NCR Q2 Earnings and Revenues Beat Estimates, Decline Y/Y
NCR Corporation’s NCR second-quarter 2020 non-GAAP earnings of 27 cents per share handily outpaced the Zacks Consensus Estimate of 18 cents. However, the reported figure plummeted 64.5% on lower revenues, year over year.
The company’s revenues of $1.48 billion surpassed the consensus mark of $1.33 billion. The revenue figure, however, decreased 13% year over year on a reported basis and 12% at constant currency (CC).
The coronavirus outbreak had an adverse impact on the business. Moreover, a shift from selling perpetual software licenses to recurring revenues hurt quarterly revenues by $22 million. Additionally, adverse foreign-currency fluctuations negatively impacted the top line by 1%.
Banking revenues slid 12% on a reported basis and 11% at cc year over year, due to the pandemic-induced 25% 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 hurt the Banking segment’s top-line performance by 1%.
Retail revenues fell 13% on both reported and cc basis, due to the pandemic. Moreover, a large customer rollout in the prior-year quarter resulted in a dismal year-over-year comparison.
Hospitality revenues slipped 21% on a reported basis and 20% at cc, on the pandemic-related demand issues. Also, a 1% year-over-year impact of foreign-currency fluctuations added to the segment’s concerns.
The company’s Digital Banking Solution witnessed positive momentum and added 18 new customers. The acquisition of D3 Technology drove revenues as well.
Non-GAAP gross profit of $381 million was down 21.8% year over year. Non-GAAP gross margin contracted 280 basis points to 25.7%. Lower revenues due to the pandemic and shift to recurring revenues are the key reasons behind the declines in gross profit and margin.
Non-GAAP operating expenses declined 10.2% year on year to $265 million, mainly on the company’s cost-cutting initiatives to address the business impact of the coronavirus pandemic. Its cost-cutting measures, included salary reductions, curtailing travels, and elimination of certain contractors.
Non-GAAP operating income declined to $116 million from the year-ago quarter’s $192 million.
Other Financial Details
NCR ended the June-end quarter with cash and cash equivalents of $1.68 billion compared with the $1.2 billion reported in the March-end quarter.
Free cash inflow was $171 million against an outflow of $15 million witnessed in the prior quarter.
Net cash provided by operating activities was $229 million.
Notably, in order to strengthen its liquidity position, NCR suspended its share-repurchase program and merger and acquisition activities, and cut senior employee salaries, among other cost-cutting steps during the first quarter.
Additionally, on Mar 24, the company withdrew the remaining available funds of $630 million from its five-year, $1.1-billion revolving credit facility. Moreover, on Apr 13, the company issued $400 million of senior unsecured notes.
Zacks Rank and Key Picks
Currently, NCR carries a Zacks Rank #5 (Strong Sell).
Better-ranked stocks in the broader technology sector include Dropbox DBX, Zoom Video Communications ZM and Synaptics SYNA, each 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 Dropbox, Zoom and Synaptics is currently pegged at 32.5%, 25%, and 10%, respectively.
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