Company Quick10K Filing
Teradata
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 116 $4,130
10-Q 2019-11-12 Quarter: 2019-09-30
10-Q 2019-08-06 Quarter: 2019-06-30
10-Q 2019-05-06 Quarter: 2019-03-31
10-K 2019-02-26 Annual: 2018-12-31
10-Q 2018-11-05 Quarter: 2018-09-30
10-Q 2018-08-06 Quarter: 2018-06-30
10-Q 2018-05-08 Quarter: 2018-03-13
10-K 2018-02-23 Annual: 2017-12-31
10-Q 2017-11-06 Quarter: 2017-09-30
10-Q 2017-08-04 Quarter: 2017-06-30
10-Q 2017-05-05 Quarter: 2017-03-31
10-K 2017-02-27 Annual: 2016-12-31
10-Q 2016-11-03 Quarter: 2016-09-30
10-Q 2016-08-09 Quarter: 2016-06-30
10-Q 2016-05-06 Quarter: 2016-03-31
10-K 2016-02-26 Annual: 2015-12-31
10-Q 2015-11-06 Quarter: 2015-09-30
10-Q 2015-08-07 Quarter: 2015-06-30
10-Q 2015-05-08 Quarter: 2015-03-31
10-K 2015-02-27 Annual: 2014-12-31
10-Q 2014-11-07 Quarter: 2014-09-30
10-Q 2014-08-08 Quarter: 2014-06-30
10-Q 2014-05-12 Quarter: 2014-03-31
10-K 2014-02-27 Annual: 2013-12-31
10-Q 2013-11-04 Quarter: 2013-09-30
10-Q 2013-08-02 Quarter: 2013-06-30
10-Q 2013-05-03 Quarter: 2013-03-31
10-K 2013-02-28 Annual: 2012-12-31
10-Q 2012-11-02 Quarter: 2012-09-30
10-Q 2012-08-03 Quarter: 2012-06-30
10-Q 2012-05-04 Quarter: 2012-03-31
10-K 2012-02-29 Annual: 2011-12-31
10-Q 2011-11-04 Quarter: 2011-09-30
10-Q 2011-08-08 Quarter: 2011-06-30
10-Q 2011-05-06 Quarter: 2011-03-31
10-K 2011-03-01 Annual: 2010-12-31
10-Q 2010-11-04 Quarter: 2010-09-30
10-Q 2010-08-05 Quarter: 2010-06-30
10-Q 2010-05-06 Quarter: 2010-03-31
10-K 2010-02-26 Annual: 2009-12-31
8-K 2019-11-04 Earnings, Officers, Regulation FD, Exhibits
8-K 2019-08-01 Earnings, Regulation FD, Other Events, Exhibits
8-K 2019-05-02 Earnings, Regulation FD, Exhibits
8-K 2019-04-30 Officers, Shareholder Vote, Exhibits
8-K 2019-02-07 Earnings, Regulation FD, Exhibits
8-K 2019-01-14 Earnings, Officers, Regulation FD, Exhibits
8-K 2018-11-15 Officers, Exhibits
8-K 2018-11-01 Earnings, Regulation FD, Exhibits
8-K 2018-08-02 Earnings, Regulation FD, Exhibits
8-K 2018-06-14 Officers, Exhibits
8-K 2018-06-11 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-06-06 Exit Costs
8-K 2018-05-03 Earnings, Regulation FD, Exhibits
8-K 2018-04-17 Shareholder Vote
8-K 2018-02-08 Earnings, Regulation FD, Other Events, Exhibits
8-K 2018-01-31 Officers, Exhibits
TDC 2019-09-30
Part I-Financial Information
Item 5. Other Information 40 Item 6. Exhibits 41 Signatures 42
Part 1-Financial Information
Item 1. Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A").
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part Ii-Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-31.1 tdc093019ex311.htm
EX-31.2 tdc093019ex312.htm
EX-32 tdc093019ex32.htm

