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): February 3, 2020
TERADATA CORPORATION
(Exact name of registrant as specified in its charter)
Commission File Number 001-33458
| Delaware | 75-3236470 |
|---|---|
| (State or other jurisdiction of<br><br>incorporation or organization) | (I.R.S. Employer<br><br>Identification No.) |
17095 Via Del Campo
San Diego, California 92127
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code: (866) 548-8348
N/A
(Former name or former 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 (see General Instruction A.2 below):
☐ 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))
| Title of each class | Trading Symbol | Name of each exchange 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.
Teradata Corporation ("Teradata" or the "Company") is furnishing the following information as required under Item 2.02 “Results of Operations and Financial Condition” of Form 8-K and Item 7.01 “Regulation FD Disclosure.” 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.
On February 6, 2020, the Company issued a press release setting forth its fourth quarter and full-year 2019 operating results as well as current revenue and earnings per share outlook estimates for the first quarter and full-year 2020 (the "Press Release"). A copy of the Press Release is attached hereto as Exhibit 99.1 and hereby incorporated by reference.
| Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
|---|
Retirement of William S. Stavropoulos from Board
On February 3, 2020, Mr. William S. Stavropoulos, a member of the Board of Directors (the “Board”) of Teradata, notified Teradata that he will retire from the Board, effective upon expiration of his current term at the 2020 Annual Meeting of Stockholders (the “Annual Meeting”) and, accordingly, he will not be standing for reelection by the stockholders at the Annual Meeting. Mr. Stavropoulos’ decision was not due to any disagreement with Teradata on any matter relating to Teradata’s operations, policies or practices. Mr. Stavropoulos has served as a director of Teradata since 2007 and serves as a member of the Committee on Directors and Governance of the Board.
Effective upon Mr. Stavropoulos’ resignation as a director, the number of directors on the Board will be reduced from twelve to eleven and the number of directors in the class of directors to be elected at the Annual Meeting (Class I) will be reduced from four to three.
Appointment of Michael P. Gianoni as Chairman of the Board
Effective as of February 6, 2020, Michael P. Gianoni was appointed non-executive Chairman of the Board to succeed Victor L. Lund, who has served as Executive Chairman since January 2019. Mr. Lund will continue as Interim President and Chief Executive Officer and a director of Teradata. With this appointment as an independent Chairman of the Board, Mr. Gianoni will no longer serve as independent Lead Director of the Board. The Board believes that this leadership structure, separating the positions of Chairman and Chief Executive Officer, best serves the interests of Teradata and its stockholders.
Under the Teradata Director Compensation Program for the 2019-2020 Board year ending with the 2020 Annual Meeting, Mr. Gianoni is entitled to receive an additional annual retainer of $120,000 for serving as Chairman of the Board, and he will no longer receive an additional annual retainer of $30,000 for serving as Lead Director.
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.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits:
The following exhibits are attached with this current report on Form 8-K:
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release, dated February 6, 2020, issued by the Company |
| 104 | Cover page interactive data file (embedded within the Inline XBRL document) |
SIGNATURES
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 thereunto duly authorized.
| TERADATA CORPORATION | ||
|---|---|---|
| Date: February 6, 2020 | By: | /s/ Mark A. Culhane |
| Mark A. Culhane | ||
| Chief Financial Officer |
Exhibit
| INVESTOR CONTACT<br><br>Nabil Elsheshai<br><br>858-485-2125 office<br><br>nabil.elsheshai@teradata.com<br><br><br><br>MEDIA CONTACT<br><br>Jennifer Donahue<br><br>858-485-3029 office<br><br>jennifer.donahue@teradata.com |
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Teradata Reports Fourth Quarter and Full Year 2019 Financial Results
| • | Annual recurring revenue (ARR) increased 9 percent, both reported and in constant currency, from the fourth quarter of 2018 ^(1)^ |
|---|---|
| • | Recurring revenue increased 7 percent both reported and in constant currency, from the fourth quarter of 2018 and 9 percent, 11 percent in constant currency, for the full year^(1)^ |
| --- | --- |
| • | Full year gross margin expansion of 290 basis points, 270 basis points on a non-GAAP basis^(2)^ |
| --- | --- |
SAN DIEGO - February 6, 2020 -- Teradata Corp. (NYSE: TDC) reported fourth-quarter and full-year 2019 financial results driven by an ongoing transition to a recurring revenue model. Subscription-based transactions comprised 89 percent of the company’s bookings mix in the quarter. Recurring revenue increased 7 percent, both reported and in constant currency^(1)^, from the fourth quarter of 2018. ARR increased 9 percent, both reported and in constant currency(^1)^, from the prior-year period. As the company shifts to a recurring revenue model and focuses its consulting resources on strategic engagements that drive increased software consumption within its targeted customer base, perpetual revenue and consulting revenue declined versus the prior-year period, as expected. Fourth-quarter total revenue was $494 million, compared to 2018 fourth-quarter total revenue of $588 million. Currency translation had a one percentage point negative impact on the fourth-quarter total revenue comparison^(1)^.
