NCR Announces Second Quarter 2015 Results
- Revenue of $1.60 billion, down 3% as reported, up 4% constant currency; Software-related revenue of $440 million, down 1% as reported, up 3% constant currency
- Non-pension operating income (NPOI) of $202 million, down 4% as reported, up 4% constant currency; Non-GAAP diluted EPS of $0.66
- GAAP loss from operations of $(266) million, down 257%; GAAP diluted EPS of $(2.03); GAAP results impacted by $427 million non-cash charge for settlement of UK London pension plan
- Free cash flow improvement of $92 million; net cash provided by operating activities of $167 million
- Revenue and non-GAAP guidance reaffirmed for full-year 2015; Free cash flow guidance increased
DULUTH, Georgia - NCR Corporation (NYSE: NCR) reported financial results today for the three months ended June 30, 2015.
“Our second quarter results were in line with our expectations and we remain on track to achieve our objectives for the full year,” said Chairman and CEO Bill Nuti. “Our constant currency results were driven by balanced performance across all of our businesses, including Retail Solutions where execution continues to improve, and we generated solid free cash flow growth. We also continued to transform our business through further growth of our software revenues, our commitment to a new state-of-the-art world headquarters in Technology Square in Atlanta, Georgia, and the transfer of our UK London pension plan to an insurer. We remain positioned at the forefront of the omni-commerce business environment to deliver innovative software platforms to help our customers meet the needs of the increasingly connected consumer."
Q2 Financial Summary
Second Quarter$ in millions, except per share amounts2015 2014 As Reported Constant CurrencyRevenue$1,604 $1,658 (3)% 4%Income from operations *$(266) $169 (257)% Non-pension operating income (NPOI)$202 $210 (4)% 4% **Diluted earnings per share ***$(2.03) $0.53 (483)% Non-GAAP diluted earnings per share$0.66 $0.68 (3)% 6% **
* Income from operations in the second quarter of 2015 includes an $8 million charge related to the ongoing restructuring plan and a $427 million non-cash charge related to settlement of the UK London pension plan.
** NPOI includes approximately $16 million and non-GAAP diluted earnings per share includes approximately $0.06 of unfavorable foreign currency impacts.
*** Diluted earnings per share in the second quarter of 2015 includes $0.04 related to the ongoing restructuring plan and $2.51 related to settlement of the UK London pension plan.
In this release, we use the non-GAAP measures non-pension operating income (NPOI), non-GAAP diluted earnings per share and free cash flow, and we present certain measures on a constant currency basis. These non-GAAP measures are described and reconciled to their most directly comparable GAAP measures elsewhere in this release.
Q2 Supplemental Revenue Information
Second Quarter$ in millions2015 2014 % Change % Change Constant CurrencyCloud *$135 $125 8% 9%Software License/Software Maintenance168 172 (2%) 3%Professional Services137 149 (8%) (2%)Total Software-Related Revenue440 446 (1%) 3%Hardware622 637 (2%) 6%Other Services542 575 (6%) 2%Total Revenue$1,604 $1,658 (3%) 4%
* Referred to as Software-as-a-Service or SaaS in prior Company earnings releases.
Software-related revenue increased 3% on a constant currency basis, including 9% constant currency growth in cloud revenue driven by Financial Services and Hospitality. Additionally, on a constant currency basis, hardware revenue was up significantly at 6% in the second quarter, and other services was up 2%.
Q2 Operating Segment Results
Second Quarter$ in millions2015 2014 % Change % Change Constant CurrencyRevenue by segment Financial Services$840 $900 (7)% 1%Retail Solutions505 503 —% 7%Hospitality172 170 1% 4%Emerging Industries87 85 2% 11%Total Revenue$1,604 $1,658 (3)% 4%Operating income by segment Financial Services$123 $137 (10)% (2)%% of Financial Services Revenue14.6% 15.2% Retail Solutions42 48 (13)% (4)%% of Retail Solutions Revenue8.3% 9.5% Hospitality27 23 17% 17%% of Hospitality Revenue15.7% 13.5% Emerging Industries10 2 400% 500%% of Emerging Industries Revenue11.5% 2.4% Segment operating income$202 $210 (4)% 4%% of Total Revenue12.6% 12.7%
Financial Services Constant currency revenue growth was driven by growth in the Americas, Western Europe and Middle East Africa offset by declines in Russia and China. Operating income was down due to a less favorable mix of revenue in North America and Europe as well as due to lower revenue in Russia and China.
