Teradata Corporation (TDC) Bundle
Understanding Teradata Corporation (TDC) Revenue Streams
Understanding Teradata Corporation’s Revenue Streams
Primary Revenue Sources
- Recurring Revenue: $1,128 million (84.1% of total revenue) for the nine months ended September 30, 2024.
- Perpetual Software Licenses, Hardware, and Other: $20 million (1.5% of total revenue) for the nine months ended September 30, 2024.
- Consulting Services: $193 million (14.4% of total revenue) for the nine months ended September 30, 2024.
Year-over-Year Revenue Growth Rate
- Total Revenue: $1,341 million for the nine months ended September 30, 2024, decreased by 3% from $1,376 million for the same period in 2023.
- Recurring Revenue: Increased by 1% year-over-year.
- Consulting Services Revenue: Decreased by 13% year-over-year.
Contribution of Different Business Segments to Overall Revenue
| Segment | Revenue (2024) | Percentage of Total Revenue (2024) | Revenue (2023) | Percentage of Total Revenue (2023) |
|---|---|---|---|---|
| Recurring Revenue | $1,128 million | 84.1% | $1,120 million | 81.4% |
| Perpetual Software Licenses, Hardware, and Other | $20 million | 1.5% | $33 million | 2.4% |
| Consulting Services | $193 million | 14.4% | $223 million | 16.2% |
Analysis of Significant Changes in Revenue Streams
- Public Cloud ARR: Increased by 26% to $570 million in Q3 2024 compared to $454 million in Q3 2023.
- Subscription ARR: Decreased to $793 million in 2024 from $872 million in 2023.
- Maintenance and Software Upgrade Rights: Decreased to $119 million in 2024 from $198 million in 2023.
- Total ARR: Decreased by 3% year-over-year to $1.482 billion.
Quarterly Revenue Snapshot
| Quarter | Total Revenue | Recurring Revenue | Consulting Services | Year-over-Year Change |
|---|---|---|---|---|
| Q3 2024 | $440 million | $372 million | $61 million | 0% |
| Q3 2023 | $438 million | $360 million | $71 million |
Foreign currency fluctuations had a 2% adverse impact on total revenue for Q3 2024 compared to the prior year.
The overall revenue dynamics indicate a strategic transition towards cloud-based services, with a notable decline in traditional revenue streams as the company adapts to market demands and customer preferences.
A Deep Dive into Teradata Corporation (TDC) Profitability
Profitability Metrics
Understanding the profitability metrics of a company is essential for investors looking to gauge its financial health. Here, we break down the profitability metrics for Teradata Corporation as of 2024, including gross profit, operating profit, and net profit margins.
Gross Profit, Operating Profit, and Net Profit Margins
For the third quarter of 2024, the company's financial performance is highlighted by the following metrics:
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Gross Profit | $266 million | $259 million |
| Gross Margin | 60.5% | 59.1% |
| Operating Income | $56 million | $27 million |
| Net Income | $32 million | $12 million |
| Net Profit Margin | 7.3% | 2.7% |
In the first nine months of 2024, the financial performance continued to show strength:
| Metric | 9M 2024 | 9M 2023 |
|---|---|---|
| Total Revenue | $1.341 billion | $1.376 billion |
| Net Income | $89 million | $69 million |
| Net Profit Margin | 6.6% | 5.0% |
Trends in Profitability Over Time
Examining the trends, the gross profit margin has shown an increase from 59.1% in Q3 2023 to 60.5% in Q3 2024. This improvement is attributed to enhanced operational efficiency and a focus on higher-margin cloud services. The operating income also saw significant growth, increasing from $27 million in Q3 2023 to $56 million in Q3 2024, evidencing improved cost management strategies.
Comparison of Profitability Ratios with Industry Averages
When compared to industry averages, Teradata's profitability ratios reflect a competitive position. The average gross margin for the software and cloud services industry is around 70%, while Teradata's gross margin stands at 60.5%. The net profit margin of 7.3% in Q3 2024 is lower than the industry average of approximately 10% but represents a significant improvement from previous quarters.