For the full year, total revenue was $1.899 billion, compared to $2.164 billion reported in the prior year. Subscription-based transactions comprised 88 percent of the Company’s bookings mix for the full year. Recurring revenue of $1.362 billion increased 9 percent, 11 percent in constant currency^(1)^from the prior year. ARR at the end of 2019 was $1.427 billion, a 9 percent increase, both reported and in constant currency^(1)^, from the end of 2018.
“Teradata continues to make solid progress on its business transformation. We closed out our 2019 transition year on a positive note, as we doubled our cloud customers, grew both recurring revenue and ARR, and effectively completed our transition to a subscription business,” said Vic Lund, Interim CEO, Teradata. “Teradata has strong differentiation in delivering the answers our customers need, at the scale they require, and we are resolutely focused on helping customers drive competitive advantage in this world of ever-growing data."
Teradata reported a net loss of $23 million under U.S. Generally Accepted Accounting Principles (GAAP) in the fourth quarter, or $0.21 per share, which compared to net income of $15 million, or $0.13 per diluted share, in the fourth quarter of 2018. Non-GAAP 2019 fourth-quarter net income, which excludes stock-based compensation
expense and other special items, was $25 million, or $0.22 per diluted share, as compared to $58 million, or $0.49 per diluted share, in the fourth quarter of 2018^(2)^.^^
For the full year, net loss reported under GAAP was $24 million, or $0.21 per share, which compared to net income of $30 million, or $0.25 per diluted share, in 2018. Non-GAAP 2019 full-year net income, which excludes stock-based compensation expense and other special items, was $121 million, or $1.05 per diluted share, as compared to $156 million, or $1.29 per diluted share, in 2018^(2)^.^^
Gross Margin
2019 fourth-quarter gross margin reported under GAAP was 50.2 percent versus 49.1 percent for the fourth quarter of 2018. On a non-GAAP basis, excluding stock-based compensation expense and other special items, 2019 fourth-quarter gross margin was 53.2 percent versus 52.0 percent in the same period of the prior year^(2)^.
2019 full-year gross margin reported under GAAP was 50.3 percent versus 47.4 percent in 2018. On a non-GAAP basis, excluding stock-based compensation expense and other special items, 2019 full-year gross margin was 53.3 percent versus 50.6 percent in 2018^(2)^. The gross margin rate was higher year-over-year primarily due to a higher mix of recurring revenue.
Operating Loss/Income
2019 fourth-quarter operating loss reported under GAAP was $9 million compared to operating income of $23 million in the fourth quarter of 2018. On a non-GAAP basis, excluding stock-based compensation expense and other special items, 2019 fourth quarter operating income was $48 million versus $74 million in the fourth quarter of 2018^(2)^.
2019 full-year operating income reported under GAAP was $6 million compared to $43 million in 2018. On a non-GAAP basis, excluding stock-based compensation expense and other special items, 2019 full-year operating income was $183 million versus $210 million in 2018^(2)^. The decline in operating income was primarily driven by the higher subscription-based bookings mix which resulted in a significant decline in perpetual revenue, as well as a decline in consulting revenue, as expected and consistent with our strategy.
