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Teradata Reports Fourth Quarter and Full-Year 2014 Results
- Full-year revenue of $2.732 billion, up 1 percent, up 3 percent in constant currency(1)
- Fourth quarter revenue was $761 million, down 1 percent, up 3 percent in constant currency(1)
- GAAP EPS of $0.77 in the quarter, $2.33 for the full-year period
- Non-GAAP EPS of $0.91 in the quarter, $2.86 for the full-year period(2)
- Cash from Operations increased 54 percent in the quarter, and 33 percent to $680 million for the year
Teradata Corp. (NYSE: TDC) reported revenue of $761 million for the quarter ended December 31, 2014, versus $769 million in the fourth quarter of 2013. Fourth quarter revenue decreased 1 percent when compared to the prior year period, but increased 3 percent when compared in constant currency.(1) For the full-year 2014, revenue was $2.732 billion, a 1 percent increase from $2.692 billion in 2013. In constant currency, full-year revenue increased 3 percent.(1) Currency created a headwind of 4 percent for the fourth quarter revenue comparison, and 2 percent for the full-year comparison.
Gross margin was 55.8 percent, versus 56.0 percent reported in the fourth quarter of 2013 under U.S. Generally Accepted Accounting Principles (GAAP). On a non-GAAP basis, excluding stock-based compensation expense and special items described in footnote #2, gross margin was 56.9 percent, versus 57.3 percent in the prior year period.(2) The decrease in non-GAAP gross margin for the quarter resulted primarily from lower product gross margins. On a GAAP basis, gross margin for the full-year 2014 was 54.1 percent, versus 54.7 percent in 2013. On a non-GAAP basis, excluding special items described in footnote #2, 2014 full-year non-GAAP gross margin was 55.5 percent, versus 56.0 percent for the full-year 2013.(2) The decrease in non-GAAP gross margin for the full-year primarily resulted from increased amortization of previously capitalized software and lower consulting services rates.
Teradata reported fourth quarter net income of $118 million, or $0.77 per diluted share, which compared to net income of $112 million, or $0.68 per diluted share, in the fourth quarter of 2013. Stock-based compensation expense and other special items reduced Teradata's 2014 fourth quarter net income by $22 million, or $0.14 of earnings per diluted share, as reported under GAAP.(2) Excluding stock-based compensation expense and special items, non-GAAP net income in the fourth quarter of 2014 was $140 million, or $0.91 per diluted share, versus $144 million, or $0.88 per diluted share, in the fourth quarter of 2013.(2)
Full-year net income reported under GAAP was $367 million, or $2.33 per diluted share, which compared to net income of $377 million, or $2.27 per diluted share in 2013. Stock-based compensation expense and other special items reduced Teradata's 2014 net income by $85 million, or $0.53 of earnings per diluted share.(2) Excluding stock-based compensation expense and special items, full-year non-GAAP net income was $452 million, or $2.86 per diluted share in 2014, compared to $459 million, or $2.76 per diluted share in 2013.(2)
"Teradata's fourth quarter and full-year financial results were roughly in line with what we were expecting, however we are not satisfied with these results," said Mike Koehler, president and chief executive officer, Teradata Corporation. "We were pleased with the record number of new customer wins for the quarter and with the second highest number of wins for the year, along with the additions we made to our Big Data Analytics and Marketing Applications portfolios.
"We are increasing investments significantly in 2015 in Big Data Analytics, Marketing Applications, Teradata Cloud, and in demand creation to go broader in the market. Although this will impact earnings in 2015, we believe these investments will position us well for longer term revenue and earnings growth."
Fourth quarter GAAP operating income of $158 million compared to $177 million reported in the fourth quarter of 2013. On a non-GAAP basis, operating income was $187 million versus $205 million in the fourth quarter of 2013.(2) The decrease was primarily due to lower revenue and product gross margin as well as higher R&D expense.
Full-year operating income was $503 million in 2014, versus $532 million in 2013. On a non-GAAP basis, full-year operating income was $621 million, versus $641 million in 2013.(2) The year-over-year decrease was due to lower gross margin and higher R&D and selling expense.
Teradata's GAAP tax rate was 24.8% in the fourth quarter 2014 versus 27.3% in 2013, and the non-GAAP tax rate was 25.1% as compared to 29.4% in 2013.(2) The year-over-year decrease was largely driven by a higher proportion of foreign pre-tax earnings in 2014 versus the prior period, and a $4 million discrete tax benefit for the retroactive reinstatement of the 2014 U.S. Federal Research and Development Tax Credit recognized during the fourth quarter of 2014.
The full-year 2014 GAAP tax rate was 25.7% versus 25.8% for 2013. The full-year 2014 non-GAAP tax rate was 27.2% as compared to 28.2% for 2013.(2) There were no material discrete tax items impacting the non-GAAP tax rates for full-year 2014 or 2013. The decrease between periods was driven by a higher proportion of foreign pre-tax earnings in 2014 versus the prior period.
During the fourth quarter of 2014, Teradata generated $97 million of cash from operating activities, compared to $63 million in the prior-year period. Teradata generated $62 million of free cash flow (cash from operating activities less capital expenditures and additions to capitalized software)(3) in the fourth quarter of 2014, versus $25 million in the same period in 2013.
For the full-year, Teradata generated $680 million of cash from operating activities, compared to $510 million in 2013. Teradata generated $551 million of free cash flow(3) in 2014, versus $372 million in 2013. The timing of accounts receivable collections in 2014 was the primary driver that led to the higher free cash flow in the fourth quarter and full-year periods of 2014 as compared to 2013.
Teradata ended the quarter with $834 million in cash, a $139 million increase from December 31, 2013.
During the quarter, Teradata purchased approximately 6.1 million shares of its stock for $268 million. For the full-year 2014, Teradata acquired approximately 13 million shares for $560 million.
As of December 31, 2014, Teradata had total debt of approximately $468 million, including $248 million outstanding under a term loan and $220 million drawn on its $300 million credit facility.
Teradata expects full-year 2015 reported revenue to be flat to down 2 percent as compared to 2014. On a constant currency basis, revenue is expected to grow 3 - 5 percent in 2015.(1)
Reflecting investments Teradata expects to make in 2015 as well as the negative impact of currency translation, earnings per share for the full-year 2015 is expected to be in the $1.91-$2.11 range on a GAAP basis and $2.50-$2.70 on a non-GAAP basis, which excludes stock-based compensation expense and other special items.(2) Teradata expects approximately $0.22 of negative impact from currency translation in 2015, which is included in Teradata's GAAP and non-GAAP EPS guidance.
A conference call is scheduled today at 8:30 a.m. (ET) to discuss the company's fourth quarter and full-year 2014 results. Access to the conference call, as well as a replay of the call, is available on Teradata's website at investor.teradata.com.
Supplemental financial information regarding Teradata's operating results is also available on the Investor Relations page of Teradata's website.
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