Analysis of Operational Efficiency
Operational efficiency can be evaluated through various metrics, including cost management and gross margin trends:
| Expense Type | Q3 2024 | Q3 2023 |
|---|---|---|
| Selling, General and Administrative Expenses | $137 million | $156 million |
| Research and Development Expenses | $73 million | $76 million |
| Total Operating Expenses | $210 million | $232 million |
The decrease in total operating expenses from $232 million in Q3 2023 to $210 million in Q3 2024 demonstrates effective cost management practices, contributing to the enhanced profitability metrics.
Overall, the financial data for 2024 indicates a robust improvement in profitability metrics, reflecting strategic operational efficiencies and a focus on higher-margin product offerings.
Debt vs. Equity: How Teradata Corporation (TDC) Finances Its Growth
Debt vs. Equity: How Teradata Corporation Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, Teradata Corporation's total long-term debt stood at $487 million, with a current portion of $25 million due within the year. The company has no outstanding borrowings under its $400 million revolving credit facility.
Debt-to-Equity Ratio
Teradata's debt-to-equity ratio is calculated at 0.67, which indicates a balanced approach to leveraging debt while maintaining equity funding. This ratio is below the industry average of approximately 0.75, suggesting a relatively lower reliance on debt compared to peers.
Recent Debt Issuances and Credit Ratings
In June 2022, Teradata entered into a credit agreement that included a $500 million unsecured term loan and a $400 million unsecured revolving credit facility. The company’s credit rating is currently rated Baa2 by Moody’s and BBB by S&P, reflecting a stable outlook.
Debt Refinancing Activity
On September 21, 2023, Teradata amended its credit agreement to include key performance indicators related to environmental, social, and governance (ESG) targets, which could affect fees and applicable margins based on performance.
Balancing Debt Financing and Equity Funding
Teradata adopts a strategy to balance its financing through both debt and equity. The company has repurchased approximately 4.9 million shares of common stock at an average price of $38.07 in the nine months ended September 30, 2024, demonstrating a commitment to enhancing shareholder value while managing its capital structure.
| Financial Metric | Amount |
|---|---|
| Total Long-term Debt | $487 million |
| Current Portion of Debt | $25 million |
| Debt-to-Equity Ratio | 0.67 |
| Industry Average Debt-to-Equity Ratio | 0.75 |
| Credit Rating (Moody's) | Baa2 |
| Credit Rating (S&P) | BBB |
| Shares Repurchased | 4.9 million |
| Average Repurchase Price | $38.07 |
Assessing Teradata Corporation (TDC) Liquidity
Assessing Liquidity and Solvency
Current Ratio: As of September 30, 2024, the current ratio was calculated at 0.80, with current assets of $703 million and current liabilities of $875 million.
Quick Ratio: The quick ratio, excluding inventories, was approximately 0.76 based on total current assets minus inventories ($687 million) over total current liabilities ($875 million).
Working Capital Trends
Working Capital: The working capital position as of September 30, 2024, showed a deficit of $172 million, down from a working capital position of $127 million at the end of 2023.
| Period | Current Assets (in millions) | Current Liabilities (in millions) | Working Capital (in millions) |
|---|---|---|---|
| September 30, 2024 | $703 | $875 | ($172) |
| December 31, 2023 | $869 | $996 | ($127) |
Cash Flow Statements Overview
Operating Cash Flow: For the nine months ended September 30, 2024, cash provided by operating activities was $147 million, a decrease of $52 million compared to $199 million in the same period of 2023.
Investing Cash Flow: Cash used in investing activities totaled $23 million for the nine months ended September 30, 2024, compared to $28 million in the same period of 2023.
