8-K
TERADATA CORP /DE/ (TDC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): May 5, 2020
TERADATA CORPORATION
(Exact Name of Registrant as Specified in its Charter)
| Delaware | 001-33458 | 75-3236470 |
|---|---|---|
| (State or Other Jurisdiction<br> <br>of Incorporation) | (Commission<br> <br>File Number) | (I.R.S. Employer<br> <br>Identification No.) |
| 17095 Via Del Campo<br> <br>San Diego, California | 92127 | |
| --- | --- | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number including area code: (866) 548-8348
N/A
(Former Name or Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading<br> <br>Symbols | Name of Each Exchange<br> <br>on which Registered |
|---|---|---|
| Common Stock, $0.01 par value | TDC | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Results of Operations and Financial Condition. |
|---|
On May 7, 2020, Teradata Corporation (the “Company” or “Teradata”) issued a press release setting forth its first-quarter 2020 operating results as well as current recurring revenue and earnings per share outlook estimates for the second quarter of 2020 (the “Earnings Release”), as set forth below in Item 7.01, and incorporated herein by reference. A copy of the Earnings Release is attached hereto as Exhibit 99.1 and hereby incorporated by reference. Such information, including Exhibit 99.1 attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934.
| Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
|---|
Election of Stephen McMillan as President and Chief Executive Officer and Director
On May 5, 2020, Teradata’s Board of Directors (the “Board”) elected Stephen McMillan as President and Chief Executive Officer (“CEO”) of the Company, effective as of June 8, 2020 (the “Effective Date”), succeeding Victor L. Lund, who will depart as Interim President and CEO as of the Effective Date.
Mr. McMillan, age 49, has served as the Executive Vice President of Global Services for F5 Networks, Inc., a transnational company that specializes in application services and application delivery networking, since October 2017. Prior to joining F5, from September 2015 until October 2017, he was Senior Vice President, Customer Success and Managed Cloud Services at Oracle Corporation (“Oracle”). From May 2012 to September 2015, he served as Senior Vice President, Managed Cloud Services at Oracle. Prior to joining Oracle, Mr. McMillan spent 19 years at International Business Machines Corporation, where he held a number of leadership roles focused on global managed services, consulting, and information technology.
In connection with his election as President and CEO, on May 5, 2020, Teradata entered into an offer letter with Mr. McMillan (the “Offer Letter”). The Offer Letter provides that Mr. McMillan will receive an initial annual base salary of $800,000, a target annual incentive bonus opportunity of 125% of his base salary under the Company’s management incentive plan (pro-rated for 2020), and will be eligible to participate in the other benefit plans generally made available to the Company’s senior executives, including the Company’s Executive Severance Plan (“ESP”) and change in control plan.
The Offer Letter also provides that Mr. McMillan will be paid a signing bonus of $500,000, which is subject to a repayment obligation of $250,000 of such amount (net of taxes) if Mr. McMillan’s employment is terminated with cause or he resigns for any reason other than good reason during his first year of employment, and $125,000 of such amount (net of taxes) if Mr. McMillan’s employment is terminated with cause or he resigns for any reason other than good reason during his second year of employment. He will receive an allowance of $15,000 per month to cover his commuting costs.
In addition, the Offer Letter provides that, on or about June 9, 2020, and subject to his commencing employment with the Company, he will receive the following equity awards: (i) a new hire grant (the “New Hire Award”) of service-based restricted share units (“RSUs”), intended to offset compensation that Mr. McMillan is forfeiting from his prior employer, with a target value equal to $4,662,327, which shall vest as follows: 45% on December 1, 2020, 42% on the first anniversary of the date of grant, and 13% on the second anniversary of the date of grant, in each case subject to continued employment; (ii) an annual grant of service-based RSUs under Teradata’s 2020 long-term equity program (the “2020 RSU Award”) with a target value of $3,400,000, which shall vest in equal annual installments on the first, second and third anniversaries of the grant date, in each case subject to continued employment; and (iii) an annual grant of performance-based RSUs under Teradata’s 2020 long-term equity program (the “2020 PBRSU Award”) with a target value of $5,100,000, subject to a three-year performance period commencing January 1, 2020 and achievement of the same performance goals applicable to other senior executives of Teradata. The New Hire Award is subject to accelerated vesting in full, and each of the 2020 RSU Award and the 2020 PBRSU Award is subject to pro-rated vesting (subject to a minimum of two years of vesting credit), upon a termination of Mr. McMillan’s employment by Teradata without cause or by McMillan with good reason (with the 2020 PBRSU Award vesting based on actual performance results for the entire performance period).
With respect to Mr. McMillan’s participation in the ESP, the Offer Letter provides that Mr. McMillan will participate as a Level I participant under the terms and conditions of the ESP, amended as follows: (i) he is entitled to receive severance under the ESP in the event he resigns for good reason at any time (and not just in connection with a change in control) upon giving the Company notice and an opportunity to cure, and (ii) upon a qualified termination under the ESP, he is entitled to enhanced vesting of any outstanding but unvested service-based or performance-based restricted share units (other than the New Hire Award, the 2020 RSU Award and the 2020 PBRSU Award), such that he will be treated as receiving an additional year of vesting for both types of awards (with payout of any performance awards subject to actual performance results during the applicable performance period).
