Teradata Announces 2011 Third Quarter Results

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- Revenue increased 23 percent from the third quarter of 2010
- GAAP EPS was $0.51, versus $0.44 in the prior-year period
- Non-GAAP EPS increased 28 percent to $0.59, versus $0.46 in the third quarter of 2010(2)
- Cash from Operations increased 57 percent from the third quarter of 2010
- Increasing revenue and EPS guidance for 2011

Teradata Corporation (NYSE: TDC) reported revenue of $602 million for the quarter ended September 30, 2011, an increase of 23 percent from $489 million in the third quarter of 2010. The year-over-year comparison was benefited by approximately 4 percentage points from currency translation. (1)

Special items were included in Teradata's results reported under U.S. Generally Accepted Accounting Principles (GAAP) for the third quarter of 2011, including $6 million of amortization of acquisition-related intangible assets; $4 million of transaction, integration and reorganization costs; $3 million of acquisition-related purchase accounting adjustments; and $8 million of stock-based compensation expense. Included in the prior year quarter's results was $7 million of stock-based compensation expense.

Gross margin in the third quarter was 54.5 percent compared to 57.1 percent in the third quarter of 2010. Excluding the special items mentioned above, gross margin was 55.4 percent in the third quarter of 2011, compared to 57.3 percent in the third quarter of 2010.(2) The decrease in non-GAAP gross margin from the strong prior-year period resulted from a significant increase in our third quarter 2010 consulting services revenue which generates lower gross margin than product revenue. Product gross margin was also lower than the record high product gross margin generated in the third quarter of 2010, which more than offset improved services gross margin in the third quarter of 2011.

Net income reported for the third quarter of 2011 was $87 million, or $0.51 per diluted share, which compared to net income of $75 million, or $0.44 per diluted share, in the third quarter of 2010. Excluding the special items, non-GAAP EPS was $0.59 in the third quarter of 2011, versus $0.46 in the third quarter of 2010. (2)

"We continued to deliver strong operating results in the third quarter, growing revenue 23 percent and earnings per share 28 percent. Based on this performance, we are raising our full-year guidance for both revenue and earnings per share," said Mike Koehler, president and chief executive officer of Teradata Corporation.

"Teradata's industry-leading data warehousing, big data analytics, and integrated marketing management solutions are in demand as companies look to cost effectively manage the data explosion and extract new insights from both traditional and new types of data.

"As a result of our growth and continued adoption by new and existing customers we are raising our full year 2011 GAAP earnings per share to the $1.98 to $2.03 range and full-year non-GAAP EPS guidance to the $2.25 to $2.30 range." (2)

Regional Operating Segment Results

Teradata reports its results in three regional operating segments.

Americas

Teradata generated $375 million of revenue in its Americas region in the third quarter of 2011, up 28 percent from $292 million in the third quarter of 2010. Currency translation did not affect revenue growth in the Americas in the third quarter. (1)

Gross margin in the Americas region in the third quarter of 2011 was 59.5 percent, versus the record high 61.6 percent achieved in the third quarter of 2010. The decrease in reported gross margin from the strong prior-year period resulted from lower product gross margin due to deal mix and increased amortization of capitalized software development cost and acquired technology.

Europe, Middle East and Africa (EMEA)

Revenue in Teradata's EMEA region in the third quarter of 2011 was $133 million, up 22 percent from $109 million generated in the third quarter of 2010. Currency translation benefited the revenue comparison in the EMEA region by 8 percentage points. (1)

Gross margin in the EMEA region in the third quarter of 2011 was 46.6 percent, versus 51.4 percent reported in the third quarter of 2010, primarily due to the greater proportion of consulting revenue as compared to the prior-year period, as well as lower product gross margin due to deal mix and increased amortization of capitalized software development cost and acquired technology.