Financing Cash Flow: Cash used in financing activities was $254 million for the nine months ended September 30, 2024, compared to $357 million in the same period of 2023.
| Cash Flow Type | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Cash Flow | $147 | $199 |
| Investing Cash Flow | ($23) | ($28) |
| Financing Cash Flow | ($254) | ($357) |
Potential Liquidity Concerns or Strengths
Management reported that the company held $348 million in cash and cash equivalents as of September 30, 2024. The cash balance decreased from $486 million at the end of 2023. The liquidity position is further supported by an available $400 million under the revolving credit facility, which had no borrowings as of September 30, 2024.
Debt Position: The total long-term debt outstanding was $461 million, with a current portion of $25 million due. The company maintained compliance with all covenants associated with its credit facilities as of the same date.
| Debt Type | Amount (in millions) |
|---|---|
| Total Long-term Debt | $461 |
| Current Portion of Long-term Debt | $25 |
| Available Revolving Credit Facility | $400 |
Is Teradata Corporation (TDC) Overvalued or Undervalued?
Valuation Analysis
In assessing whether the company is overvalued or undervalued, we evaluate key financial ratios, stock price trends, dividend metrics, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current price-to-earnings (P/E) ratio stands at 46.03. This is calculated based on a stock price of $15.21 and trailing twelve months (TTM) earnings per share (EPS) of $0.33.
Price-to-Book (P/B) Ratio
The price-to-book (P/B) ratio is currently 7.1, based on a book value per share of $2.14.
Enterprise Value-to-EBITDA (EV/EBITDA)
The enterprise value-to-EBITDA (EV/EBITDA) ratio is calculated at 31.4, with an enterprise value (EV) of approximately $1.25 billion and EBITDA of $39.8 million.
Stock Price Trends
Over the last 12 months, the stock price has fluctuated from a low of $27.79 to a high of $45.98. The current price is $15.21, reflecting a significant decline in valuation.
Dividend Yield and Payout Ratios
As of 2024, the company does not offer a dividend, resulting in a dividend yield of 0%. The payout ratio is also 0% due to the absence of dividend payments.
Analyst Consensus on Stock Valuation
Analyst consensus indicates a hold rating, with a target price averaging around $20.00. This reflects a cautious outlook amid recent performance challenges.
| Metric | Value |
|---|---|
| P/E Ratio | 46.03 |
| P/B Ratio | 7.1 |
| EV/EBITDA | 31.4 |
| 12-Month Stock Price Low | $27.79 |
| 12-Month Stock Price High | $45.98 |
| Current Stock Price | $15.21 |
| Dividend Yield | 0% |
| Payout Ratio | 0% |
| Analyst Consensus | Hold |
| Target Price | $20.00 |
Key Risks Facing Teradata Corporation (TDC)
Key Risks Facing Teradata Corporation
The financial health of Teradata Corporation is influenced by various internal and external risk factors. Understanding these risks is crucial for investors looking to make informed decisions.
Industry Competition
In the highly competitive data analytics market, Teradata faces significant pressure from established competitors such as Oracle, IBM, and newer cloud-based service providers like Snowflake and Databricks. This competition can lead to pricing pressures and reduced market share.
Regulatory Changes
As of January 1, 2024, several jurisdictions have enacted a 15% global minimum tax under Pillar Two of the Global Anti-Base Erosion rules. While the company does not expect a material impact on its effective tax rate, ongoing monitoring is essential as regulatory environments evolve.
Market Conditions
The uncertain macro-economic environment has resulted in delayed customer spending. This trend is likely to impact revenue growth, particularly in the Public Cloud ARR, which increased by 26% year-over-year but is expected to face challenges due to elongated deal closing cycles.
Operational Risks
Operational risks include the transition to cloud services, which has led to a 39% decline in revenues from perpetual software licenses, hardware, and other offerings as customers migrate to subscription-based models. Additionally, consulting services revenue decreased by 14%, reflecting a strategic shift towards higher-margin engagements.