Income Taxes
Teradata’s 2019 fourth-quarter tax rate under GAAP was negative 43.8 percent compared to 21.1 percent in the fourth quarter of 2018. Excluding special items, Teradata’s non-GAAP 2019 fourth-quarter tax rate was 39.0 percent versus 17.1 percent in the fourth quarter of 2018^(2)^. Teradata’s 2019 full-year tax rate under GAAP was negative 41.2 percent compared to negative 11.1 percent in 2018. Excluding special items, Teradata’s non-GAAP 2019 full-year tax rate was 24.4 percent versus 19.6 percent in 2018^(2)^. The increase in the non-GAAP effective tax rate year-over-year was primarily due to earnings mix and an increase in the U.S. Global Intangible Low-Taxed Income (GILTI) tax period-over-period.
Cash Flow
For the 2019 fourth quarter, Teradata generated $54 million of cash from operating activities compared to $107 million in the same period of 2018. During the quarter, Teradata used $13 million versus using $63 million in the fourth quarter of 2018, for capital expenditures and additions to capitalized software development costs. Teradata’s 2019 fourth-quarter free cash flow was $41 million, compared to $44 million in the fourth quarter of 2018^(3)^. In addition, the company added $37 million of finance leases in the fourth quarter and $115 million for the full year 2019, primarily to support subscription sales.
For the full year 2019, Teradata generated $148 million of cash from operating activities versus $364 million in 2018. During the year, Teradata used $59 million compared to using $160 million in 2018 for capital expenditures and additions to capitalized software development costs. This resulted in 2019 full-year free cash flow of $89 million compared to $204 million in 2018^(3)^.
Balance Sheet
Teradata ended 2019 with $494 million in cash. During the fourth quarter of 2019, Teradata repurchased 2.2 million shares of the Company’s common stock for approximately $61 million. For the full year, the Company repurchased 8.5 million shares for approximately $300 million. At the end of the fourth quarter, Teradata had approximately 111 million shares outstanding.
The Company had total debt of $612 million as of December 31, 2019, including $130 million of outstanding finance lease obligations. There were no funds drawn on the company’s $400 million revolving credit facility as of December 31, 2019.
Guidance
ARR and recurring revenue are both expected to increase at least 8 percent for the full year 2020.
Full-year 2020 GAAP earnings per share is expected to be $1.43 to $1.47. On a non-GAAP basis, which excludes the intellectual property (IP) restructuring tax benefit, stock-based compensation expense and other special items, earnings per share is expected to be in the $1.18 to $1.22 range^(2)^.
Recurring revenue in the first quarter of 2020 is expected to be in the $353 million to $355 million range.
GAAP earnings per share in the first quarter of 2020 is expected to be in the $1.30 to $1.32 range. Non-GAAP earnings per share, excluding the IP restructuring tax benefit, stock-based compensation expense and other special items, in the first quarter is expected to be in the $0.22 to $0.24 range^(2)^.
Earnings Conference Call
A conference call is scheduled today at 2:00 p.m. PT to discuss the Company’s 2019 fourth-quarter and full-year 2019 results and provide a business and financial update. Access to the conference call, as well as a replay of the call, is available on the Investor Relations page of Teradata’s website at investor.teradata.com.