Asia Pacific / Japan (APJ)

Teradata generated $94 million of revenue in its APJ region in the third quarter of 2011, a 7 percent increase from $88 million in the third quarter of 2010. The revenue comparison in the APJ region benefited by 9 percentage points from currency translation. (1)

Gross margin in the APJ region in the third quarter of 2011 was 45.7 percent, compared to 48.9 percent in the third quarter of 2010. The gross margin decline was driven primarily by strong growth in consulting revenues which generate lower gross margin, as well as from lower product margins.

Operating Income

Third-quarter operating income of $122 million improved from $106 million reported in the third quarter of 2010. Excluding the items previously mentioned, non-GAAP operating income increased 27 percent to $143 million.(2) In the quarter, higher revenue more than offset increased selling, general and administrative expense and research and development expense, which now include ongoing operating expenses from recent acquisitions. On a non-GAAP basis, operating margin improved to 23.6 percent, versus 23.1 percent in the third quarter of 2010. (2)

Cash Flow

During the third quarter of 2011, Teradata generated $102 million of cash from operating activities, compared to $65 million in the prior-year period. Capital expenditures in the third quarter totaled $27 million compared to $18 million in the third quarter of 2010. Teradata generated $75 million of free cash flow (cash from operations less capital expenditures for property and equipment and additions to capitalized software) (3) in the third quarter of 2011, a 60 percent increase from $47 million in the same period in 2010.

During the first nine months of 2011, Teradata generated $387 million of cash from operating activities, compared to $265 million in the prior-year period. Capital expenditures in the first nine months of 2011 were $87 million, compared to $62 million in the same period in 2010. During the first nine months of 2011, Teradata generated $300 million of free cash flow, a 48 percent increase from $203 million in the same period in 2010. (3)

Balance Sheet

Teradata ended the third quarter of 2011 with $691 million in cash, a $9 million increase from June 30, 2011, as cash generated during the quarter more than offset $57 million of cash Teradata used in the third quarter to repurchase approximately 1.1 million shares of its publicly-traded stock.

As of September 30, 2011, Teradata had total debt of $300 million outstanding under a 5-year term loan. Additionally, Teradata has $300 million of funds available through a pre-arranged credit facility, but had no borrowings related to the credit facility as of September 30, 2011.

2011 Outlook

Teradata is increasing its expectation for full-year 2011 revenue growth to 19-21 percent. Teradata anticipates that currency fluctuations will benefit the year-over-year revenue comparison by approximately 3 percentage points, based on currency rates on October 31, 2011.

Teradata is also increasing its expectation for full-year 2011 GAAP earnings per share to the $1.98 to $2.03 range and full-year non-GAAP EPS guidance to the $2.25 to $2.30 range. (2) Teradata excludes gains from equity investments, estimated purchase accounting adjustments, amortization of acquisition-related intangible assets, stock-based compensation expense, as well as transaction, integration and reorganization costs to arrive at non-GAAP earnings per share.

2011 Third-Quarter Earnings Conference Call

A conference call is scheduled today at 8:30 a.m. (ET) to discuss the company's third-quarter 2011 results. Access to the conference call, as well as a replay of the call, is available on Teradata's web site at www.teradata.com/investor.

Supplemental financial information regarding Teradata's operating results is also available on the Investor Relations page of Teradata's web site.

Teradata Corporation (NYSE: TDC) is the world's leading analytic data solutions company focused on integrated data warehousing, big data analytics, and business applications. Teradata's innovative products and services deliver integration and insight to empower organizations to achieve competitive advantage. Visit teradata.com for details.

Teradata is a trademark or registered trademark of Teradata Corporation in the United States and other countries.

1. The impact of currency is determined by calculating the prior-period results using the current-year monthly average currency rates. See the foreign currency schedule on the Investor Relations page of the company's web site www.teradata.com/investor.

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Teradata Deutschland
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Sandra Ertel
Teradata GmbH
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Gregg Swearingen
Mike O'Sullivan
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