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Data and analytics software provider Teradata (NYSE:TDC) fell short of analysts' expectations in Q2 CY2024, with revenue down 5.6% year on year to $436 million. It made a non-GAAP profit of $0.64 per share, improving from its profit of $0.48 per share in the same quarter last year.
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Teradata (TDC) Q2 CY2024 Highlights:
- Revenue: $436 million vs analyst estimates of $447.3 million (2.5% miss)
- Adjusted Operating Income: $96 million vs analyst estimates of $73.23 million (31.1% beat)
- EPS (non-GAAP): $0.64 vs analyst estimates of $0.48 (33.5% beat)
- Gross Margin (GAAP): 60.8%, up from 59.7% in the same quarter last year
- Free Cash Flow of $39 million, up 85.7% from the previous quarter
- Annual Recurring Revenue: $1.47 billion at quarter end, down 3.8% year on year
- Billings: $389 million at quarter end, up 9% year on year
- Market Capitalization: $2.98 billion
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 InfrastructureGenerating 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 GrowthAs you can see below, Teradata's revenue has declined over the last three years, shrinking from $491 million in Q2 2021 to $436 million this quarter.
Teradata's revenue was down again this quarter, falling 5.6% year on year.
Looking ahead, analysts covering the company were expecting sales to grow 2.1% over the next 12 months before the earnings results announcement.
Cash Is KingAlthough earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.
Teradata has shown impressive cash profitability, driven by its cost-effective customer acquisition strategy that gives it the option to invest in new products and services rather than sales and marketing. The company's free cash flow margin averaged 14.7% over the last year, better than the broader software sector.
Teradata's free cash flow clocked in at $39 million in Q2, equivalent to a 8.9% margin. The company's cash profitability regressed as it was 1 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren't a big deal because investment needs can be seasonal, but we'll be watching to see if the trend extrapolates into future quarters.
Over the next year, analysts predict Teradata's cash conversion will improve. Their consensus estimates imply its free cash flow margin of 14.7% for the last 12 months will increase to 23.8%, giving it more money to invest.
Key Takeaways from Teradata's Q2 Results It was good to see Teradata beat analysts' billings and earnings expectations this quarter. On the other hand, its revenue and ARR (annual recurring revenue, a leading indicator of demand) missed Wall Street's estimates. Overall, this was a mediocre quarter for Teradata. The stock traded down 2.3% to $28.50 immediately following the results.