Mr. McMillan will become subject to the Company’s stock ownership guidelines applicable to the chief executive officer position. He will also be entitled to standard indemnification and insurance coverage available to the Company’s other executive officers.
On May 5, 2020, the Board also elected Mr. McMillan as a director, effective as of the Effective Date. Mr. McMillan was elected to Class III, with a term expiring at the Annual Meeting of Stockholders in 2022, or until such time as his successor is duly elected and qualified or as is otherwise provided in Teradata’s Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws. Mr. McMillan was elected to serve as a member of the Executive Committee of the Board, effective as of the Effective Date. Mr. McMillan will not receive any additional compensation for his service as a director.
There are no arrangements or understandings between Mr. McMillan and any other person pursuant to which he was elected as President and CEO or director, and there are no family relationships between Mr. McMillan and any of the Company’s other directors or executive officers. There are no transactions in which Mr. McMillan has a direct or indirect interest that would be required to be disclosed under Item 404(a) of Regulation S-K.
Departure of Victor Lund as Interim President and Chief Executive Officer and Director
In connection with Mr. McMillan’s election as President and CEO, upon the Board’s request, Mr. Lund resigned as a director and as an employee of Teradata, effective as of the Effective Date. In connection with Mr. Lund’s departure, under the terms of Mr. Lund’s outstanding equity awards, his unvested performance-based and service-based RSUs outstanding as of the Effective Date shall vest in full (with payout of any performance awards subject to actual performance results during the applicable performance period).
As of the Effective Date, Mr. Lund will provide CEO transition services as an advisor to Mr. McMillan for the remainder of 2020 and shall receive a consulting fee equal to the continuation of his current base salary of $83,333.33 per month, pursuant to a consulting agreement entered into between the Company and Mr. Lund (the “Consulting Agreement”). The Consulting Agreement enables Mr. Lund, who possesses deep knowledge of the Company and its strategy as well as experience as a chief executive officer of international public companies, to be available to Mr. McMillan for consultation through completion of the current fiscal year.
The foregoing is only a brief description of the above-specified compensatory arrangements, does not purport to be a complete description of the rights and obligations of the parties thereunder and is qualified in its entirety by reference to the Offer Letter, award agreements, ESP participation agreement, and Consulting Agreement that will be filed as exhibits to the Company’s Quarterly Report on Form 10-Q for the quarter ending June 30, 2020.
| Item 7.01 | Regulation FD Disclosure. |
|---|
The information set forth above under Item 2.02 “Results of Operations and Financial Condition” is furnished pursuant to this Item 7.01 and Exhibit 99.1 is hereby incorporated by reference into this Item 7.01.
On May 7, 2020, Teradata issued a press release (the “Management Change Press Release”) with respect to the matters described under Item 5.02 “Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers,” a copy of which is furnished pursuant to this Item 7.01, and is attached hereto as Exhibit 99.2 and incorporated herein by reference.
| Item 9.01 | Financial Statements and Exhibits. |
|---|---|
| (d) | Exhibits |
| --- | --- |
The following exhibits are attached with this Current Report on Form 8-K:
| Exhibit<br> <br>No. | Description | |
|---|---|---|
| 99.1 | Press Release dated May 7, 2020, issued by the Company (Earnings Release). | |
| 99.2 | Press Release dated May 7, 2020, issued by the Company (Management Change Press Release). | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Teradata Corporation | |
|---|---|
| By: | /s/ Mark Culhane |
| Mark Culhane | |
| Chief Financial Officer |
Dated: May 7, 2020
EX-99.1
Exhibit 99.1
| INVESTOR CONTACT<br><br><br>Nabil Elsheshai<br> <br>858-485-2125 office<br> <br>nabil.elsheshai@teradata.com<br><br><br><br> <br>MEDIA CONTACT<br><br><br>Jennifer Donahue<br> <br>858-485-3029 office<br><br><br>jennifer.donahue@teradata.com |
|---|
Teradata Reports First Quarter 2020 Financial Results
| • | Teradata continued to make progress on key Cloud, Vantage, and Go-to-market efforts in the first quarter |
|---|---|
| • | The Company’s technology is critical in supporting customers during<br>COVID-19 and Teradata used this opportunity to further support customers and deepen relationships |
| --- | --- |
| • | Teradata’s first-quarter results were negatively impacted by<br>COVID-19 |
| --- | --- |
| • | The Company is withdrawing its full-year 2020 guidance due to uncertainties relating to COVID-19 |
| --- | --- |
SAN DIEGO – May 7, 2020 — Teradata Corp. (NYSE: TDC) today announced its first-quarter 2020 financial results. Business trends through the first two-thirds of the quarter were normal, however the second half of March saw a significant number of deals postponed which negatively impacted first-quarter results. Recurring revenue increased 4 percent, 6 percent in constant currency^(1)^, from the first quarter of 2019. Annual recurring revenue (ARR) increased 6 percent, 8 percent in constant currency^(1)^, from the first quarter of 2019. Total first-quarter revenue was $434 million, compared to 2019 first-quarter total revenue of $468 million. As the company continues to shift to a recurring revenue model and focuses its consulting business on higher-margin engagements, both perpetual and consulting revenues declined versus prior year as expected. In addition, currency translation had a 1 percentage point negative impact on the first-quarter total revenue comparison.
