free cash flow generated in the quarter was $53 million compared with $113 million in the previous quarter.
Guidance
For 2015, the company expects revenues to decrease 3% – 6% on a reported basis but flat to 3% up on a constant currency basis compared with 2014.
Loss per share in 2015 is expected in the range of 62-32 cents on a GAAP basis and $2.20-$2.50 on a non-GAAP basis, which excludes stock-based compensation expense and other special items.
Our Take
We believe that new customer wins and strengthening relationships with large vendors will be the primary revenue drivers. Teradata will continue to benefit from its international expansion, improved traction from sales force expansion, new products and alliances, market share gains and a growing database analytics market.
However, increased investment in sales, a sluggish spending environment in the domestic market and increasing competition from EMC Corp. EMC, NetApp NTAP and International Business Machines Corporation IBM are resulting in continued pricing pressure that will likely limit margin expansion in the rest of 2015.
Currently, Teradata has a Zacks Rank #4 (Sell).
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