Teradata Earnings 2019-09-30

TDC 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
NUAN 4,514 5,189 3,146 1,889 1,090 71 390 6,115 58% 15.7 1%
MANH 4,504 372 217 589 327 96 134 4,384 55% 32.6 26%
SMAR 4,477 757 220 220 178 -66 -56 3,965 81% -71.3 -9%
TDC 4,130 2,123 1,756 2,060 1,013 22 196 3,984 49% 20.3 1%
PVTL 4,058 1,921 596 716 475 -134 -115 3,250 66% -28.4 -7%
ACIW 3,908 3,450 2,398 1,069 592 83 270 5,179 55% 19.2 2%
SINA 3,884 5,886 2,123 0 0 0 0 2,241 0%
BLKB 3,769 1,874 1,501 872 474 27 132 3,945 54% 29.9 1%
QTWO 3,633 952 566 287 134 -57 -37 3,048 47% -83.0 -6%
LOGM 3,628 3,922 1,103 1,240 936 23 377 3,714 75% 9.8 1%

Document
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tdc:segment
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
OR 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number 001-33458
TERADATA CORPORATION
(Exact name of registrant as specified in its charter) 
Delaware
 
75-3236470
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
17095 Via Del Campo
San Diego, California 92127
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (866548-8348
Securities registered pursuant to Section 12(b) of the Act:
Title of each class:
 
Trading Symbol
 
Name of Each Exchange on which Registered:
Common Stock, $0.01 par value
 
TDC
 
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer
 
ý
  
Accelerated filer
 
¨
Non-accelerated filer
 
¨
  
Smaller reporting company
 
 
 
 
  
Emerging growth company
 

1


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes     No  ý
At October 31, 2019, the registrant had approximately 112.5 million shares of common stock outstanding.

2



TABLE OF CONTENTS
PART I—FINANCIAL INFORMATION
 
 
 
 
 
 
 
  
Description
Page
 
 
 
Item 1.
Financial Statements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
PART II—OTHER INFORMATION
 
 
 
 
  
Description
Page
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 

3


Item 5.
 
 
 
Item 6.
 
 
 
 

4

Table of Contents

 
Part 1—FINANCIAL INFORMATION
Item 1.
Financial Statements.
Teradata Corporation
Condensed Consolidated Statements of Income (Loss) (Unaudited)
 
Three Months Ended
September 30,
 
Nine Months Ended 
 September 30,
In millions, except per share amounts
2019
 
2018
 
2019
 
2018
Revenue
 
 
 
 
 
 
 
Recurring
$
343

 
$
312

 
$
1,012

 
$
926

Perpetual software licenses and hardware
16

 
77

 
76

 
243

Consulting services
100

 
137

 
317

 
407

Total revenue
459

 
526

 
1,405

 
1,576

Cost of revenue
 
 
 
 
 
 
 
Cost of recurring
110

 
93

 
323

 
271

Cost of perpetual software licenses and hardware
9

 
43

 
60

 
164

Cost of consulting services
93

 
126

 
315

 
404

Total cost of revenue
212

 
262

 
698

 
839

Gross profit
247

 
264

 
707

 
737

Operating expenses
 
 
 
 
 
 
 
Selling, general and administrative expenses
151

 
166

 
447

 
481

Research and development expenses
86

 
84

 
245

 
236

Total operating expenses
237

 
250

 
692

 
717

Income from operations
10

 
14

 
15

 
20

Other expense, net
 
 
 
 
 
 
 
Interest expense
(8
)
 
(6
)
 
(19
)
 
(16
)
Interest income
4

 
4

 
10

 
11

Other expense
(2
)
 
(2
)
 
(7
)
 
(7
)
Total other expense, net
(6
)
 
(4
)
 
(16
)
 
(12
)
Income (loss) before income taxes
4

 
10

 
(1
)
 
8

Income tax benefit
(6
)
 
(8
)
 

 
(7
)
Net income (loss)
$
10

 
$
18

 
$
(1
)
 
$
15

Net income (loss) per common share
 
 
 
 
 
 
 
Basic
$
0.09

 
$
0.15

 
$
(0.01
)
 
$
0.13

Diluted
$
0.09

 
$
0.15

 
$
(0.01
)
 
$
0.12

Weighted average common shares outstanding
 
 
 
 
 
 
 
Basic
113.2

 
118.7

 
115.2

 
119.9

Diluted
114.2

 
120.7

 
115.2

 
121.8

See Notes to Condensed Consolidated Financial Statements (Unaudited).