“Teradata is focused on supporting our customers and employees through the COVID-19 pandemic. Our history of fostering strong customer relationships and our long-standing position delivering business essential analytics are foundational to our customers in these challenging times,” said Vic Lund, Interim CEO, Teradata. “Our resilience has been proven as we advance our key strategic initiatives including accelerating our transition to the Cloud, driving broader adoption of Vantage, and expanding our go-to-market opportunities. Our extensive enterprise customer base, mission critical technology, and strong financial condition position us well to emerge stronger from the pandemic.”
Teradata reported 2020 first-quarter net income of $168 million under U.S. Generally Accepted Accounting Principles (GAAP), or $1.51 per diluted share, which compared to a net loss of $(10) million, or $(0.09) per share, in the first quarter of 2019. As previously disclosed, the company restructured certain of its intellectual property (IP) and recognized a discrete tax benefit in the quarter which contributed $1.41 per diluted share to EPS on a GAAP basis. Non-GAAP 2020 first-quarter net income, which excludes the IP restructuring tax benefit, stock-based compensation expense and other special items, was $30 million, or $0.27 per diluted share, as compared to $26 million, or $0.22 per diluted share, in the first quarter of 2019^(2)^.^^
1
Gross Margin
2020 first-quarter gross margin reported under GAAP was 51.8 percent versus 47.9 percent for the first quarter of 2019. On a non-GAAP basis, excluding stock-based compensation expense and other special items, 2020 first-quarter gross margin was 54.1 percent, versus 51.5 percent in the prior-year period^(2)^. Gross margin was higher year-over-year due primarily to continued mix shift, away from perpetual hardware and consulting to higher margin recurring revenue.
Operating Loss / Income
2020 first-quarter operating loss reported under GAAP was $(6) million which compares to $(5) million in the first quarter of 2019. On a non-GAAP basis, excluding stock-based compensation expense and other special items, 2020 first-quarter operating income was $32 million versus $41 million in the first quarter of 2019^(2)^. The decrease in non-GAAP operating income was primarily driven by revenue-related headwinds due to the impact of COVID-19, as well as ongoing investments related to our go-to-market and Cloud initiatives.
Income Taxes
Teradata’s 2020 first-quarter tax rate under GAAP was 1,300.0 percent compared to 0.0 percent in the first quarter of 2019, primarily driven by the recognition of a $157 million tax benefit related to the IP restructuring previously disclosed. Excluding special items, Teradata’s non-GAAP 2020 first-quarter tax rate was negative 25.0 percent versus 27.8 percent in the first quarter of 2019^(2)^.
Cash Flow
During the first quarter of 2020, Teradata generated $10 million of cash from operating activities compared to $49 million in the same period of 2019. During the quarter, Teradata used $12 million for capital expenditures and additions to capitalized software development costs, versus using $16 million in the first quarter of 2019. Teradata’s 2020 first-quarter free cash flow was $(2) million, compared to $33 million in the first quarter of 2019^(3)^. The decline in free cash flow year-over-year was primarily driven by over $30 million of delayed cash collections related to COVID-19, the majority of which were collected in April.
Balance Sheet
Teradata ended the first quarter 2020 with $394 million in cash. During the first quarter of 2020, Teradata repurchased 3.7 million shares of the Company’s common stock for approximately $75 million. At the end of the first quarter, Teradata had approximately $432 million of board authorization remaining for share repurchases and 108.3 million shares outstanding. However, as a precautionary measure, the Company has suspended its share buyback program due to the ongoing COVID-19 pandemic to help ensure it has appropriate cash levels to support its customers and employees.
As of March 31, 2020, the Company had total debt of $610 million, including $135 million of outstanding finance lease obligations. There were no funds drawn on the company’s $400 million revolving credit facility as of March 31, 2020.
2
Teradata’s Response to COVID-19
First and foremost, our thoughts are with those who has been impacted by COVID-19, directly or indirectly. The health of our employees, our customers and our communities is paramount in these unprecedented times. As COVID-19 spread rapidly around the world during the first quarter, Teradata took a number of measures to support our customers and protect our employees, including, among other things:
| 1. | To help limit the spread of the virus, our associates are working from home, we are limiting company travel and<br>have transitioned our marketing events to be entirely virtual; |
|---|---|
| 2. | Our focus is on helping our customers through this pandemic by continuing to deliver the highest levels of<br>performance, availability and peace of mind; |
| --- | --- |
| 3. | In support of the broader global community, we will also be making some of our technology available for our<br>customers, partners, and communities - particularly in healthcare, government and other verticals where collectively, we can positively impact efforts in combating COVID-19; and |
| --- | --- |
| 4. | Finally, because the situation is dynamic, we instituted a Pandemic Response Team which will continue to<br>monitor the guidance from leading global health organizations and take the appropriate steps to keep all of our stakeholders safe and healthy. |
| --- | --- |
Guidance
Due to the evolving nature and uncertain impact of COVID-19 on Teradata’s operating and financial results, the Company is withdrawing its guidance for the full-year 2020, which was provided on February 6, 2020.
