Nov. 5, 2009 (PR Newswire) --

ATLANTA, Nov. 5 /PRNewswire-FirstCall/ -- Teradata Corporation (NYSE: TDC), the world's largest company solely focused on data warehousing and enterprise analytics, today reported revenue of $425 million for the quarter ended September 30, 2009, a 3 percent decrease from $439 million in the third quarter of 2008.( )( )Revenue decreased 2 percent from the third quarter of 2008, when adjusted for 1 percentage point of negative impact from currency fluctuation.(1)( )

(Logo: http://www.newscom.com/cgi-bin/prnh/20090909/TERADATALOGO )

Gross margin in the third quarter was 53.4 percent, versus 54.0 percent in the third quarter of 2008. Product gross margin was 62.3 percent, versus 64.3 percent during the third quarter of 2008. As expected, amortization of software development costs was higher versus the prior-year quarter. Services gross margin improved 200 basis points to 46.2 percent due to higher professional services margin, as Teradata continues to effectively manage expenses while increasing the productivity of the company's professional services resources.

Teradata reported third-quarter net income under Generally Accepted Accounting Principles (GAAP) of $63 million, or $0.36 per diluted share, compared to net income of $60 million, or $0.33 per diluted share, in the third quarter of 2008.

Included in Teradata's 2009 third quarter results was a $5 million impairment charge ($0.02 per share) to write down the value of a historical equity investment. Excluding this item, non-GAAP earnings per share was $0.38 in the third quarter 2009.(2) Included in Teradata's 2008 third quarter results was a $3 million impairment charge ($0.01 per share) to write down the value of a historical equity investment and a $3 million increase in the income tax provision ($0.02 per share) related to Teradata's estimated 2007 federal income tax accrual when compared to the filing of its 2007 federal income tax return in the third quarter of 2008. Excluding these items, non-GAAP earnings per share was $0.36 in the third quarter of 2008.(2)

"We are pleased to report another solid quarter for Teradata, with net income and earnings per share increasing over the prior year period. Growth in our EMEA region and our professional services business along with good operational execution were key elements driving our results in the quarter," said Mike Koehler, president and chief executive officer of Teradata Corporation. "As a result, we are increasing our earnings guidance for full year 2009 to $1.32 - $1.36 per share, or $1.34 - $1.38 on a non-GAAP basis.(2) ( )

"With continued focus on extending our technology and services leadership, we remain committed to providing our customers with the analytics and agility to cut through the complexities of their businesses and help them drive better results.

"Ongoing investments in technology, partnerships and people, along with the discipline and dedication of our Teradata team, should position Teradata well to lead the enterprise data warehousing market going forward."

Regional Operating Segment Results

Teradata reports its results in three regional operating segments.

Americas

Teradata generated $247 million of revenue in its Americas region in the third quarter of 2009, down 2 percent from $253 million in the third quarter of 2008. Currency translation did not have a meaningful impact on the third quarter year-over-year revenue comparison for the Americas region.(1)

Gross margin in the Americas region in the quarter was 55.9 percent, compared to 56.9 percent in the third quarter of 2008. Gross margin in the quarter was lower due to the decline in product revenue from the prior year period and a higher amount of services revenue. And, as expected, product gross margin was lower in the quarter due to increased amortization of software development costs.

Europe, Middle East and Africa (EMEA)

Revenue in Teradata's EMEA region in the third quarter of 2009 was $109 million, up 3 percent from $106 million generated in the third quarter of 2008. Revenue increased 9 percent when adjusted for currency translation, which negatively impacted the revenue comparison in the EMEA region by 6 percentage points.(1)

Gross margin in the EMEA region was 53.2 percent, versus 51.9 percent in the third quarter of 2008. Gross margin in EMEA improved in the third quarter of 2009 due to higher product revenue and improved professional services margin, more than offsetting the increased amortization of capitalized software development costs.