5


Teradata Corporation
Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited)
 
Three Months Ended
September 30,
 
Nine Months Ended 
 September 30,
In millions
2019
 
2018
 
2019
 
2018
Net income (loss)
$
10

 
$
18

 
$
(1
)
 
$
15

Other comprehensive loss:
 
 
 
 
 
 
 
Foreign currency translation adjustments
(11
)
 
(6
)
 
(18
)
 
(23
)
Derivatives:
 
 
 
 
 
 
 
Unrealized (loss) gain on derivatives, before tax
(2
)
 
4

 
(15
)
 
1

Unrealized (loss) gain on derivatives, tax portion
1

 

 
4

 

Unrealized (loss) gain on derivatives, net of tax
(1
)
 
4

 
(11
)
 
1

Defined benefit plans:
 
 
 
 
 
 
 
Defined benefit plan adjustment, before tax
2

 

 
4

 
4

Defined benefit plan adjustment, tax portion
(1
)
 

 
(1
)
 
(1
)
Defined benefit plan adjustment, net of tax
1

 

 
3

 
3

Other comprehensive loss
(11
)
 
(2
)
 
(26
)
 
(19
)
Comprehensive (loss) income
$
(1
)
 
$
16

 
$
(27
)
 
$
(4
)
See Notes to Condensed Consolidated Financial Statements (Unaudited).


6

Table of Contents

Teradata Corporation
Condensed Consolidated Balance Sheets (Unaudited)
In millions, except per share amounts
September 30,
2019
 
December 31,
2018
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
528

 
$
715

Accounts receivable, net
328

 
588

Inventories
36

 
28

Other current assets
86

 
97

Total current assets
978

 
1,428

Property and equipment, net
333

 
295

Capitalized software, net
42

 
72

Right of use assets - operating lease, net
53

 

Goodwill
394

 
395

Acquired intangible assets, net
11

 
16

Deferred income taxes
67

 
67

Other assets
101

 
87

Total assets
$
1,979

 
$
2,360

Liabilities and stockholders’ equity
 
 
 
Current liabilities
 
 
 
Current portion of long-term debt
$
25

 
$
19

Current portion of finance lease liability
42

 
17

Current portion of operating lease liability
19

 

Accounts payable
103

 
141

Payroll and benefits liabilities
115

 
224

Deferred revenue
408

 
490

Other current liabilities
60

 
118

Total current liabilities
772

 
1,009

Long-term debt
460

 
478

Finance lease liability
66

 
30

Operating lease liability
41

 

Pension and other postemployment plan liabilities
101

 
113

Long-term deferred revenue
68

 
105

Deferred tax liabilities
4

 
3

Other liabilities
139

 
127

Total liabilities
1,651

 
1,865

Commitments and contingencies (Note 9)

 

Stockholders’ equity
 
 
 
Preferred stock: par value $0.01 per share, 100.0 shares authorized, no shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively

 

Common stock: par value $0.01 per share, 500.0 shares authorized, 112.4 and 116.8 shares issued at September 30, 2019 and December 31, 2018, respectively
1

 
1

Paid-in capital
1,517

 
1,418

Accumulated deficit
(1,063
)
 
(823
)
Accumulated other comprehensive loss
(127
)
 
(101
)
Total stockholders’ equity
328

 
495

Total liabilities and stockholders’ equity
$
1,979

 
$
2,360

See Notes to Condensed Consolidated Financial Statements (Unaudited).

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Table of Contents

Teradata Corporation
Condensed Consolidated Statements of Cash Flows (Unaudited) 
 
Nine Months Ended 
 September 30,
In millions
2019
 
2018
Operating activities
 
 
 
Net (loss) income
$
(1
)
 
$
15

Adjustments to reconcile net (loss) income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
113

 
95

Stock-based compensation expense
59

 
50

Deferred income taxes
1

 
(11
)
Changes in assets and liabilities:
 
 
 
Receivables
260

 
182

Inventories
(8
)
 
(15
)
Current payables and accrued expenses
(156
)
 
(8
)
Deferred revenue
(119
)
 
7

Other assets and liabilities
(55
)
 
(58
)
Net cash provided by operating activities
94

 
257

Investing activities
 
 
 
