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NCR Beats on Q3 Earnings and Revenues, Raises Top-Line View
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NCR Corporation third-quarter 2019 non-GAAP earnings of 73 cents per share surpassed the Zacks Consensus Estimate of 67 cents. On a year-over-year basis, the figure increased 25.9%.
The company’s revenues of $1.78 billion topped the consensus estimate of $1.60 billion. The figure increased 15% year over year on a reported basis and 17% in constant currency (CC).
Growth across each of the segments, particularly banking drove the top line.
Banking revenues increased 18% on a reported basis and 21% in CC, primarily due to 60% CC growth in ATM revenues driven by higher backlog conversion and strong order rates.
Software related to ATMs contributed considerably to the year-over-year increase in Banking revenues, with growth in hardware maintenance backlog and a future annuity stream from large customer wins in the quarter.
Strength in ATM replacement cycle, particularly in the Americas and Europe, and upgrades on Windows 10, were significant revenue drivers for the segment.
Retail revenues rose 12% on a reported basis and 13% in CC, driven by revenue contribution of JetPay and solid traction in self-checkout solution. Higher hardware maintenance activity and several new managed service contracts benefited the segment.
Hospitality revenues increased 12% on a reported basis and 13% in CC, driven by higher cloud revenues from NCR Silver and Aloha products, payments revenues from the JetPay acquisition, and increase in point-of-sale revenues.
The company’s Digital Banking Solution witnessed solid growth. NCR launched some new features in the third quarter that increased revenues from new and existing customers while improving retention rate. During the quarter, it signed 29 recurring contract deals that would have been an upfront payment in the past.
NCR completed the acquisition of D3 Technology early in the third quarter. Notably, the clinical services provider NYMBUS licensed the D3 Digital Banking platform shortly after the acquisition was completed.
In Digital First Restaurant, NCR witnessed early success in its bundle of software, services, hardware and payments, Aloha Essentials. Notably, 65% of all SMB Aloha sites sold through its direct sales channel were sold as an Aloha Essentials subscription bundle.
Digital Connected Services continued to witness an expansion of customer base.
Margins
Non-GAAP gross profit of $513 million was up 20.7% year over year. Non-GAAP gross margin expanded 140 basis points to 28.8%.
Non-GAAP operating expenses were $311 million, up 17.8% due to higher employee-related and real estate costs.
Non-GAAP operating income of $202 million increased 25.5% year over year.
Operating income from Banking grew 47% in CC, driven by a favorable mix for ATMs, and higher software margin related to ATMs.
Operating income of the Retail segment rose 28% in CC primarily driven by improved hardware profitability.
Operating income of the Hospitality segment decreased 34% in CC due continued investment in NCR Silver and NCR Aloha.
Balance Sheet & Other Financial Details
NCR exited the quarter with cash and cash equivalents of approximately $388 million, up from $335 million reported in the previous quarter.
The company ended the third quarter with $3.42 billion of long-term debt compared with $2.92 billion in the second quarter.
Free cash flow was $57 million against outflow of $9 million in the prior quarter.
Outlook
The company raised full-year 2019 revenue guidance. It now expects 5-6% year-over-year revenue growth, up from previously predicted 3-4% rise.
NCR reiterated outlook for full-year 2019 earnings, net income and cash flow. Non-GAAP earnings per share are expected to be between $2.75 and $2.85.
Cash flow from operations is estimated to be between $705 million and $730 million and free cash flow is likely to be $300-$350 million.
Unusually strong revenue growth in the fourth quarter of last year is expected to make year-over-year comparison difficult.
Notably, majority of NCR’s annual free cash flow is typically generated in the fourth quarter. This is expected to reflect positively in the balance sheet.
Long-term earnings growth rate for Alteryx, Chegg and Benefitfocus is 39.85%, 30% and 20%, respectively.
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NCR Beats on Q3 Earnings and Revenues, Raises Top-Line View
NCR Corporation third-quarter 2019 non-GAAP earnings of 73 cents per share surpassed the Zacks Consensus Estimate of 67 cents. On a year-over-year basis, the figure increased 25.9%.