Asia Pacific /Japan (APJ)

Teradata generated $69 million of revenue in its APJ region in the quarter, a 14 percent decrease from $80 million in the third quarter of 2008. The revenue decline in the APJ region was 17 percent when adjusted for 3 percentage points of benefit from currency translation.(1)( )

Gross margin in the APJ region in the quarter was 44.9 percent, compared to 47.5 percent in the third quarter of 2008. The decrease in gross margin was driven primarily by the impact of lower product revenue volume, the under-absorption of overhead costs and higher amortization of capitalized software development costs as compared to the prior-year period.

Operating Income

Third-quarter operating income of $88 million was up from $86 million reported in the third quarter of 2008, as service gross margin improvement and lower selling, general and administrative expense more than offset the company's incremental investment in new sales territories and the impact of currency translation.

Other Items

"Other Income (Expense)" was $4 million of expense in the third quarter of 2009, compared to $1 million of expense in the third quarter of 2008. The expense in both periods was driven by impairment charges taken in the quarter related to previous equity investments. Interest income in the third quarter of 2009 was significantly lower than in the third quarter of 2008, due to the lower interest rate environment. Excluding the impairment charges for the historical equity investments, Other Income would have been $1 million in the third quarter of 2009 and $2 million in the third quarter of 2008.(2)( )

The effective income tax rate in the third quarter of 2009 was 25.0 percent, versus 29.4 percent in the prior-year period.

Cash Flow

During the third quarter of 2009, Teradata generated $96 million of cash from operating activities, compared to $94 million in the prior-year period. Capital expenditures in the third quarter of 2009 were $21 million, compared to $15 million in the third quarter of 2008. Teradata generated $75 million of free cash flow( )(cash from operations less capital expenditures and additions to capitalized software)(3) in the third quarter of 2009, versus generating $79 million in the same period in 2008.

During the first nine months of 2009, Teradata generated $364 million of cash from operating activities, compared to $322 million in the prior-year period. Capital expenditures in the first nine months of 2009 were $61 million, compared to $58 million in the same period in 2008. During the first three quarters of 2009, Teradata generated $303 million of free cash flow, versus $264 million in the same period in 2008.

For the periods
---------------
ended September 30
------------------
(in millions)
Three Months      Nine months
------------      ------------
2009    2008      2009    2008
----    ----      ----    ----
Net Income (GAAP)                         $63     $60      $170    $171
===     ===      ====    ====

Cash provided by operating activities
(GAAP)                                   $96     $94      $364    $322
Less capital expenditures for:
----
Expenditures for property and
equipment                           (5)     (2)      (18)    (13)
Additions to capitalized software   (16)    (13)      (43)    (45)
----    ----      ----    ----
Total capital expenditures       (21)    (15)      (61)    (58)

Free Cash Flow  (non-GAAP measure) (3)    $75     $79      $303    $264
===     ===      ====    ====

Free Cash Flow as a percentage of Net
Income (3)                               119%    132%      178%    154%

Balance Sheet

Teradata ended the third quarter of 2009 with $704 million in cash, a $66 million increase from June 30, 2009. In addition, the company used approximately $21 million of cash to repurchase approximately 830,000 shares during the third quarter of 2009. During the first nine months of 2009, the company used approximately $71 million to repurchase approximately 3.5 million shares. Teradata had no debt outstanding as of September 30, 2009.

2009 Outlook

Teradata is increasing its expectation for 2009 full-year GAAP earnings to $1.32 - $1.36 per share, from its previous earnings guidance range of $1.22 - $1.28 per share. On a non-GAAP basis, excluding the impairment charge ($0.02 per share) related to a prior equity investment, Teradata expects 2009 earnings per share in the $1.34 - $1.38 range.(2)

Although Teradata continues to expect that selling, general and administrative expenses for the full-year will be down from 2008, selling expense, research and development expenses, as well as amortization of capitalized software costs, are expected to be higher in the fourth quarter of 2009 compared to these items in the prior quarters of 2009. The company continues to expect revenue to be down 1 to 3 percent in constant currency for the full year.