Expenditures for property and equipment
(43
)
 
(92
)
Additions to capitalized software
(3
)
 
(5
)
Net cash used in investing activities
(46
)
 
(97
)
Financing activities
 
 
 
Repurchases of common stock
(239
)
 
(206
)
Repayments of long-term borrowings
(12
)
 
(40
)
Repayments of credit facility borrowings

 
(240
)
Payments of finance leases
(18
)
 
(1
)
Other financing activities, net
40

 
23

Net cash used in financing activities
(229
)
 
(464
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
(6
)
 
(17
)
Decrease in cash, cash equivalents and restricted cash
(187
)
 
(321
)
Cash, cash equivalents and restricted cash at beginning of period
716

 
1,089

Cash, cash equivalents and restricted cash at end of period
$
529

 
$
768

 
 
 
 
Supplemental cash flow disclosure:
 
 
 
Assets acquired under operating lease
$
5

 
$

Assets acquired under finance lease
$
78

 
$
23

Reconciliation of cash, cash equivalents and restricted cash to the Condensed Consolidated Balance Sheets:
 
September 30, 2019
 
December 31, 2018
Cash and cash equivalents
$
528

 
$
715

Restricted cash
1

 
1

Total cash, cash equivalents and restricted cash
$
529

 
$
716


See Notes to Condensed Consolidated Financial Statements (Unaudited).

8

Table of Contents

Teradata Corporation
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)


 
Common Stock
 
Paid-in
 
Accumulated
 
Accumulated Other Comprehensive
 
 
In millions
Shares
 
Amount
 
Capital
 
Deficit
 
Loss
 
Total
December 31, 2018
117

 
$
1

 
$
1,418

 
$
(823
)
 
$
(101
)
 
$
495

Net loss

 

 

 
(10
)
 

 
(10
)
Employee stock compensation, employee stock purchase programs and option exercises
1

 

 
48

 

 

 
48

Repurchases of common stock, retired
(1
)
 

 

 
(58
)
 

 
(58
)
Pension and postemployment benefit plans, net of tax

 

 

 

 
1

 
1

Unrealized loss on derivatives, net of tax

 

 

 

 
(3
)
 
(3
)
Currency translation adjustment

 

 

 

 
(6
)
 
(6
)
March 31, 2019
117

 
$
1

 
$
1,466

 
$
(891
)
 
$
(109
)
 
$
467

Net loss

 

 

 
(1
)
 

 
(1
)
Employee stock compensation, employee stock purchase programs and option exercises

 

 
25

 

 

 
25

Repurchases of common stock, retired
(3
)
 

 

 
(117
)
 

 
(117
)
Pension and postemployment benefit plans, net of tax

 

 

 

 
1

 
1

Unrealized loss on derivatives, net of tax

 

 

 

 
(7
)
 
(7
)
Currency translation adjustment

 

 

 

 
(1
)
 
(1
)
June 30, 2019
114

 
$
1

 
$
1,491

 
$
(1,009
)
 
$
(116
)
 
$
367

Net income

 

 

 
10

 

 
10

Employee stock compensation, employee stock purchase programs and option exercises

 

 
26

 

 

 
26

Repurchases of common stock, retired
(2
)
 

 

 
(64
)
 

 
(64
)
Pension and postemployment benefit plans, net of tax

 

 

 

 
1

 
1

Unrealized loss on derivatives, net of tax

 

 

 

 
(1
)
 
(1
)
Currency translation adjustment

 

 

 

 
(11
)
 
(11
)
September 30, 2019
112

 
$
1

 
$
1,517

 
$
(1,063
)
 
$
(127
)
 
$
328

See Notes to Condensed Consolidated Financial Statements (Unaudited).