The company’s revenues of $1.78 billion topped the consensus estimate of $1.60 billion. The figure increased 15% year over year on a reported basis and 17% in constant currency (CC).
Growth across each of the segments, particularly banking drove the top line.
NCR Corporation Price, Consensus and EPS Surprise
NCR Corporation price-consensus-eps-surprise-chart | NCR Corporation Quote
Quarter Details
Banking revenues increased 18% on a reported basis and 21% in CC, primarily due to 60% CC growth in ATM revenues driven by higher backlog conversion and strong order rates.
Software related to ATMs contributed considerably to the year-over-year increase in Banking revenues, with growth in hardware maintenance backlog and a future annuity stream from large customer wins in the quarter.
Strength in ATM replacement cycle, particularly in the Americas and Europe, and upgrades on Windows 10, were significant revenue drivers for the segment.
Retail revenues rose 12% on a reported basis and 13% in CC, driven by revenue contribution of JetPay and solid traction in self-checkout solution. Higher hardware maintenance activity and several new managed service contracts benefited the segment.
Hospitality revenues increased 12% on a reported basis and 13% in CC, driven by higher cloud revenues from NCR Silver and Aloha products, payments revenues from the JetPay acquisition, and increase in point-of-sale revenues.
The company’s Digital Banking Solution witnessed solid growth. NCR launched some new features in the third quarter that increased revenues from new and existing customers while improving retention rate. During the quarter, it signed 29 recurring contract deals that would have been an upfront payment in the past.
NCR completed the acquisition of D3 Technology early in the third quarter. Notably, the clinical services provider NYMBUS licensed the D3 Digital Banking platform shortly after the acquisition was completed.
In Digital First Restaurant, NCR witnessed early success in its bundle of software, services, hardware and payments, Aloha Essentials. Notably, 65% of all SMB Aloha sites sold through its direct sales channel were sold as an Aloha Essentials subscription bundle.
Digital Connected Services continued to witness an expansion of customer base.
Margins
Non-GAAP gross profit of $513 million was up 20.7% year over year. Non-GAAP gross margin expanded 140 basis points to 28.8%.
Non-GAAP operating expenses were $311 million, up 17.8% due to higher employee-related and real estate costs.
Non-GAAP operating income of $202 million increased 25.5% year over year.
Operating income from Banking grew 47% in CC, driven by a favorable mix for ATMs, and higher software margin related to ATMs.
Operating income of the Retail segment rose 28% in CC primarily driven by improved hardware profitability.
Operating income of the Hospitality segment decreased 34% in CC due continued investment in NCR Silver and NCR Aloha.
Balance Sheet & Other Financial Details
NCR exited the quarter with cash and cash equivalents of approximately $388 million, up from $335 million reported in the previous quarter.
The company ended the third quarter with $3.42 billion of long-term debt compared with $2.92 billion in the second quarter.
Free cash flow was $57 million against outflow of $9 million in the prior quarter.
Outlook
The company raised full-year 2019 revenue guidance. It now expects 5-6% year-over-year revenue growth, up from previously predicted 3-4% rise.
NCR reiterated outlook for full-year 2019 earnings, net income and cash flow. Non-GAAP earnings per share are expected to be between $2.75 and $2.85.
Cash flow from operations is estimated to be between $705 million and $730 million and free cash flow is likely to be $300-$350 million.
Unusually strong revenue growth in the fourth quarter of last year is expected to make year-over-year comparison difficult.
Notably, majority of NCR’s annual free cash flow is typically generated in the fourth quarter. This is expected to reflect positively in the balance sheet.
Zacks Rank and Other Key Picks
NCR currently has a Zacks Rank #2 (Buy).
A few other top-ranked stocks in the broader technology sector are Alteryx, Inc., Chegg, Inc. (CHGG - Free Report) and Benefitfocus, Inc. , each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Alteryx, Chegg and Benefitfocus is 39.85%, 30% and 20%, respectively.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.
This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.
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