Teradata (NYSE:TDC) Reports Q4 In Line With Expectations But Stock Drops 11.5%

Jabin Bastian /
2024/02/12 4:19 pm EST

Data and analytics software provider Teradata (NYSE:TDC) reported results in line with analysts' expectations in Q4 FY2023, with revenue up 1.1% year on year to $457 million. It made a non-GAAP profit of $0.56 per share, improving from its profit of $0.35 per share in the same quarter last year.

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Teradata (TDC) Q4 FY2023 Highlights:

  • Revenue: $457 million vs analyst estimates of $455.7 million (small beat)
  • ARR: $1.570 billion vs analyst estimates of $1.577 billion (small miss)
  • Guidance for 2024 ARR growth of "4% to 8% year-over-year, in constant currency" (6% midpoint missed vs. expectations of roughly 8% growth)
  • Guidance for 2024 revenue growth of "0% to 2% year-over-year, in constant currency" (1% midpoint missed vs. expectations of roughly 4% growth)
  • EPS (non-GAAP): $0.56 vs analyst estimates of $0.51 (9% beat)
  • Guidance for 2024 EPS (non-GAAP) of $2.23 at the midpoint (6% miss vs expectations of $2.38)
  • Free Cash Flow of $168 million, up from $36 million in the previous quarter
  • Gross Margin (GAAP): 60.8%, up from 58.6% in the same quarter last year
  • Market Capitalization: $4.79 billion

“Teradata ended 2023 with $528 million of Cloud ARR, delivering ten-fold growth in less than four years,” said Steve McMillan, President and CEO, Teradata.

Part of point-of-sale and ATM company NCR from 1991 to 2007, Teradata (NYSE:TDC) offers a software-as-service platform that helps organizations manage their data across multiple storages and analyze it.

Data Infrastructure

Generating insights from system level data is an increasing priority for most businesses, but to do so requires connecting and analyzing piles of data stored and siloed in separate databases. This is the demand driver for cloud based data infrastructure software providers, who can more readily integrate, distribute and process information vs. legacy on-premise software providers.

Sales Growth

As you can see below, Teradata's revenue has been declining over the last two years, shrinking from $475 million in Q4 FY2021 to $457 million this quarter.

Teradata Total Revenue

Teradata's quarterly revenue was only up 1.1% year on year, which isn't particularly great. However, its revenue increased $19 million quarter on quarter, a strong improvement from the $24 million decrease in Q3 2023. This is a sign of acceleration of growth and very nice to see indeed.

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Cash Is King

If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. Teradata's free cash flow came in at $168 million in Q4, up 40% year on year.

Teradata Free Cash Flow

Teradata has generated $355 million in free cash flow over the last 12 months, a solid 19.2% of revenue. This strong FCF margin stems from its asset-lite business model, giving it optionality and plenty of cash to reinvest in its business.

Key Takeaways from Teradata's Q4 Results

The quarter itself was fine. Revenue beat by a bit, ARR missed by a bit, but profit and EPS both came in better. Guidance is a key driver of the stock weakness. ARR, revenue, and non-GAAP EPS guidance for 2024 were all below expectations. The stock is down 11.5% after reporting, trading at $43.18 per share.

So should you invest in Teradata right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.

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