9

Table of Contents

 
Common Stock
 
Paid-in
 
Accumulated
 
Accumulated Other Comprehensive
 
 
In millions
Shares
 
Amount
 
Capital
 
Deficit
 
Loss
 
Total
December 31, 2017
122

 
$
1

 
$
1,320

 
$
(579
)
 
$
(74
)
 
$
668

Net loss

 

 

 
(7
)
 

 
(7
)
Employee stock compensation, employee stock purchase programs and option exercises
1

 

 
30

 

 

 
30

Repurchases of common stock, retired
(2
)
 

 

 
(77
)
 

 
(77
)
Adoption of ASC 606

 

 

 
26

 

 
26

Currency translation adjustment

 

 

 

 
4

 
4

March 31, 2018
121

 
$
1

 
$
1,350

 
$
(637
)
 
$
(70
)
 
$
644

Net income

 

 

 
4

 

 
4

Employee stock compensation, employee stock purchase programs and option exercises

 

 
26

 

 

 
26

Repurchases of common stock, retired
(2
)
 

 

 
(81
)
 

 
(81
)
Pension and postemployment benefit plans, net of tax

 

 

 

 
3

 
3

Unrealized loss on derivatives, net of tax

 

 

 

 
(3
)
 
(3
)
Currency translation adjustment

 

 

 

 
(21
)
 
(21
)
June 30, 2018
119

 
$
1

 
$
1,376

 
$
(714
)
 
$
(91
)
 
$
572

Net income

 

 

 
18

 

 
18

Employee stock compensation, employee stock purchase programs and option exercises

 

 
21

 

 

 
21

Repurchases of common stock, retired
(1
)
 

 

 
(49
)
 

 
(49
)
Unrealized gain on derivatives, net of tax

 

 

 

 
4

 
4

Currency translation adjustment

 

 

 

 
(6
)
 
(6
)
September 30, 2018
118

 
$
1

 
$
1,397

 
$
(745
)
 
$
(93
)
 
$
560


See Notes to Condensed Consolidated Financial Statements (Unaudited).



10

Table of Contents

Notes to Condensed Consolidated Financial Statements (Unaudited)
1. Basis of Presentation
These statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) and, in accordance with those rules and regulations, do not include all information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, the condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to fairly state the results of operations, financial position and cash flows of Teradata Corporation (“Teradata” or the “Company”) for the interim periods presented herein. The year-end 2018 condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make use of estimates and assumptions that affect the reported amounts and disclosures. Actual results may vary from these estimates.  
These condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Teradata’s most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2018, as amended by Form 10-K/A (the “2018 Annual Report”). The results of operations for any interim period are not necessarily indicative of the results of operations to be expected for the full year. Prior period amounts have been restated to conform to the current year presentation, except for lease accounting discussed in Notes 2 and 12.
2. New Accounting Pronouncements

Fair Value Measurement.  In August 2018, the Financial Accounting Standards Board ("FASB") issued new guidance that modifies disclosure requirements related to fair value measurement. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Implementation on a prospective or retrospective basis varies by specific disclosure requirement. Early adoption is permitted. The standard also allows for early adoption of any removed or modified disclosures upon issuance of this update while delaying adoption of the additional disclosures until their effective date. The Company is currently evaluating this guidance to determine the impact it may have on its disclosures.

Compensation-Retirement Benefits-Defined Benefit Plans-General. In August 2018, the FASB issued new guidance that modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. For public companies, the amendments in this update are effective for fiscal years beginning after December 15, 2020, with early adoption permitted, and is to be applied on a retrospective basis to all periods presented. The Company is currently evaluating this guidance to determine the impact it may have on its disclosures.

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. In August 2018, the FASB issued new guidance that reduces complexity for the accounting for costs of implementing a cloud computing service arrangement and aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). For public companies, the amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. Implementation should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The effects of this standard on our financial position, results of operations or cash flows are not expected to be material.

Codification Improvements to Financial Instruments-Credit Losses, Derivatives and Hedging, and Financial Instruments. In June 2016, the FASB issued Accounting Standards, Measurement of Credit Losses on Financial Instruments, which introduced the expected credit losses methodology for the measurement of credit losses on

11

Table of Contents

financial assets measured at amortized cost basis, replacing the previous incurred loss methodology. Since the issuance of this accounting standard, the FASB has identified certain areas that require clarification and improvement. In May 2019, the FASB issued guidance that allows entities to make an irrevocable one-time election upon adoption of the new credit losses standard to measure financial assets measured at amortized cost (except held-to-maturity securities) using the fair value option. The election is to be applied on an instrument-by-instrument basis. For entities that have already adopted the new credit losses standard, the relief is effective for fiscal years beginning after December 15, 2019 and interim periods therein, and early adoption is permitted. For all other entities, the guidance is effective upon adoption of the new credit losses standard. The company is currently evaluating this new guidance to determine the impact it may have on our financial position, results of operations or cash flows.

