Teradata Corp.’s (TDC) fourth quarter 2014 adjusted earnings per share (including stock-based compensation expense but excluding other items) of 84 cents beat the Zacks Consensus Estimate of 83 cents but remained flat year over year.
Excluding stock-based compensation, earnings per share came in at 91 cents, down 3.4% on a year-over-year basis. For 2014, earnings per share were $2.86, up from $2.76 in the year-ago quarter.
Quarterly revenues of $761 million missed the Zacks Consensus Estimate of $776 million and also dipped 1% year over year. For 2014, revenues were $2.7 billion, up 1% year over year.
Quarterly Segment Details
Services revenues increased 6% from the year-ago quarter to $401 million, driven by higher maintenance revenues (up 2% year over year). Consulting revenues remained flat year over year.
Products revenues decreased 1% year over year to $360 million.
Region-wise, revenues from America decreased 2% year over year to $456 million. Americas contributed 60% of total revenue in the fourth quarter. International accounted for 40% of revenues and remained flat year over year at $305 million.
Margin
Gross margin (including stock-based compensation expense but excluding other one-time items) contracted 60 basis points (bps) from the year-ago quarter to 56.5%, primarily due to unfavorable business mix.
Operating income (including stock-based compensation expense but excluding other one-time items) decreased 11.3% year over year to $173 million.
Balance Sheet
Teradata exited the year with $834 million in cash and cash equivalents versus $695 million in the previous year. As of Dec 31, 2014, Teradata had total long-term debt of $195 million compared with $248 million as of Dec 31, 2013.
Teradata generated cash flow from operations of $97 million in the quarter compared with $63 million in the previous quarter. Free cash flow generated in the quarter was $62 million compared with $25 million in the previous quarter.
Guidance
For 2015, the company expects revenues to remain flat to down 2% compared with 2014 levels. On a constant currency basis, revenues are expected to rise 3% – 5% in 2015.
Earnings per share are expected in the range of $1.91-$2.11 on a GAAP basis and $2.50-$2.70 on a non-GAAP basis, which excludes stock-based compensation expense and other special items. For 2015, Teradata expects approximately 22 cents of negative impact from currency translation, which is included in Teradata's GAAP and non-GAAP earnings guidance.
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 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 Oracle Corp. (ORCL) are resulting in continued pricing pressure that will likely limit margin expansion going forward.
Currently, Teradata has a Zacks Rank #4 (Sell).
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