Supplemental Financial Information
Additional information regarding Teradata’s operating results is provided below as well as on the Investor Relations page of 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 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 at investor.teradata.com, which is used to determine revenue on a constant currency (“CC”) basis. | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | ||||||||
| (in millions) | ||||||||||||||
| For the Three Months ended December 31 | ||||||||||||||
| 2019 | 2018 | % Change as Reported | % Change in Constant Currency | |||||||||||
| Recurring revenue | $ | 350 | $ | 328 | 7% | 7% | ||||||||
| Perpetual software licenses and hardware | 30 | 97 | (69)% | (69)% | ||||||||||
| Consulting services | 114 | 163 | (30)% | (30)% | ||||||||||
| Total revenue | $ | 494 | $ | 588 | (16)% | (15)% | ||||||||
| Americas | $ | 263 | $ | 298 | (12)% | (11)% | ||||||||
| EMEA | 139 | 172 | (19)% | (19)% | ||||||||||
| APAC | 92 | $ | 118 | (22)% | (21)% | |||||||||
| Total revenue | $ | 494 | $ | 588 | (16)% | (15)% | Revenue | |||||||
| --- | --- | --- | --- | --- | --- | --- | ||||||||
| (in millions) | ||||||||||||||
| For the Twelve Months ended December 31 | ||||||||||||||
| 2019 | 2018 | % Change as Reported | % Change in Constant Currency | |||||||||||
| Recurring revenue | $ | 1,362 | $ | 1,254 | 9% | 11% | ||||||||
| Perpetual software licenses and hardware | 106 | 340 | (69)% | (68)% | ||||||||||
| Consulting services | 431 | 570 | (24)% | (23)% | ||||||||||
| Total revenue | $ | 1,899 | $ | 2,164 | (12)% | (10)% | ||||||||
| Americas | $ | 1,057 | $ | 1,126 | (6)% | (5)% | ||||||||
| EMEA | 492 | 587 | (16)% | (13)% | ||||||||||
| APAC | 350 | $ | 451 | (22)% | (20)% | |||||||||
| Total revenue | $ | 1,899 | $ | 2,164 | (12)% | (10)% | Annual recurring revenue* | $ | 1,427 | $ | 1,308 | 9% | 9% | |
| --- | --- | --- | --- | --- | --- | --- |
* Annual recurring revenue is defined as the annual value at a point in time of all recurring contracts, 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 certain non-GAAP measures such as non-GAAP gross profit, non-GAAP operating income, 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 financial statements prepared in accordance with GAAP. |
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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.
Teradata’s reconciliation of GAAP to non-GAAP results included in this release.
| For the<br><br>Three Months | For the<br><br>Twelve Months | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in millions, except per share data) | ended December 31 | ended December 31 | ||||||||||||
| Gross Profit: | 2019 | 2018 | % Chg. | 2019 | 2018 | % Chg. | ||||||||
| GAAP Gross Profit | $ | 248 | $ | 289 | (14)% | $ | 955 | $ | 1,026 | (7)% | ||||
| % of Revenue | 50.2 | % | 49.1 | % | 50.3 | % | 47.4 | % | ||||||
| Excluding: | ||||||||||||||
| Stock-based compensation expense | 3 | 4 | 14 | 15 | ||||||||||
| Acquisition, integration, reorganization related, and other costs | 7 | 2 | 11 | 5 | ||||||||||
| Amortization of capitalized software | 5 | 11 | 33 | 49 | ||||||||||
| Non-GAAP Gross Profit | $ | 263 | $ | 306 | (14)% | $ | 1,013 | $ | 1,095 | (7)% | ||||
| % of Revenue | 53.2 | % | 52.0 | % | 53.3 | % | 50.6 | % | ||||||
| Operating (Loss)/ Income | ||||||||||||||
| GAAP Operating (Loss)/Income | $ | (9 | ) | $ | 23 | (139)% | $ | 6 | $ | 43 | (86)% | |||
| % of Revenue | (1.8 | )% | 3.9 | % | 0.3 | % | 2.0 | % | ||||||
| Excluding: | ||||||||||||||
| Stock-based compensation expense | 28 | 16 | 87 | 66 | ||||||||||
| Amortization of acquisition-related intangible assets | 1 | 2 | 6 | 6 | ||||||||||
| Acquisition, integration, reorganization related, and other costs | 23 | 22 | 51 | 46 | ||||||||||
| Amortization of capitalized software | 5 | 11 | 33 | 49 | ||||||||||
| Non-GAAP Operating Income | $ | 48 | $ | 74 | (35)% | $ | 183 | $ | 210 | (13)% | ||||
| % of Revenue | 9.7 | % | 12.6 | % | 9.6 | % | 9.7 | % | ||||||
| Net Income | ||||||||||||||
| GAAP Net (Loss)/Income | $ | (23 | ) | $ | 15 | (253)% | $ | (24 | ) | $ | 30 | (180)% | ||
| % of Revenue | (4.7 | )% | 2.6 | % | (1.3 | )% | 1.4 | % | ||||||