Recently Adopted Guidance
Leases. In February 2016, the FASB issued new guidance, which requires a lessee to account for leases as finance or operating leases. Both types of leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability on its balance sheet, with differing methodology for income statement and cash flow recognition. For lessors, the standard modifies the classification criteria and the accounting for sales-type and direct financing leases. Entities will classify leases to determine how to recognize lease-related revenue and expense. We adopted the new standard as of January 1, 2019 using the modified retrospective adoption approach utilizing the optional transition method with prior periods not recast and have elected certain of the practical expedients allowed under the standard. The Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2019 are presented under the new standard, while comparative years presented are not adjusted and continue to be reported in accordance with our historical accounting policy. See Note 12 for more information.
Comprehensive Income. In February 2018, the FASB issued new guidance for Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02), which allows companies to reclassify stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 (the "2017 Tax Act") from accumulated other comprehensive income to retained earnings. The impact of applying this standard did not have a material impact on our condensed consolidated financial statements.

Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made. In June 2018, the FASB issued new guidance to clarify and improve the scope and the accounting guidance for contributions received and contributions made. The amendments are intended to assist entities in evaluating whether transactions should be accounted for as contributions (nonreciprocal transactions) or as exchange (reciprocal) transactions and determining whether a contribution is conditional. The Company adopted this guidance on January 1, 2019, which did not have a material impact on our condensed consolidated financial statements.

12

Table of Contents

3. Revenue from Contracts with Customers
Disaggregation of Revenue from Contracts with Customers
The following table presents a disaggregation of revenue:
 
Three months ended September 30,
 
Nine months ended September 30,
in millions
2019
 
2018
 
2019
 
2018
Americas
 
 
 
 
 
 
 
Recurring
$
222

 
$
198

 
$
652

 
$
590

Perpetual software licenses and hardware

 
31

 
31

 
93

Consulting services
34

 
48

 
111

 
145

Total Americas
256

 
277

 
794

 
828

EMEA
 
 
 
 
 
 
 
Recurring
75

 
70

 
223

 
207

Perpetual software licenses and hardware
12

 
26

 
29

 
69

Consulting services
31

 
43

 
101

 
139

Total EMEA
118

 
139

 
353

 
415

APAC
 
 
 
 
 
 
 
Recurring
46

 
44

 
137

 
129

Perpetual software licenses and hardware
4

 
20

 
16

 
81

Consulting services
35

 
46

 
105

 
123

Total APAC
85

 
110

 
258

 
333

Total Revenue
$
459

 
$
526

 
$
1,405

 
$
1,576


Contract Balances
The timing of revenue recognition, billings and cash collections results in billed accounts receivable, contract assets, and customer advances and deposits (deferred revenue or contract liabilities) on the condensed consolidated balance sheet. Accounts receivable include amounts due from customers that are unconditional. Contract assets relate to the Company’s rights to consideration for goods delivered or services completed and recognized as revenue but billing and the right to receive payment is conditional upon the completion of other performance obligations. Contract assets are included in other current assets on the balance sheet and are transferred to accounts receivable when the rights become unconditional. Deferred revenue consists of advance payments and billings in excess of revenue recognized. Deferred revenue is classified as either current or noncurrent based on the timing of when the Company expects to recognize revenue. These assets and liabilities are reported on a contract-by-contract basis at the end of each reporting period. The following table provides information about receivables, contract assets and deferred revenue from contracts with customers:
 
As of
in millions
September 30, 2019
 
December 31, 2018
Accounts receivable, net
$
328

 
$
588

Contract assets
$
8

 
$
14

Current deferred revenue
$
408

 
$
490

Long-term deferred revenue
$
68

 
$
105



Revenue recognized during the nine months ended September 30, 2019 from amounts included in deferred revenue at the beginning of the period was $468 million.