For the second quarter of 2020, Teradata expects recurring revenue in the range between $348 million and $352 million.
GAAP loss per share in the second quarter of 2020 is expected to be in the $(0.09) to $(0.06) range. Non-GAAP earnings per share, excluding stock-based compensation expense and other special items, in the second quarter is expected to be in the $0.19 to $0.22 range^(2)^.
Earnings Conference Call
A conference call is scheduled today at 2:00 p.m. PT to discuss the Company’s 2020 first-quarter results and provide a business and financial update. Access to the conference call, as well as a replay of the conference call, is available on Teradata’s website at investor.teradata.com.
3
Supplemental Financial Information
Additional information regarding Teradata’s operating results is provided below as well as on Teradata’s website at investor.teradata.com.
| 1. | The impact of currency is determined by calculating the prior-period results using the current-year monthly<br>average currency rates (except for currency impact on ARR which is calculated using month-end rates). See the foreign currency fluctuation schedule on the Investor Relations page of the Company’s web site<br>at investor.teradata.com, which is used to determine revenue on a constant currency (“CC”) basis. |
|---|
Revenue
(in millions)
| For the Three Months ended March 31 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | % Change asReported | % Change inConstant Currency | |||||||
| Recurring revenue | $ | 345 | $ | 331 | 4 | % | 6 | % | ||
| Perpetual software licenses and hardware | 14 | 31 | (55 | %) | (55 | %) | ||||
| Consulting services | 75 | 106 | (29 | %) | (28 | %) | ||||
| Total revenue | $ | 434 | $ | 468 | **** | (7 | %) | **** | (6 | %) |
| Americas | $ | 244 | $ | 269 | (9 | %) | (9 | %) | ||
| EMEA | 118 | 113 | 4 | % | 6 | % | ||||
| APAC | 72 | 86 | (16 | %) | (13 | %) | ||||
| Total revenue | $ | 434 | $ | 468 | **** | (7 | %) | **** | (6 | %) |
| As of March 31 | ||||||||||
| 2020 | 2019 | % Change asReported | % Change inConstant Currency | |||||||
| Annual recurring revenue (ARR)* | $ | 1,402 | $ | 1,319 | **** | 6 | % | **** | 8 | % |
| * | Annual recurring revenue is defined as the annual value at a point in time of all recurring contracts,<br>including subscription, software upgrade rights, maintenance and managed services. | |||||||||
| --- | --- | |||||||||
| 2. | Teradata reports its results in accordance with GAAP. However, as described below, the Company believes that<br>certain non-GAAP measures, such as non-GAAP gross profit, non-GAAP operating income,<br>non-GAAP net income, and non-GAAP earnings per diluted share, or EPS, all of which exclude certain items (as well as free cash flow) are useful for investors. Our non-GAAP measures are not meant to be considered in isolation or as substitutes for, or superior to, results determined in accordance with GAAP, and should be read only in conjunction with our condensed consolidated<br>financial statements prepared in accordance with GAAP. | |||||||||
| --- | --- |
The following tables reconcile Teradata’s actual and projected results and EPS under GAAP to the Company’s actual and projected non-GAAP results and EPS for the periods presented, which exclude certain specified items. Our management internally uses supplemental non-GAAP financial measures, such as gross profit, operating income, net income and EPS, excluding certain items, to understand, manage and evaluate our business and support operating decisions on a regular basis. The Company believes such non-GAAP financial measures (1) provide useful information to investors regarding the underlying business trends and performance of the Company’s ongoing operations, (2) are useful for period-over-period comparisons of such operations and results, that may be more easily compared to peer companies and allow investors a view of the Company’s operating results excluding stock-based compensation expense and special items, (3) provide useful information to management and investors regarding present and future business trends, and (4) provide consistency and comparability with past reports and projections of future results.
4
Teradata’s reconciliation of GAAP to non-GAAP results included in this release.
