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Teradata Misses on Q3 Earnings and Revenues, Lowers View


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Teradata Corp. TDC reported third quarter adjusted earnings per share (including stock-based compensation expense but excluding other items) of 48 cents, missing the Zacks Consensus Estimate of 50 cents and also falling short of the year-ago quarter earnings of 66 cents.

The company reported non-GAAP earnings of 55 cents a share, down 8.3% on a year-over-year basis.

Quarterly revenues of $606 million missed the Zacks Consensus Estimate of $637 million and also dropped 9% year over year.

Quarterly Segment Details

Services revenues dipped 2% from the year-ago quarter to $366 million. Consulting revenues were down 3% from the year-ago quarter to $194 million while Maintenance services declined 1% year over year to $172 million.

Products revenues decreased 18% year over year to $240 million.

Margin

Adjusted gross margin (including stock-based compensation expense but excluding other items) contracted 180 basis points (bps) from the year-ago quarter to 51.7%, due to lower revenues and lower service margins in the Marketing Applications business.

Non-GAAP operating income was $107 million, down from $150 million in the prior-year quarter.

Balance Sheet

Teradata exited the quarter with $874 million in cash and cash equivalents compared with $921 million as on Jun 30, 2015. Teradata had long-term debt of $577 million at the end of the quarter compared with $585 million in the previous quarter.

Teradata generated cash flow from operations of $68 million in the quarter compared with $102 million in the previous quarter. Free cash flow generated in the quarter was $33 million compared with $66 million in the previous quarter.

Restructuring Plan

Teradata plans to optimize its cost structure and streamline its operations to drive long-term growth.The company also intends to exit from its Marketing Application business to focus on its Data and Analytics business, which seems more promising.

Among other things, Teradata is also bringing out a cloud version of its offerings to provide more flexible options to its clients. The first  cloud version of Teradata is set to come on Amazon's AMZN Web Services in the first quarter of 2016.

Guidance

The company lowered its guidance for 2015. The company expects revenues to decrease 6% to 7% (earlier expectation was a decline of 3% - 6%) on a reported basis but flat to down 2% (earlier projection was flat to up 3%) on a constant currency basis compared with 2014.

Loss per share in 2015 is expected in the range of 51 cents to 71 cents (more than the previous projection of a loss of 32 cents to 62 cents) on a GAAP basis. On a non-GAAP basis (excluding stock-based compensation expense and other special items), the company projects earning in the range of $2.00 - $2.20 per share, down from the earlier guided range of $2.20-$2.50.

In fiscal 2016, the company expects benefits of nearly $120 million in its operating income, owing to cost reduction initiatives and its exit from the Marketing Applications business.

To Conclude

In the near term, the company will likely be impacted by its ongoing restructuring activities. Nonetheless, Teradata is a leading provider of data warehousing and enterprise analytics. The company is positioning itself well to benefit from the robust growth in the data warehousing market by developing a strong product portfolio and through customer wins, strategic partnerships and accretive acquisitions.

In fact, for the 15th consecutive year, the company has been categorized as a leader in Gartner's Magic Quadrant for Data Warehouse Database Management Systems, followed by Oracle ORCL and IBM Corporation IBM .

However, given the restructuring related costs, a sluggish spending environment in the domestic market and increasing competition from peers, resulting in continued pricing pressure, can weigh on its financials.

Currently, Teradata has a Zacks Rank #3 (Hold).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.





This article appears in: Business , Investing , Earnings , Stocks
Referenced Symbols: TDC , AMZN , IBM , ORCL




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