13

Table of Contents

Transaction Price Allocated to Unsatisfied Obligations
The following table includes estimated revenue expected to be recognized in the future related to the Company's unsatisfied (or partially satisfied) obligations at September 30, 2019:
in millions

Total at September 30, 2019

Year 1

Year 2 and Thereafter
Remaining unsatisfied obligations

$
2,558


$
1,210


$
1,348



The amounts above represent the price of firm orders for which work has not been performed or goods have not been delivered and exclude unexercised contract options outside the stated contractual term that do not represent material rights to the customer. Although the Company believes that the contract value in the above table is firm, approximately $1,831 million of the amount includes customer-only general cancellation for convenience terms that the Company is contractually obligated to perform unless the customer notifies us. The Company expects to recognize revenue of approximately $300 million in the next year from contracts that are non-cancelable. Customers typically do not cancel before the end of the contractual term and historically the Company has seen very little churn in its customer base. The Company believes the inclusion of this information is important to understanding the obligations that the Company is contractually required to perform and provides useful information regarding remaining obligations related to these executed contracts.
4. Contract Costs
The Company capitalizes sales commissions and other contract costs that are incremental direct costs of obtaining customer contracts if the expected amortization period of the asset is greater than one year. These costs are recorded in Other Assets on the Company’s balance sheet. The capitalized amounts are calculated based on the annual recurring revenue and total contract value for individual multi-term contracts. The judgments made in determining the amount of costs incurred include whether the commissions are in fact incremental and would not have occurred absent the customer contract. Costs to obtain a contract are amortized as selling, general and administrative expenses on a straight-line basis over the expected period of benefit, which is typically around four years. These costs are periodically reviewed for impairment. The following table identifies the activity relating to capitalized contract costs:
in millions
 
December 31, 2018
 
Capitalized
 
Amortization
 
September 30, 2019
Capitalized contract costs
 
$
54

 
$
37

 
$
(14
)
 
$
77


5. Supplemental Financial Information
 
As of
In millions
September 30,
2019
 
December 31,
2018
Inventories
 
 
 
Finished goods
$
24

 
$
16

Service parts
12

 
12

Total inventories
$
36

 
$
28

 
 
 
 
Deferred revenue
 
 
 
Deferred revenue, current
$
408

 
$
490

Long-term deferred revenue
68

 
105

Total deferred revenue
$
476

 
$
595



14

Table of Contents


6. Goodwill and Acquired Intangible Assets

Effective January 1, 2019, the Company implemented an organizational change to its operating segments and will report future results under the separate segments: Americas, EMEA and APAC. The following table identifies the activity relating to goodwill by operating segment.

In millions
December 31, 2018
 
Reassignment of Goodwill
 
Currency translation adjustments
 
September 30, 2019
Goodwill
 
 
 
 
 
 
 
Americas
$
253

 
$

 
$

 
$
253

International
142

 
(142
)
 

 

EMEA

 
88

 
(1
)
 
87

APAC

 
54

 

 
54

Total goodwill
$
395

 
$

 
$
(1
)
 
$
394



Acquired intangible assets were specifically identified when acquired and are deemed to have finite lives. The gross carrying amount and accumulated amortization for the Company's acquired intangible assets were as follows:
 
 
 
September 30, 2019
 
December 31, 2018
In millions
Amortization
Life (in Years)
 
Gross
Carrying
Amount
 
Accumulated
Amortization
and Currency
Translation
Adjustments
 
Gross
Carrying
Amount
 
Accumulated
Amortization
and Currency
Translation
Adjustments
Acquired intangible assets

 
 
 
 
 
 
 
 
Intellectual property/developed technology
5
 
$
35

 
$
(24
)
 
$
35

 
$
(20
)


The aggregate amortization expense (actual and estimated) for acquired intangible assets is as follows:
 
 
Three Months Ended September 30
 
Nine Months Ended September 30,
In millions
 
2019
 
2018
 
2019
 
2018
Amortization expense
 
$
1

 
$
1

 
$
4

 
$
5

 
 
