Teradata Corporation (TDC)

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Teradata (TDC)

Q4 2011 Earnings Call

February 09, 2012 8:30 am ET

Executives

Gregg Swearingen -

Michael F. Koehler - Chief Executive Officer, President, Director and Member of Executive Committee

Stephen M. Scheppmann - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Analysts

Wamsi Mohan - BofA Merrill Lynch, Research Division

Katy Huberty - Morgan Stanley, Research Division

Matt J. Summerville - KeyBanc Capital Markets Inc., Research Division

Rahul Bhangare

Bill C. Shope - Goldman Sachs Group Inc., Research Division

Edward Maguire - Credit Agricole Securities (USA) Inc., Research Division

Brent Thill - UBS Investment Bank, Research Division

James Derrick Wood - Susquehanna Financial Group, LLLP, Research Division

Raimo Lenschow - Barclays Capital, Research Division

Shebly Seyrafi - FBN Securities, Inc., Research Division

Brad Reback - Oppenheimer & Co. Inc., Research Division

Presentation

Operator

Welcome to the Q4 2011 Teradata Earnings Call. My name is John, and I'll be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Mr. Gregg Swearingen. Mr. Swearingen, you may begin.

Gregg Swearingen

Good morning, and thanks for joining us for our 2011 Fourth Quarter Earnings Call. Mike Koehler, Teradata's CEO, will begin today by summarizing Teradata's Q4 results. Steve Scheppmann, Teradata's CFO, will then provide more details regarding our financial performance, as well as our guidance for 2012. Darryl McDonald, Teradata's EVP of Applications, Business Development & CMO is also in the room to answer questions.

Our discussion today includes forecasts and other information that are considered forward-looking statements. While these statements reflect our current outlook, they are subject to a number of risks and uncertainties that could cause actual results to vary materially. These risk factors are described in Teradata's 10-K and other filings with the SEC.

On today's call, we will also be discussing certain non-GAAP financial information, which excludes stock-based compensation expense and other special items, as well as other non-GAAP items such as free cash flow and constant currency revenue comparisons. A reconciliation of our non-GAAP results to our reported GAAP results and other information concerning these measures is included in our earnings release and on the Investor page of Teradata's website, which can be found at teradata.com. A replay of this conference call will also be available later today on our website.

Teradata assumes no obligation to update or revise the information included in this conference call, whether as a result of new information or future results.

I'll now turn the call over to Mike.

Michael F. Koehler

Thanks, Gregg, and good morning, everyone. Teradata ended 2011 with the highest revenue growth ever achieved for a quarter during the past decade. Q4 revenue of $673 million was up 23% over prior years reported and in constant currency. And non-GAAP earnings per share of $0.66 grew 25%. Product revenue increased 24% in Q4, which was well above the 20% growth rate we have averaged in 2010 and 2011. Services revenue continued its strong growth at 22%, and our non-GAAP gross margin rate improved 70 basis points to 56.5%.

New customer wins were at record levels in Q4, making this one of the finest quarters ever achieved for Teradata. For the full year, revenue finished at $2.36 billion, and non-GAAP earnings per share finished at $2.32. Revenue growth of 22% as reported and 19% in constant currency was by far the highest annual growth rate for Teradata.

We were particularly pleased with the growth of our core Data Warehouse business in 2011, which grew 16% net of currency and acquisitions. Our previous highest growth rate was in 2010 when revenue grew 12% in constant currency.

For the year, we also had a record number of Data Warehouse new customer wins, and Aprimo was close to their all-time record for new customer wins as well. Among the new customers joining Teradata in 2011 were 18 companies that are in the Fortune 500. And finally, our new sales territories finished well above the $120 million revenue target we set for 2011.

With this increased demand, we chose to add more resources into the existing new territories to capture the revenue opportunity. In addition, we consolidated or reduced some of the existing new territories added from previous years to optimize the return on our investments. As a result, we exited the year with 45 net new territories versus the increased target of 60 we set in July, well above the original target of 30 we set at the beginning of the year. Overall, Q4 and 2011 were the best quarter and the best year ever for Teradata.

Turning to the regions, all 3 regions grew more than 20% in constant currency in Q4. The Americas fourth quarter revenue was up 22% as reported and in constant currency, and for the full year grew revenue 21% as recorded and in constant currency to a total of $1.44 billion.

The Americas set records for new customer wins for the year and in the quarter, including: One of the largest military medical agencies, which is implementing Aster Data to unify and analyze huge volumes of multi-structured, clinical and patient data to improve treatments while reducing the cost of care; AARP selected Aprimo Marketing Studio On Demand to increase coordination of various marketing functions, with the intent of improving their member experience; and at one of the largest financial services companies, which is installing an integrated data warehouse to increase operational efficiencies, better understanding risks and reducing fraud. This customer is also a user of Aprimo.

Read the rest of this transcript for free on seekingalpha.com