NCR Corporation reported strong fourth-quarter 2021 results. The enterprise technology provider reported non-GAAP earnings of 76 cents, surpassing the Zacks Consensus Estimate of 71 cents per share.

The bottom line improved 28.8% from 59 cents per share reported in the year-ago quarter, primarily driven by higher revenues and improved margins.

For the fourth quarter of 2021, the company reported revenues of $2.03 billion, outpacing the consensus mark of $2.01 billion. The top line witnessed a year-over-year surge of 15%, driven by contributions from the Cardtronics business, and solid growth across the company’s banking and hospitality segments.

NCR progressed significantly with its strategic growth initiatives, which are transforming it into a software platform and payments company. The company’s recurring revenues improved 35% to $1.18 billion in the quarter under review.

Quarterly Details

Banking revenues increased 40% year over year to $1.12 billion, primarily on higher software and services revenues (including the contributions of Cardtronics) and ATM hardware sales. Software and services revenues increased 27% to $1.47 billion during the quarter under review.

Retail revenues rose 9% to $620 million, primarily on higher self-checkout revenues and point-of-sale revenues across its food-drug-merchandise and convenience-fuel-retail customers.

Hospitality revenues surged 27% to $231 million, mainly driven by an increase in point-of-sale revenues across the company’s enterprise and small-and-medium business customers.

During the fourth quarter, NCR’s T&T revenues declined 20% to $68 million.

NCR’s Digital Banking Solution continued witnessing solid momentum, with revenues increasing 13.7% year over year to $133 million. Digital banking registered users rose 3.3% year over year to 25.3 million.

Operating Details

Non-GAAP gross margin of $549 million was up 18.1% year over year. Non-GAAP gross margin rate contracted 150 basis points (bps) to 27%, primarily due to elevated component and freight costs, partially offset by price hikes.

Non-GAAP operating expenses increased 7% year on year to $334 million, mainly due to the company’s planned increase in research and development costs related to higher strategic investments and inclusion of Cardtronics expenses.

Adjusted EBITDA surged 36.8% year over year to $353 million. The adjusted EBITDA margin expanded 160 bps to 17.4%.

Non-GAAP operating income increased to $215 million from the year-ago quarter’s $152 million. Non-GAAP operating margin contracted 280 bps to 16.4% from the year-earlier quarter’s 19.2%.

Balance Sheet & Other Details

NCR exited the December-end quarter with cash and cash equivalents of $447 million compared with $383 million reported during the September-end quarter.

Free cash inflow totaled $100 million compared with the prior quarter’s $125 million. Net cash provided by operating activities was $270 million in the fourth quarter.

During the full-year 2021, the company generated operating and free cash flows of $1.08 billion and $460 million, respectively.

Full-Year Highlights   

NCR reported revenues of $7.16 billion in 2021, up 15% year over year. Recurring revenues grew 25% to $4.17 billion.

Non-GAAP diluted earnings were $2.56 per share, indicating a surge of 51.5% year over year.

For the full-year 2021, adjusted EBITDA increased 38.8% year over year to $1.24 billion. Adjusted EBITDA margin expanded 300 bps to 17.4%.

Guidance 2022

For the first quarter of 2022, NCR projects revenues between $1.9 billion and $1.95 billion. It forecast non-GAAP diluted earnings between 60 cents per share and 65 cents per share, increasing in the range of 18-27%.

Adjusted EBITDA is expected to be $325-$350 million, up 26-36% from the year-ago reported figure.

For the full-year 2022, NCR anticipates revenues between $8 billion and $8.2 billion, suggesting a year-over-year increase of 12-15%.

The company expects adjusted EBITDA in the band of $1.5-$1.575 billion, indicating a 21-27% year-over-year growth.

Non-GAAP diluted earnings are estimated to grow between 27% and 39%, in the range of $3.25-$3.55 per share.

Zacks Rank & Key Picks

NCR currently has a Zacks Rank #4 (Sell).

Some better-ranked stocks from the broader computer and technology sector include the iPhone maker Apple (AAPL Quick QuoteAAPL - Free Report) , sporting a Zacks Rank #1 (Strong Buy), Analog Devices (ADI Quick QuoteADI - Free Report) and Axcelis Technologies (ACLS Quick QuoteACLS - Free Report) , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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