Actual
 
For the years ended (estimated)
In millions
 
2018
 
2019
 
2020
 
2021
 
2022
 
Amortization expense
 
$
7

 
$
6

 
$
4

 
$
4

 
$
2




15

Table of Contents

7. Income Taxes
Income tax provisions for interim periods are based on estimated annual income tax rates, adjusted to reflect the effects of any significant infrequent or unusual items which are required to be discretely recognized within the current interim period. As a result of the 2017 Tax Act, the Company changed its indefinite reversal assertion related to its undistributed earnings of its foreign subsidiaries and no longer considers a majority of its foreign earnings permanently reinvested outside of the United States ("U.S."). As a result, the effective tax rates in the periods presented are largely based upon the forecasted pre-tax earnings mix and allocation of certain expenses in various taxing jurisdictions where the Company conducts its business.
The effective tax rate is as follows:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
In millions
 
2019
 
2018
 
2019
 
2018
Effective tax rate
 
(150.0
)%
 
(80.0
)%
 
%
 
(87.5
)%


For the three months ended September 30, 2019, a $5 million discrete tax benefit was recorded related to the reversal of an uncertain tax position resulting from the expiration of the statute of limitations. For the nine months ended September 30, 2019, the $5 million discrete tax benefit was partially offset by $4 million in discrete tax expense recorded in the second quarter related to the reversal of the United States Tax Court’s decision in the Altera Corp. v. Commissioner case by the Ninth Circuit Court of Appeals on June 7, 2019. The Altera case focused on whether current U.S. Treasury Regulations requiring the inclusion of stock-based compensation expense in a taxpayer's cost-sharing calculations are valid. As a result of these discrete items and incremental tax expense related to equity compensation, the Company recorded insignificant income tax expense on a pre-tax net loss of $1 million for the nine months ended September 30, 2019, resulting in an effective income tax rate of zero percent.
For the three and nine months ended September 30, 2018, the Company recorded a $7 million tax benefit as an adjustment to the provisional estimates as a result of additional regulatory guidance and changes in interpretations and assumptions the Company has made as a result of the 2017 Tax Act. This resulted in an income tax benefit for the respective periods.

The Company estimates its annual effective tax rate for 2019 to be approximately 300%, which takes into consideration, among other things, the forecasted earnings mix by jurisdiction, and the impact of discrete tax items. The 2017 Tax Act subjects U.S. shareholders to a tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. The Company has elected to provide for the tax expense related to GILTI in the year the tax is incurred, and has included approximately $1 million of tax expense related to GILTI in our forecasted marginal effective tax rate for 2019.
8. Derivative Instruments and Hedging Activities
As a portion of Teradata’s operations is conducted outside the U.S. and in currencies other than the U.S. dollar, the Company is exposed to potential gains and losses from changes in foreign currency exchange rates. In an attempt to mitigate the impact of currency fluctuations, the Company uses foreign exchange forward contracts to hedge transactional exposures resulting predominantly from foreign currency denominated inter-company receivables and payables. The forward contracts are designated as fair value hedges of specified foreign currency denominated inter-company receivables and payables and generally mature in three months or less. The fair values of foreign exchange contracts are based on market spot and forward exchange rates and represent estimates of possible value that may not be realized in the future. Across its portfolio of contracts, Teradata has both long and short positions relative to the U.S. dollar. As a result, Teradata’s net involvement is less than the total contract notional amount of the Company’s foreign exchange forward contracts.

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Gains and losses from foreign exchange forward contracts are fully recognized each period and reported along with the offsetting gain or loss of the related hedged item, either in cost of revenues or in other income (expense), depending on the nature of the related hedged item.

In June 2018, Teradata executed a five-year interest rate swap with a $500 million initial notional amount to hedge the floating interest rate of its term loan, as more fully described in Note 11. The Company uses interest rate swaps to manage interest rate risks on future interest payments caused by interest rate changes on its variable rate term loan. The notional amount of the hedge will step-down according to the amortization schedule of the term loan. The notional amount of the hedge was $488 million as of September 30, 2019.

The Company performed an initial effectiveness assessment in the third quarter of 2018 on the interest rate swap, and the hedge was determined to be effective. The hedge is being evaluated qualitatively on a quarterly basis for effectiveness. Changes in fair value are recorded in Accumulated Other Comprehensive Loss and periodic settlements of the swap will be recorded in interest expense along with the interest on amounts outstanding under the term loan.
The following table identifies the contract notional amount of the Company’s derivative financial instruments: