NCR Q4 Earnings Miss, Revenues Beat Estimates, Down Y/Y

NCR (NYSE:NCR) Corporation NCR fourth-quarter 2020 non-GAAP earnings of 59 cents per share missed the Zacks Consensus Estimate of 66 cents. Moreover, the reported figure plunged 30.6% on lower revenues, year over year.

The company’s revenues of $1.63 billion surpassed the consensus mark of $1.62 billion. The top-line figure, however, decreased 14% year over year on a reported basis. Management noted that the foreign-currency fluctuations did not impact the fourth-quarter results.

The coronavirus pandemic has hurt the company’s hardware business. NCR’s hardware revenues plunged 30% on a 36% decline in ATM hardware and 23% fall in SCO/POS (Self-Checkout/Point-of-Sale) sales.

During the earnings conference call, the company noted that approximately $203 million or 80% of the decline in total revenues resulted from a weak hardware business performance. In addition, a shift from selling perpetual software licenses to recurring revenues hurt quarterly revenues by $32 million.

Quarter Details

Banking revenues slid 16% on a reported as well as on constant currency (cc) basis year over year, due to the pandemic-induced 36% decline in ATM hardware revenues. Shift from selling perpetual software licenses to recurring revenues also affected the year-over-year comparison. Unfavorable currency exchange rates did not impact the Banking segment’s top-line performance during the fourth quarter.

Retail revenues decreased 7% on a reported basis and 8% on cc basis, mainly due to decrease in SCO and POS revenues, partially offset by higher service revenues. However, favorable foreign currency-exchange rates aided the Retail division’s revenues by 1%.

Hospitality revenues slipped 22% on a reported and 21% on a cc basis, primarily on a decline in hardware revenues. Unfavorable currency-exchange rates hurt the segment’s top-line performance by 1%.

The company’s Digital Banking Solution witnessed solid momentum and added five new customers. Digital banking’s registered users grew 12% year over year.

Margins

Non-GAAP gross profit of $465 million was down 14% year over year. Non-GAAP gross margin contracted 20 basis points to 28.5%. Lower revenues due to the pandemic and shift to recurring revenues are the key reasons behind these declines in gross profit and margin.

Non-GAAP operating expenses declined 3.4% year on year to $313 million, chiefly on the company’s cost-cutting initiatives to address the pandemic’s impact on the business. Its cost-cutting measures, included salary reductions, curtailing travels, and elimination of certain contractors.

Non-GAAP operating income declined to $152 million from the year-ago quarter’s $217 million. Non-GAAP operating margin shrunk 220 basis points to 9.3% from the year-earlier quarter’s 11.5%.

Other Financial Details

NCR ended the December-end quarter with cash and cash equivalents of $338 million compared with the $1.61 billion reported during the September-end quarter.

Free cash inflow was $149 million compared with the prior quarter’s $302 million. Net cash provided by operating activities was $146 million during the fourth quarter. In fiscal 2021, the company generated operating and free cash flows of $641 million and $448 million, respectively.

Notably, NCR suspended its share-repurchase program and merger and acquisition activities, and cut senior employee salaries among other cost-cutting steps during first-quarter 2020, in order to strengthen the company’s liquidity position.

Additionally, on Mar 24, 2020, the company withdrew the remaining available funds of $630 million from its five-year, $1.1-billion revolving credit facility. Also, on Apr 13, 2020, the company issued $400 million of senior unsecured notes.

Furthermore, the company deleveraged its balance sheet by $200 million in August 2020 through redeeming $1.3 billion of debt and issuing $1.1 billion of debt.

Zacks Rank and Key Picks

NCR currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector include Shopify (NYSE:SHOP) SHOP, Zoom Video Communications (NASDAQ:ZM) ZM and Apple AAPL, all flaunting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Shopify, Zoom and Apple is currently pegged at 32.5%, 25% and 11.5%, respectively.

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