| For the<br><br><br>Three Months | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| (in millions, except per share data) | ended March 31 | ||||||||
| Gross Profit: | 2020 | 2019 | % Chg. | ||||||
| GAAP Gross Profit | $ | 225 | $ | 224 | — | % | |||
| % of Revenue | 51.8 | % | 47.9 | % | |||||
| Excluding: | |||||||||
| Stock-based compensation expense | 4 | 3 | |||||||
| Acquisition, integration, reorganization-related, and other costs | — | 3 | |||||||
| Amortization of capitalized software | 6 | 11 | |||||||
| Non-GAAP Gross Profit | $ | 235 | $ | 241 | (2 | %) | |||
| % of Revenue | 54.1 | % | 51.5 | % | |||||
| Operating (Loss) | |||||||||
| GAAP Operating Loss | $ | (6 | ) | $ | (5 | ) | (20 | %) | |
| % of Revenue | (1.4 | %) | (1.1 | %) | |||||
| Excluding: | |||||||||
| Stock-based compensation expense | 21 | 15 | |||||||
| Amortization of acquisition-related intangible assets | 1 | 2 | |||||||
| Acquisition, integration, reorganization-related, and other costs | 10 | 18 | |||||||
| Amortization of capitalized software | 6 | 11 | |||||||
| Non-GAAP Operating Income | $ | 32 | $ | 41 | (22 | %) | |||
| % of Revenue | 7.4 | % | 8.8 | % | |||||
| Net Income / (Loss) | |||||||||
| GAAP Net Income / (Loss) | $ | 168 | $ | (10 | ) | 1,780 | % | ||
| % of Revenue | 38.7 | % | (2.1 | %) | |||||
| Excluding: | |||||||||
| Stock-based compensation expense | 21 | 15 | |||||||
| Amortization of acquisition-related intangible assets | 1 | 2 | |||||||
| Acquisition, integration, reorganization-related, and other costs | 10 | 18 | |||||||
| Amortization of capitalized software | 6 | 11 | |||||||
| IP Restructuring Tax Benefit^(1)^ | (157 | ) | — | ||||||
| Tax Contingency adjustment^(2)^ | (18 | ) | — | ||||||
| Income tax adjustments^(3)^ | (1 | ) | (10 | ) | |||||
| Non-GAAP Net Income | $ | 30 | $ | 26 | 15 | % | |||
| % of Revenue | 6.9 | % | 5.6 | % |
5
| For the Three Months<br>ended March 31 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Earnings Per Share: | 2020 | 2019 | 2020 Q2<br>Guidance | |||||
| GAAP Earnings / (Loss) Per Share | $ | 1.51 | $ | (0.09 | ) | (0.09) - (0.06 | ||
| Excluding: | ||||||||
| Stock-based compensation expense | 0.19 | 0.13 | 0.25 | |||||
| Amortization of acquisition-related intangible assets | 0.01 | 0.02 | 0.01 | |||||
| Acquisition, integration, reorganization-related, and other costs | 0.09 | 0.15 | 0.03 | |||||
| Amortization of capitalized software | 0.05 | 0.09 | 0.05 | |||||
| IP Restructuring tax benefit^(1)^ | (1.41 | ) | — | — | ||||
| Tax Contingency adjustment^(2)^ | (0.16 | ) | — | — | ||||
| Income tax adjustments^(3)^ | (0.01 | ) | (0.09 | ) | (0.06 | |||
| Impact of dilution^(4)^ | — | 0.01 | — | |||||
| Non-GAAP Diluted Earnings Per Share | $ | 0.27 | $ | 0.22 | $ | 0.19 – 0.22 |
All values are in US Dollars.
| (1) | The Company’s forecasted full-year 2020 GAAP effective tax rates include $157 million of discrete tax<br>benefit related to an intra-entity asset transfer of certain of its intellectual property to one of its Irish subsidiaries, which occurred on January 1, 2020. The one-time tax benefit for this<br>intra-entity asset transfer was recorded as a deferred tax asset for GAAP reporting purposes in the first quarter of 2020 but was excluded from Non-GAAP results. |
|---|---|
| (2) | The Company’s forecasted full-year 2020 GAAP marginal effective tax rate includes $3 million of tax<br>expense related to tax contingencies pursuant to FIN 48. For GAAP purposes, this is a component of the marginal rate and is recognized as tax benefit or expense based on the Company’s reported GAAP<br>pre-tax income or loss for the quarter. To more accurately reflect the impact of the expense on a quarterly basis for Non-GAAP purposes, the $3 million of tax<br>expense is being recognized ratably each quarter instead of being included in the marginal effective rate. |
| --- | --- |
| (3) | Represents the income tax effect of the pre-tax adjustments to<br>reconcile GAAP to Non-GAAP income based on the applicable jurisdictional statutory tax rate of the underlying item. Including the income tax effect assists investors in understanding the tax provision<br>associated with those adjustments and the effective tax rate related to the underlying business and performance of the Company’s ongoing operations. |
| --- | --- |
As a result of these adjustments, the Company’s non-GAAP effective tax rate for the first quarter of 2020 was (25.0%) and 27.8% in the first quarter of 2019.
| (4) | Represents the impact to earnings per share as a result of moving from basic to diluted shares.<br> |
|---|---|
| 3. | As described below, the Company believes that free cash flow is a useful<br>non-GAAP measure for investors. Teradata defines free cash flow as cash provided by /used in operating activities less capital expenditures for property and equipment, and additions to capitalized software.<br>Free cash flow does not have a uniform definition under GAAP and therefore, Teradata’s definition may differ from other companies’ definitions of this measure. Teradata’s management uses free cash flow to assess the financial<br>performance of the Company and believes it is useful for investors because it relates the operating cash flow of the Company to the capital that is spent to continue and improve business operations. In particular, free cash flow indicates the amount<br>of cash generated after capital expenditures for, among other things, investment in the Company’s existing businesses, strategic acquisitions, strengthening the Company’s balance sheet, repurchase of the Company’s stock and repayment<br>of the Company’s debt obligations, if any. Free cash flow does not represent the residual cash flow available for discretionary expenditures since there may be other nondiscretionary expenditures that are not deducted from the measure. This non-GAAP measure is not meant to be considered in isolation, as a substitute for, or superior to, results determined in accordance with GAAP, and should be read only in conjunction with our condensed consolidated<br>financial statements prepared in accordance with GAAP. |
| --- | --- |
6
| (in millions) | For the Three Months | |||||
|---|---|---|---|---|---|---|
| ended March 31 | ||||||
| 2020 | 2019 | |||||
| Cash provided by operating activities (GAAP) | $ | 10 | $ | 49 | ||
| Less capital expenditures for: | ||||||
| Expenditures for property and equipment | (10 | ) | (15 | ) | ||
| Additions to capitalized software | (2 | ) | (1 | ) | ||
| Total capital expenditures | (12 | ) | (16 | ) | ||
| Free Cash Flow (non-GAAP measure) | $ | (2 | ) | $ | 33 |
Note to Investors
This news release contains forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934. Forward-looking statements generally relate to opinions, beliefs and projections of expected future financial and operating performance, business trends, and market conditions, among other things. These forward-looking statements are based upon current expectations and assumptions and involve risks and uncertainties that could cause actual results to differ materially, including the factors discussed in this release and those relating to: the global economic environment and business conditions in general or on the ability of our suppliers to meet their commitments to us, or the timing of purchases by our current and potential customers; the rapidly changing and intensely competitive nature of the information technology industry and the data analytics business; fluctuations in our operating results, including as a result of the pace and extent to which customers shift from perpetual to subscription-based licenses; our ability to realize the anticipated benefits of our business transformation program or other restructuring and cost saving initiatives; risks inherent in operating in foreign countries, including foreign currency fluctuations; risks associated with the evolving nature and uncertain impact of COVID-19 on our business, financial condition and operating results, including the impact of COVID-19 on our customers and suppliers; risks associated with data privacy, cyberattacks and maintaining secure and effective internal information technology and control systems; the timely and successful development, production or acquisition and market acceptance of new and existing products and services; tax rates; turnover of workforce and the ability to attract and retain skilled employees; protecting our intellectual property; availability and successful exploitation of new alliance and acquisition opportunities; recurring revenue may decline or fail to be renewed; the impact on our business and financial reporting from changes in accounting rules; and other factors described from time to time in Teradata’s filings with the U.S. Securities and Exchange Commission, including its annual report on Form 10-K and subsequent quarterly reports on Forms 10-Q, as well as the Company’s annual report to stockholders. Teradata does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
About Teradata
Teradata transforms how businesses work and people live through the power of data. Teradata leverages all of the data, all of the time, so you can analyze anything, deploy anywhere, and deliver analytics that matter. We call this pervasive data intelligence. And it’s the answer to the complexity, cost, and inadequacy of today’s approach to analytics. Get the answer at teradata.com.
Teradata and the Teradata logo are trademarks or registered trademarks of Teradata Corporation and/or its affiliates in the U.S. and worldwide.
#
7
Schedule A
TERADATA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME
(in millions, except per share amounts - unaudited)
| For the Period Ended March 31 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Three Months | |||||||||
| 2020 | 2019 | % Chg | |||||||
| Revenue | |||||||||
| Recurring | $ | 345 | $ | 331 | 4 | % | |||
| Perpetual software licenses and hardware | 14 | 31 | (55 | %) | |||||
| Consulting services | 75 | 106 | (29 | %) | |||||
| Total revenue | 434 | 468 | (7 | %) | |||||
| Gross profit | |||||||||
| Recurring | 225 | 225 | |||||||
