Teradata Reports Financial Results for Second Quarter 2016 

Operating Income

Reported operating income of $87 million in the second quarter of 2016 compared to a $(262) million GAAP operating loss in the second quarter of 2015, which was due to a goodwill impairment charge. On a non-GAAP basis, excluding stock-based compensation expense, special items and the Marketing Applications business, operatingincomewas$131 million in the second quarter of 2016. Non GAAP operating income was $107 million in the second quarter of 2015. The year-over-year increase in non-GAAP operating income was primarily due to the company’s cost reduction initiatives, higher services gross margin rates, and the benefit of excluding the now-exited Marketing Applications business.

Cash Flow

During the second quarter 2016, Teradata generated $99 million of cash from operating activities, compared to $80 million in the prior year period. The increase in cash generation was largely due to the favorable year-over -year change in working capital. Teradata generated $72 million of free cash flow (cash from operating activities less capital expenditures and additions to capitalized software) in the second quarter of 2016, compared to $53 million in the same period in 2015. For the first half of 2016, Teradata generated $297 million of free cash flow, compared to $243 million in the prior year period.

Balance Sheet

Teradata ended the second quarter 2016 with $909 million in cash, with over 98 percent of its cash held outside the United States. During the quarter, the company used $80 million of domestic cash to pay off its revolving credit facility. Additionally during the second quarter, Teradata purchased 600,000 shares of its stock for approximately $15 million.

As of June 30, 2016, Teradata had total debt of approximately $585 million, all of which was outstanding under a term loan. Teradata had no borrowings under its $400 million revolving credit facility as of that date.

Sale of Marketing Applications business

On July 1, 2016, Teradata completed the sale of its Marketing Applications business for approximately $90 million. After adjustments, closing costs and taxes, net proceeds from the sale were approximately $75 million, which will be used for general corporate purposes.

2016 Outlook

GAAP revenue for 2016 continues to be expected in the $2.320 billion to $2.390 billion range, which includes approximately $69 million of revenue generated from the Marketing Applications business before it was sold on July 1, 2016. Excluding the Marketing Applications business, revenue for 2016 continues to be expected in the $2.250 billion to $2.320 billion range.

Full-year 2016 GAAP earnings per share guidance is now $0.89 to $1.04. On a non-GAAP basis, which excludes stock-based compensation expense, other special items and the Marketing Applications business results, Teradata’s expectations for earnings per share remain in the $2.35 to $2.50 range. Teradata’s Marketing Applications business experienced an $18 million operating loss in the first half of 2016 and approximately a $45 million operating loss in 2015.

Business Transformation Update

Teradata continues to make good progress in its business transformation, including the recent completion of the sale of its Marketing Applications business. The company has progressed from the planning stage to the execution stage of its transformation. Additionally, Teradata has moved from the cost reduction stage to active cost management as it invests for the future of the company, including its cloud-based initiatives and realignment of its go-to-market approach.

The company will provide more information regarding these initiatives during its earnings conference call today as well as during an Analyst Day that will take place on November 17, 2016 at Teradata’s R&D Labs located near San Diego, CA. More information regarding the Analyst Day will be provided in the near future.