| Excluding: | ||||||||||||||
| Stock-based compensation expense | 28 | 16 | 87 | 66 | ||||||||||
| Amortization of acquisition-related intangible assets | 1 | 2 | 6 | 6 | ||||||||||
| Acquisition, integration, reorganization related, and other costs | 23 | 22 | 51 | 46 | ||||||||||
| Amortization of capitalized software | 5 | 11 | 33 | 49 | ||||||||||
| Income tax adjustments* | (9 | ) | (8 | ) | (32 | ) | (41 | ) | ||||||
| Non-GAAP Net Income | $ | 25 | $ | 58 | (57)% | $ | 121 | $ | 156 | (22)% | ||||
| % of Revenue | 5.1 | % | 9.9 | % | 6.4 | % | 7.2 | % |
| For the Three Months | For the Twelve Months | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ended December 31 | ended December 31 | |||||||||||||
| Earnings Per Share: | 2019 | 2018 | 2019 | 2018 | 2020 Q1Guidance | 2020 FY Guidance | ||||||||
| GAAP (Loss) / Earnings Per Share | $ | (0.21 | ) | $ | 0.13 | $ | (0.21 | ) | $ | 0.25 | 1.30 - 1.32 | 1.43 - 1.47 | ||
| Excluding: | ||||||||||||||
| Stock-based compensation expense | 0.25 | 0.13 | 0.76 | 0.54 | 0.25 | 0.98 | ||||||||
| Amortization of acquisition-related intangible assets | 0.01 | 0.02 | 0.05 | 0.05 | 0.01 | 0.03 | ||||||||
| Acquisition, integration and reorganization related costs | 0.21 | 0.18 | 0.45 | 0.38 | 0.03 | 0.14 | ||||||||
| Amortization of capitalized software | 0.04 | 0.09 | 0.29 | 0.40 | 0.05 | 0.20 | ||||||||
| IP Restructuring tax benefit* | — | — | — | — | (1.36 | (1.36 | ||||||||
| Income tax adjustments** | (0.08 | ) | (0.06 | ) | (0.28 | ) | (0.33 | ) | (0.06 | (0.24 | ||||
| Impact of dilution*** | — | — | (0.01 | ) | — | — | — | |||||||
| Non-GAAP Diluted Earnings Per Share | $ | 0.22 | $ | 0.49 | $ | 1.05 | $ | 1.29 | 0.22 - 0.24 | 1.18 - 1.22 |
All values are in US Dollars.
* The Company’s forecasted first quarter and full-year 2020 GAAP effective tax rates are expected to include $152 million of discrete tax 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 tax benefit for this intra-entity asset transfer will be recorded as a deferred tax asset in the first quarter of 2020 and represents the book and tax basis difference on the transferred assets measured based on the applicable Irish statutory tax rate. The tax deductions for amortization of the IP asset will be recognized in the future, and any amortization not deducted for tax purposes will be carried forward indefinitely under Irish tax laws. The Company expects to be able to realize the deferred tax assets resulting from these intra-entity asset transfers.
** Represents the income tax effect of the pre-tax adjustments to 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 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 was 39.0% for the fourth quarter of 2019 and 17.1% in the fourth quarter of 2018.
*** Represents the impact to earnings per share as a result of moving from basic to diluted shares.
| 3. | As described below, the Company believes that free cash flow is a useful 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. 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 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 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 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 financial statements prepared in accordance with GAAP. | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in millions) | For the Three Months | For the Twelve Months | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| ended December 31 | ended December 31 | |||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||
| Cash provided by operating activities (GAAP) | $ | 54 | $ | 107 | $ | 148 | $ | 364 | ||||
| Less capital expenditures for: | ||||||||||||
| Expenditures for property and equipment | (11 | ) | (61 | ) | (54 | ) | (153 | ) | ||||
| Additions to capitalized software | (2 | ) | (2 | ) | (5 | ) | (7 | ) | ||||
| Total capital expenditures | (13 | ) | (63 | ) | (59 | ) | (160 | ) | ||||
| Free Cash Flow (non-GAAP measure) | $ | 41 | $ | 44 | $ | 89 | $ | 204 |
Teradata used $9 million of cash in the fourth quarter and $63 million of cash for the full year 2019, related to reorganizing and restructuring its operations and its go-to-market functions to align to its strategy.
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; 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 data privacy, cyberattacks and maintaining secure and effective internal information technology and control systems; the timely and successful development, production or acquisition, launch and market acceptance and quality of new and existing products and services, including cloud-based offerings; tax rates; senior management changes, workforce turnover and the ability to attract and retain skilled employees; protecting our intellectual property; the availability and successful exploitation of new alliance and acquisition opportunities; recurring revenue may decline or recurring contracts may be cancelled 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, as amended by its Form 10-K/A, 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 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.
Teradata and the Teradata logo are trademarks or registered trademarks of Teradata Corporation and/or its affiliates in the U.S. and worldwide.
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SCHEDULE A
TERADATA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME
(in millions, except per share amounts - unaudited)
| For the Period Ended December 31 | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months | Twelve Months | |||||||||||||||
| 2019 | 2018 | % Chg | 2019 | 2018 | % Chg | |||||||||||
| Revenue | ||||||||||||||||
| Recurring | $ | 350 | $ | 328 | 7 | % | $ | 1,362 | $ | 1,254 | 9 | % | ||||
| Perpetual software licenses and hardware | 30 | 97 | (69 | )% | 106 | 340 | (69 | )% | ||||||||
| Consulting services | 114 | 163 | (30 | )% | 431 | 570 | (24 | )% | ||||||||
| Total revenue | 494 | 588 | (16 | )% | 1,899 | 2,164 | (12 | )% | ||||||||
| Gross profit | ||||||||||||||||
| Recurring | 231 | 225 | 920 | 880 | ||||||||||||
| % of Revenue | 66.0 | % | 68.6 | % | 67.5 | % | 70.2 | % | ||||||||
| Perpetual software licenses and hardware | 6 | 39 | 22 | 118 | ||||||||||||
| % of Revenue | 20.0 | % | 40.2 | % | 20.8 | % | 34.7 | % | ||||||||
| Consulting services | 11 | 25 | 13 | 28 | ||||||||||||
| % of Revenue | 9.6 | % | 15.3 | % | 3.0 | % | 4.9 | % | ||||||||
| Total gross profit | 248 | 289 | 955 | 1,026 | ||||||||||||
| % of Revenue | 50.2 | % | 49.1 | % | 50.3 | % | 47.4 | % | ||||||||
| Selling, general and administrative expenses | 174 | 185 | 621 | 666 | ||||||||||||
| Research and development expenses | 83 | 81 | 328 | 317 | ||||||||||||
| (Loss) income from operations | (9 | ) | 23 | 6 | 43 | |||||||||||
| % of Revenue | (1.8 | )% | 3.9 | % | 0.3 | % | 2.0 | % | ||||||||
| Other expense, net | (7 | ) | (4 | ) | (23 | ) | (16 | ) | ||||||||
| (Loss) income before income taxes | (16 | ) | 19 | (17 | ) | 27 | ||||||||||
| % of Revenue | (3.2 | )% | 3.2 | % | (0.9 | )% | 1.2 | % | ||||||||
| Income tax expense (benefit) | 7 | 4 | 7 | (3 | ) | |||||||||||
| % Tax rate | (43.8 | )% | 21.1 | % | (41.2 | )% | (11.1 | )% | ||||||||
| Net (loss) income | $ | (23 | ) | $ | 15 | $ | (24 | ) | $ | 30 | ||||||
| % of Revenue | (4.7 | )% | 2.6 | % | (1.3 | )% | 1.4 | % | ||||||||
| Net (loss) income per common share | ||||||||||||||||
| Basic | $ | (0.21 | ) | $ | 0.13 | $ | (0.21 | ) | $ | 0.25 | ||||||
| Diluted | $ | (0.21 | ) | $ | 0.13 | $ | (0.21 | ) | $ | 0.25 | ||||||
| Weighted average common shares outstanding | ||||||||||||||||
| Basic | 111.3 | 117.3 | 114.2 | 119.2 | ||||||||||||
| Diluted | 111.3 | 119.1 | 114.2 | 121.2 |
SCHEDULE B
TERADATA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions - unaudited)
| December 31, 2019 | September 30, 2019 | December 31, 2018 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Assets | |||||||||
| Current assets | |||||||||
| Cash and cash equivalents | $ | 494 | $ | 528 | $ | 715 | |||
| Accounts receivable, net | 398 | 328 | 588 | ||||||
| Inventories | 31 | 36 | 28 | ||||||
| Other current assets | 91 | 86 | 97 | ||||||
| Total current assets | 1,014 | 978 | 1,428 | ||||||
| Property and equipment, net | 350 | 333 | 295 | ||||||
| Capitalized software, net | 36 | 42 | 72 | ||||||
| Right of use assets- operating lease, net | 51 | 53 | — | ||||||
| Goodwill | 396 | 394 | 395 | ||||||
| Acquired intangible assets, net | 10 | 11 | 16 | ||||||
| Deferred income taxes | 87 | 67 | 67 | ||||||
| Other assets | 113 | 101 | 87 | ||||||
| Total assets | $ | 2,057 | $ | 1,979 | $ | 2,360 | |||
| Liabilities and stockholders' equity | |||||||||
| Current liabilities | |||||||||
| Current portion of long-term debt | $ | 25 | $ | 25 | $ | 19 | |||
| Current portion of finance lease liability | 55 | 42 | 17 | ||||||
| Current portion of operating lease liability | 20 | 19 | — | ||||||
| Accounts payable | 66 | 103 | 141 | ||||||
| Payroll and benefits liabilities | 157 | 115 | 224 | ||||||
| Deferred revenue | 472 | 408 | 490 | ||||||
| Other current liabilities | 90 | 60 | 118 | ||||||
| Total current liabilities | 885 | 772 | 1,009 | ||||||
| Long-term debt | 454 | 460 | 478 | ||||||
| Finance lease liability | 75 | 66 | 30 | ||||||
| Operating lease liability | 38 | 41 | — | ||||||
| Pension and other postemployment plan liabilities | 137 | 101 | 113 | ||||||
| Long-term deferred revenue | 61 | 68 | 105 | ||||||
| Deferred tax liabilities | 6 | 4 | 3 | ||||||
| Other liabilities | 139 | 139 | 127 | ||||||
| Total liabilities | 1,795 | 1,651 | 1,865 | ||||||
| Stockholders' equity | |||||||||
| Common stock | 1 | 1 | 1 | ||||||
| Paid-in capital | 1,549 | 1,517 | 1,418 | ||||||
| Accumulated deficit | (1,147 | ) | (1,063 | ) | (823 | ) | |||
| Accumulated other comprehensive loss | (141 | ) | (127 | ) | (101 | ) | |||
| Total stockholders' equity | 262 | 328 | 495 | ||||||
| Total liabilities and stockholders' equity | $ | 2,057 | $ | 1,979 | $ | 2,360 |
SCHEDULE C
TERADATA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions - unaudited)
| For the Period Ended December 31 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months | Twelve Months | |||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||
| Operating activities | ||||||||||||
| Net (loss) income | $ | (23 | ) | $ | 15 | $ | (24 | ) | $ | 30 | ||
| Adjustments to reconcile net (loss) income to net | ||||||||||||
| cash provided by operating activities: | ||||||||||||
| Depreciation and amortization | 37 | 35 | 150 | 130 | ||||||||
| Stock-based compensation expense | 28 | 15 | 87 | 65 | ||||||||
| Deferred income taxes | (4 | ) | (7 | ) | (3 | ) | (18 | ) | ||||
| Changes in assets and liabilities: | ||||||||||||
| Receivables | (70 | ) | (216 | ) | 190 | (34 | ) | |||||
| Inventories | 5 | 17 | (3 | ) | 2 | |||||||
| Current payables and accrued expenses | 3 | 116 | (153 | ) | 108 | |||||||