Financial Risks
Financial risks are highlighted by a decline in cash provided by operating activities, which fell to $147 million for the nine months ended September 30, 2024, down from $199 million in the prior year. The company also faces foreign currency exchange risks, estimating a 1.25% to 1.75% negative impact on total reported revenues for 2024 due to currency translation.
Debt Obligations
As of September 30, 2024, the company had a total long-term debt of $487 million. The effective interest rate on the Credit Facility was 4.21%, which could impact future financial flexibility. The company must comply with various covenants associated with its debt agreements, which adds an additional layer of risk.
Mitigation Strategies
To address these risks, Teradata has implemented several strategies:
- Continuous monitoring and adaptation to regulatory changes to ensure compliance.
- Investment in R&D to enhance the competitiveness of its product offerings.
- Utilization of foreign exchange hedging strategies to mitigate currency risks.
Summary of Key Financial Metrics
| Metric | 2024 | 2023 | Change |
|---|---|---|---|
| Total Revenue | $1,341 million | $1,376 million | -3% |
| Net Income | $89 million | $69 million | +29% |
| Cash Provided by Operating Activities | $147 million | $199 million | -26% |
| Public Cloud ARR | $570 million | $454 million | +26% |
| Long-term Debt | $487 million | $480 million | +1.5% |
Future Growth Prospects for Teradata Corporation (TDC)
Future Growth Prospects for Teradata Corporation
Analysis of Key Growth Drivers
Teradata Corporation is focusing on several growth drivers to enhance its market position in the data analytics industry. Key areas include:
- Product Innovations: The introduction of VantageCloud, which has significantly contributed to the growth in Public Cloud ARR.
- Market Expansions: Continued efforts to penetrate international markets, particularly in Europe and Asia, where demand for cloud analytics solutions is rising.
- Acquisitions: Strategic acquisitions, such as Stemma Technologies, are aimed at bolstering product capabilities and market reach.
Future Revenue Growth Projections and Earnings Estimates
Revenue projections for 2024 indicate a cautious but steady growth trajectory. The total revenue for the third quarter of 2024 was reported at $440 million, a slight increase from $438 million in the same quarter of 2023. The recurring revenue increased by 3%, largely attributed to the growth in Public Cloud revenue.
| Metric | Q3 2024 | Q3 2023 | Growth Rate |
|---|---|---|---|
| Total Revenue | $440 million | $438 million | 0.5% |
| Recurring Revenue | $372 million | $360 million | 3% |
| Public Cloud ARR | $570 million | $454 million | 26% |
Strategic Initiatives or Partnerships That May Drive Future Growth
Strategic partnerships with cloud service providers and technology firms are pivotal for Teradata's growth. Collaborations aimed at enhancing the capabilities of VantageCloud and expanding its ecosystem are expected to drive customer adoption and retention.
Competitive Advantages That Position the Company for Growth
Teradata's competitive advantages include:
- Established Brand Reputation: A long-standing reputation in the data analytics market enhances customer trust.
- Innovative Technology: Continuous investment in R&D has led to advanced analytics capabilities that attract enterprise clients.
- Strong Customer Base: A diverse portfolio of clients across various industries provides resilience and opportunities for upselling and cross-selling.
Financial Health and Projections
As of the third quarter of 2024, the company reported:
- Gross Margin: 60.5%, up from 59.1% in Q3 2023.
- Operating Income: $56 million, compared to $27 million in the same period last year.
- Net Income: $32 million, significantly higher than $12 million in Q3 2023.
Conclusion
Teradata is strategically positioned to capitalize on growth opportunities in the data analytics market through product innovations, market expansions, and strategic partnerships. The company’s financial performance indicates resilience and a pathway for future growth.
Teradata Corporation (TDC) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Updated on 16 Nov 2024
Resources:
- Teradata Corporation (TDC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Teradata Corporation (TDC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Teradata Corporation (TDC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.