Teradata TDC reported third-quarter 2024 non-GAAP earnings of 69 cents per share, which beat the Zacks Consensus Estimate by 23.21%. The bottom line increased 64% year over year.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Revenues of $440 million beat the Zacks Consensus Estimate by 5.02%. The figure was flat year over year on a reported basis and 2% on a constant-currency (cc) basis.

Total annual recurring revenues (ARR) at the third-quarter end declined 3% year over year to $1.482 billion. The figure fell 4% at cc.

Public cloud ARR increased 26% on a reported basis and 24% at cc year over year to $570 million. The growth was driven by increasing demand for its cloud solutions.

The cloud net expansion rate was 120%, reflecting ongoing customer engagement and expansion within existing accounts.

The company’s shares have underperformed the Zacks Computer & Technology sector year to date. The stock has plunged 23.3% against the sector’s increase of 14.3%. We believe the raised guidance will help TDC stock to recover.

TDC Top Line in Detail

Recurring revenues (contributing 84.5% to revenues) increased 3% year over year on a reported basis (increased 5% at cc) to $372 million.

Perpetual software license and hardware revenues (1.6% of revenues) aligned year over year (up 2% at cc) to $7 million.

Consulting services’ revenues (13.9% of revenues) fell 14% year over year (down 12% at cc) to $61 million.

Revenues from Product Sales increased 3% year over year on a reported basis (up 5% at cc) to $379 million.

In the third quarter, Teradata strengthened its customer pipeline, achieving new deals with major enterprises like a U.S. insurance company and a large Asia-Pacific bank, which chose Teradata for high-performance data needs.

TDC’s advancements in AI capabilities, such as enhancements to its ClearScape Analytics platform, were well-received. The introduction of “bring-your-own-language models” and integration with NVIDIA’s AI platform also positioned Teradata as a strategic AI partner for its customers.

TDC Operating Details

The gross margin on a non-GAAP basis was 61.6%, expanding 130 basis points (bps) year over year.

Selling, general & administrative (SG&A) expenses declined 12.2% year over year to $137 million. Research & development (R&D) expenses were $73 million, down 3.9% year over year.

As a percentage of revenues, SG&A contracted 450 bps year over year to 31.1%, whereas R&D contracted 160 bps year over year to 16.6%.

The non-GAAP operating margin was 22.5%, up 810 bps year over year.

TDC Balance Sheet

As of Sept. 30, 2024, Teradata had cash and cash equivalents of $348 million compared with $301 million as of June 30, 2024.

Long-term debt as of Sept. 30, 2024, was $461 million compared with $467 million as of June 30, 2024.

In the third quarter, TDC generated $77 million in cash from operating activities compared with the previous quarter’s $43 million.

The company generated a free cash flow of $69 million in the reported quarter.

TDC Initiates 2024 Guidance

For fourth-quarter 2024, non-GAAP earnings are expected to be between 40 and 44 cents per share. 

For 2024, TDC expects non-GAAP earnings between $2.30 and $2.34 per share. 

Public cloud ARR growth is projected to be between 18% and 22% on a year-over-year basis.

Total ARR is expected to decline 2-4% year over year.

Teradata expects recurring revenues to remain flat at a loss of 2% year over year.

The company expects total revenues to be down 2-4% from the year-ago reported figure. 

Cash flow from operations is expected to be between $290 million and $310 million. 

Free cash flow is anticipated to be in the $270-$290 million range.

Zacks Rank & Stocks to Consider

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

Shopify SHOP, Arista Networks ANET and Blackline BL are some better-ranked stocks that investors can consider in the broader sector. Each stock presently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shopify shares have risen 0.7% year to date. SHOP is set to report its third-quarter 2024 results on Nov. 12.

Arista Networks shares have rallied 67.6% year to date. ANET is set to report its third-quarter 2024 results on Nov. 7.

Blackline shares have lost 11.8% year to date. BL is set to report its third-quarter 2024 results on Nov. 7.

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