| Deferred revenue | 57 | 108 | (62 | ) | 115 | |||||||
| Other assets and liabilities | 21 | 24 | (34 | ) | (34 | ) | ||||||
| Net cash provided by operating activities | 54 | 107 | 148 | 364 | ||||||||
| Investing activities | ||||||||||||
| Expenditures for property and equipment | (11 | ) | (61 | ) | (54 | ) | (153 | ) | ||||
| Additions to capitalized software | (2 | ) | (2 | ) | (5 | ) | (7 | ) | ||||
| Business acquisitions and other investing activities | — | (3 | ) | — | (3 | ) | ||||||
| Net cash used in investing activities | (13 | ) | (66 | ) | (59 | ) | (163 | ) | ||||
| Financing activities | ||||||||||||
| Repurchases of common stock | (61 | ) | (94 | ) | (300 | ) | (300 | ) | ||||
| Repayments of long-term borrowings | (7 | ) | — | (19 | ) | (40 | ) | |||||
| Repayment of credit facility borrowings | — | — | — | (240 | ) | |||||||
| Payments of finance leases | (15 | ) | (4 | ) | (33 | ) | (5 | ) | ||||
| Other financing activities, net | 4 | 8 | 44 | 31 | ||||||||
| Net cash used in financing activities | (79 | ) | (90 | ) | (308 | ) | (554 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | 5 | (3 | ) | (1 | ) | (20 | ) | |||||
| Decrease in cash, cash equivalents and restricted cash | (33 | ) | (52 | ) | (220 | ) | (373 | ) | ||||
| Cash, cash equivalents and restricted cash at beginning of period | 529 | 768 | 716 | 1,089 | ||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 496 | $ | 716 | $ | 496 | $ | 716 | ||||
| Supplemental cash flow disclosure: | ||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||
| Assets acquired by finance leases | $ | 37 | $ | 29 | $ | 115 | $ | 52 | ||||
| Assets acquired by operating leases | $ | 2 | $ | — | $ | 7 | $ | — |
SCHEDULE D
TERADATA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions - unaudited)
| For the Three Months Ended December 31 | For the Twelve months Ended December 31 | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | % Change As Reported | %<br><br>Change Constant Currency^(2)^ | 2019 | 2018 | % Change As Reported | %<br><br>Change Constant Currency^(2)^ | |||||||||
| Segment Revenue | ||||||||||||||||
| Americas | $ | 263 | $ | 298 | (12)% | (11)% | $ | 1,057 | $ | 1,126 | (6)% | (5)% | ||||
| EMEA | 139 | 172 | (19)% | (19)% | 492 | 587 | (16)% | (13)% | ||||||||
| APAC | 92 | 118 | (22)% | (21)% | 350 | 451 | (22)% | (20)% | ||||||||
| Total segment revenue | 494 | 588 | (16)% | (15)% | 1,899 | 2,164 | (12)% | (10)% | ||||||||
| Segment gross profit | ||||||||||||||||
| Americas | 153 | 162 | 626 | 621 | ||||||||||||
| % of Revenue | 58.2 | % | 54.4 | % | 59.2 | % | 55.2 | % | ||||||||
| EMEA | 70 | 91 | 239 | 275 | ||||||||||||
| % of Revenue | 50.4 | % | 52.9 | % | 48.6 | % | 46.8 | % | ||||||||
| APAC | 40 | 53 | 148 | 199 | ||||||||||||
| % of Revenue | 43.5 | % | 44.9 | % | 42.3 | % | 44.1 | % | ||||||||
| Total segment gross profit | 263 | 306 | 1,013 | 1,095 | ||||||||||||
| % of Revenue | 53.2 | % | 52.0 | % | 53.3 | % | 50.6 | % | ||||||||
| Reconciling items^(1)^ | (15 | ) | (17 | ) | (58 | ) | (69 | ) | ||||||||
| Total gross profit | $ | 248 | $ | 289 | $ | 955 | $ | 1,026 | ||||||||
| % of Revenue | 50.2 | % | 49.1 | % | 50.3 | % | 47.4 | % | ||||||||
| ^(1)^ Reconciling items include stock-based compensation, capitalized software, amortization of acquisition-related 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 average currency rates. |