| % of Revenue | 65.2 | % | 68.0 | % | |||||
| Perpetual software licenses and hardware | 5 | 6 | |||||||
| % of Revenue | 35.7 | % | 19.4 | % | |||||
| Consulting services | (5 | ) | (7 | ) | |||||
| % of Revenue | (6.7 | %) | (6.6 | %) | |||||
| Total gross profit | 225 | 224 | |||||||
| % of Revenue | 51.8 | % | 47.9 | % | |||||
| Selling, general and administrative expenses | 158 | 151 | |||||||
| Research and development expenses | 73 | 78 | |||||||
| Loss from operations | (6 | ) | (5 | ) | |||||
| % of Revenue | (1.4 | %) | (1.1 | %) | |||||
| Other expense, net | (8 | ) | (5 | ) | |||||
| Loss before income taxes | (14 | ) | (10 | ) | |||||
| % of Revenue | (3.2 | %) | (2.1 | %) | |||||
| Income tax benefit | (182 | ) | — | ||||||
| % Tax rate | 1,300.0 | % | — | ||||||
| Net income (loss) | $ | 168 | $ | (10 | ) | ||||
| % of Revenue | 38.7 | % | (2.1 | %) | |||||
| Net income (loss) per common share | |||||||||
| Basic | $ | 1.52 | $ | (0.09 | ) | ||||
| Diluted | $ | 1.51 | $ | (0.09 | ) | ||||
| Weighted average common shares outstanding | |||||||||
| Basic | 110.3 | 117.1 | |||||||
| Diluted | 111.3 | 117.1 |
Schedule B
TERADATA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions - unaudited)
| March 31, | December 31, | March 31, | |||||||
|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2019 | |||||||
| Assets | |||||||||
| Current assets | |||||||||
| Cash and cash equivalents | $ | 394 | $ | 494 | $ | 723 | |||
| Accounts receivable, net | 448 | 398 | 445 | ||||||
| Inventories | 28 | 31 | 52 | ||||||
| Other current assets | 104 | 91 | 82 | ||||||
| Total current assets | 974 | 1,014 | 1,302 | ||||||
| Property and equipment, net | 334 | 350 | 303 | ||||||
| Capitalized software, net | 30 | 36 | 60 | ||||||
| Right of use assets - operating lease, net | 49 | 51 | 60 | ||||||
| Goodwill | 394 | 396 | 396 | ||||||
| Capitalized contract costs | 87 | 91 | 57 | ||||||
| Deferred income taxes | 253 | 87 | 66 | ||||||
| Other assets | 30 | 32 | 42 | ||||||
| Total assets | $ | 2,151 | $ | 2,057 | $ | 2,286 | |||
| Liabilities and stockholders’ equity | |||||||||
| Current liabilities | |||||||||
| Current portion of long-term debt | $ | 25 | $ | 25 | $ | 25 | |||
| Current portion of finance lease liability | 60 | 55 | 21 | ||||||
| Current portion of operating lease liability | 17 | 20 | 17 | ||||||
| Accounts payable | 96 | 66 | 99 | ||||||
| Payroll and benefits liabilities | 86 | 157 | 103 | ||||||
| Deferred revenue | 555 | 472 | 569 | ||||||
| Other current liabilities | 67 | 91 | 80 | ||||||
| Total current liabilities | 906 | 886 | 914 | ||||||
| Long-term debt | 448 | 454 | 472 | ||||||
| Finance lease liability | 75 | 75 | 38 | ||||||
| Operating lease liability | 37 | 38 | 48 | ||||||
| Pension and other postemployment plan liabilities | 133 | 137 | 104 | ||||||
| Long-term deferred revenue | 44 | 61 | 100 | ||||||
| Deferred tax liabilities | 6 | 6 | 4 | ||||||
| Other liabilities | 153 | 138 | 139 | ||||||
| Total liabilities | 1,802 | 1,795 | 1,819 | ||||||
| Stockholders’ equity | |||||||||
| Common stock | 1 | 1 | 1 | ||||||
| Paid-in capital | 1,567 | 1,545 | 1,466 | ||||||
| Accumulated deficit | (1,050 | ) | (1,143 | ) | (891 | ) | |||
| Accumulated other comprehensive loss | (169 | ) | (141 | ) | (109 | ) | |||
| Total stockholders’ equity | 349 | 262 | 467 | ||||||
| Total liabilities and stockholders’ equity | $ | 2,151 | $ | 2,057 | $ | 2,286 |
Schedule C
TERADATA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions - unaudited)
| For the Period Ended March 31 | ||||||
|---|---|---|---|---|---|---|
| Three Months | ||||||
| 2020 | 2019 | |||||
| Operating activities | ||||||
| Net income (loss) | $ | 168 | $ | (10 | ) | |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||
| Depreciation and amortization | 42 | 37 | ||||
| Stock-based compensation expense | 21 | 15 | ||||
| Deferred income taxes | (149 | ) | 2 | |||
| Changes in assets and liabilities: | ||||||
| Receivables | (50 | ) | 143 | |||
| Inventories | 3 | (24 | ) | |||
| Current payables and accrued expenses | (43 | ) | (171 | ) | ||
| Deferred revenue | 66 | 74 | ||||
| Other assets and liabilities | (48 | ) | (17 | ) | ||
| Net cash provided by operating activities | 10 | 49 | ||||
| Investing activities | ||||||
| Expenditures for property and equipment | (10 | ) | (15 | ) | ||
| Additions to capitalized software | (2 | ) | (1 | ) | ||
| Net cash used in investing activities | (12 | ) | (16 | ) | ||
| Financing activities | ||||||
| Repurchases of common stock | (73 | ) | (56 | ) | ||
| Repayments of long-term borrowings | (6 | ) | — | |||
| Payments of finance leases | (9 | ) | (3 | ) | ||
| Other financing activities, net | — | 33 | ||||
| Net cash used in financing activities | (88 | ) | (26 | ) | ||
| Effect of exchange rate changes on cash and cash equivalents | (10 | ) | 1 | |||
| (Decrease) increase in cash, cash equivalents and restricted cash | (100 | ) | 8 | |||
| Cash, cash equivalents and restricted cash at beginning of period | 496 | 716 | ||||
| Cash, cash equivalents and restricted cash at end of period | $ | 396 | $ | 724 | ||
| Supplemental cash flow disclosure: | ||||||
| Non-cash investing and financingactivities: | ||||||
| Assets acquired by finance leases | $ | 15 | $ | 15 | ||
| Assets acquired by operating leases | $ | 3 | $ | 3 |
Schedule D
TERADATA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions - unaudited)
| For the Three Months Ended March 31 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | % ChangeAsReported | % ChangeConstantCurrency ^(2)^ | |||||||||
| Segment Revenue | ||||||||||||
| Americas | $ | 244 | $ | 269 | (9 | %) | (9 | %) | ||||
| EMEA | 118 | 113 | 4 | % | 6 | % | ||||||
| APAC | 72 | 86 | (16 | %) | (13 | %) | ||||||
| Total segment revenue | 434 | 468 | (7 | %) | (6 | %) | ||||||
| Segment gross profit | ||||||||||||
| Americas | 144 | 157 | ||||||||||
| % of Revenue | 59.0 | % | 58.4 | % | ||||||||
| EMEA | 61 | 50 | ||||||||||
| % of Revenue | 51.7 | % | 44.2 | % | ||||||||
| APAC | 30 | 34 | ||||||||||
| % of Revenue | 41.7 | % | 39.5 | % | ||||||||
| Total segment gross profit | 235 | 241 | ||||||||||
| % of Revenue | 54.1 | % | 51.5 | % | ||||||||
| Reconciling items^(1)^ | (10 | ) | (17 | ) | ||||||||
| Total gross profit | $ | 225 | $ | 224 | ||||||||
| % of Revenue | 51.8 | % | 47.9 | % | ||||||||
| ^(1)^ | Reconciling items include stock-based compensation, capitalized software, amortization of acquisition-related<br>intangible assets and acquisition, integration and reorganization-related items. | |||||||||||
| --- | --- | |||||||||||
| ^(2)^ | The impact of currency is determined by calculating the prior period results using the current-year monthly<br>average currency rates. | |||||||||||
| --- | --- |
EX-99.2
Exhibit 99.2
| MEDIA CONTACT<br><br><br>Jennifer Donahue<br> <br>858-485-3029 office<br><br><br>Jennifer.Donahue@Teradata.com |
|---|
Teradata Board Appoints Steve McMillan President and Chief Executive Officer
Proven Technology Leader Brings a Track Record of Driving Global Strategy and Execution
in Hypergrowth Enterprise Cloud Businesses
SAN DIEGO – May 7, 2020 – Teradata (NYSE: TDC) today announced that its Board of Directors has appointed Steve McMillan President and Chief Executive Officer, and a member of the Board of Directors, effective June 8, 2020. Mr. McMillan was previously at F5 Networks, Inc. as Executive Vice President of Global Services. He succeeds interim President and Chief Executive Officer, Victor Lund. Mr. Lund will step down from the Company’s Board of Directors, effective upon the appointment of Mr. McMillan as CEO on June 8, 2020.
With nearly two decades in senior leadership positions, Mr. McMillan is a seasoned technology executive with an impressive track record of transforming enterprise services and product businesses into industry-leading cloud portfolio offerings. His relentless focus on customers and strong bias for action will help propel Teradata to new levels of success.
“During this time of transformation, there is no better person to lead Teradata than Steve McMillan,” said Mike Gianoni, Chairman of the Teradata Board of Directors. “Steve is a proven leader with tremendous operational experience and business acumen, and he has a unique ability to bring people together to achieve outstanding results and drive companywide transformations to the cloud. His vision for how data will be leveraged around the world is precisely what Teradata needs as we accelerate our transformation, customer success, product innovation, and return to growth.”
Most recently, at F5, Mr. McMillan was responsible for more than half of the Company’s worldwide operations and achieved significant top-line growth and industry-leading customer satisfaction. Previously, he served as Senior Vice President, Customer Success, and Managed Cloud Services at Oracle, where he guided the Company’s transformation from a traditional hosting business to a high-growth, high-margin differentiated cloud offerings platform. Before Oracle, Mr. McMillan spent nearly 20 years at IBM, where he held a variety of increasingly senior leadership roles driving operations and execution with a consistent record of exceeding revenue and profit targets, business transformation, and collaborative leadership.
“It is a privilege to have the opportunity to lead Teradata in the next chapter of its growth strategy,” said Mr. McMillan. “Leveraging insights from data has never been more important, and Teradata is leading the way in helping global enterprises unlock real business value from this asset. Teradata has a unique position in a large market, best-in-class technology, a blue-chip customer base, and talented employees. I intend to take a customer-led approach and bring my collaborative and open leadership style to this great franchise to advance its strategy and to ensure Teradata is the partner of choice for customers around the world who need hybrid, cloud-based solutions.”
Mr. Gianoni added, “I would like to thank Vic for his extensive contributions to Teradata. We look forward to continuing to benefit from his institutional knowledge as an advisor to the Company through the end of the year and wish him all the best.”
For additional details on Steve McMillan’s track-record, please read here.
2020 First Quarter Financial Results
In a separate press release to be issued today, Teradata will report 2020 first-quarter financial results. Teradata will host a conference call at investor.teradata.com today, at 2 pm PT, to discuss its financial results. The live broadcast and a replay will be available on the Teradata website at investor.teradata.com.
About Teradata
Teradata transforms how businesses work and people live through the power of data. Teradata leverages all of the data, all of the time, so you can analyze anything, deploy anywhere, and deliver analytics that matter most to your business. And we do it on-premises, in the cloud, or anywhere in between. We call this pervasive data intelligence, powered by the cloud. It’s the answer to the complexity, cost and inadequacy of today’s approach to analytics. Get the answer at teradata.com.
The Teradata logo is a trademark, and Teradata is a registered trademark of Teradata Corporation and/or its affiliates in the U.S. and worldwide.