Retail Solutions Constant currency revenue growth was driven by increased spending by retailers in North America and Europe. Operating income was down due to a less favorable mix of revenue in North America and improved significantly as a percentage of Retail Solutions revenue compared to Q1 2015.
Hospitality Constant currency revenue growth was driven by improvements in software-related revenue in the Americas. Operating income was up driven by higher software-related revenue including cloud and professional services revenue.
Emerging Industries Constant currency revenue growth was driven by improvements in our Telecom & Technology business. Operating income was up due to higher services margins.
Free Cash Flow
Second Quarter$ in millions2015 2014Net cash provided by operating activities$167 $80 Total capital expenditures(59) (73)Net cash used in discontinued operations(13) (22)Pension discretionary contributions and settlements— 18 Free cash flow$95 $3
Free cash flow improved by $92 million in the second quarter of 2015 as compared to the second quarter of 2014 driven by improvements in cash from operations, lower capital expenditures, and lower discontinued operations.
Other Second Quarter Developments
During the second quarter of 2015, the Company completed another positive step to de-risk the global pension portfolio for investors with the transfer of the UK London pension plan to an insurer. As a result of the transfer, the Company recorded a non-cash settlement charge of $427 million in the Consolidated Statement of Operations as well as an offsetting decrease to prepaid pension costs in the Consolidated Balance Sheet.
Additionally, we were informed by the staff of the Securities and Exchange Commission that it does not intend to recommend an enforcement action against the Company following a previously disclosed investigation concerning certain aspects of the Company’s compliance with the Foreign Corrupt Practices Act.
The Company's progress to date with the restructuring plan is on track. In 2015, NCR expects to incur a pre-tax charge of approximately $39 million to $64 million with $24 million recorded in the first half of 2015. Cash payments in 2015 are expected to be approximately $71 million to $86 million with $30 million paid in the first half of 2015. Savings are in line with previous expectations with $18 million in 2014, approximately $70 million in 2015 and approximately $105 million in 2016, with about 50% of the savings benefiting NPOI.
2015 Outlook
We are reaffirming our 2015 revenue, non-pension operating income and non-GAAP diluted EPS guidance and increasing our free cash flow guidance. Income from operations (GAAP) and diluted earnings per share (GAAP) guidance has been revised to reflect the impact of the settlement of the UK London pension plan. We continue to expect unfavorable foreign currency impacts of 6% in revenue, $70 million to $75 million in NPOI and $0.30 per share in non-GAAP diluted EPS for full-year 2015.
$ in millions, except per share amounts 2015 Guidance 2014
ActualRevenue $6,525 - $6,675 $6,591 Year-over-year revenue growth (1%) to 1% 8% Constant currency revenue growth 5% to 7%(1) 10% Income from operations (GAAP) $194 - $259(2), (3) $353(2)Non-pension operating income (NPOI) $830 - $870 $820 Diluted earnings per share (GAAP) ($0.40) - ($0.70)(2), (3) $1.06(2)Non-GAAP Diluted EPS $2.60 - $2.80(4) $2.74 Net cash provided by operating activities $620 - $650 $524 Free cash flow $350 - $400(5) $313
(1) Expected constant currency growth of 5% to 7%, which includes unfavorable foreign currency impacts of approximately
6% in revenue.
(2) For 2014, actuarial mark-to-market pension adjustment is included; 2015 guidance does not include actuarial mark-to-
market pension adjustments, which will be determined in Q4 2015.
(3)Revised to reflect the $427 million non-cash charge related to settlement of the UK London pension plan.
(4) NCR expects approximately $215 million to $220 million of other expense, net including interest expense in 2015 and that its
full-year 2015 effective income tax rate will be approximately 25% compared to 22% in 2014.
(5) Free cash flow guidance has been increased to $350 million to $400 million from prior guidance of $325 million to $375
million.
Q3 2015 Outlook
For the third quarter of 2015, NCR expects its as reported revenue to be in the range of $1,630 million to $1,650 million, compared to $1,647 million in the third quarter of 2014. Revenue includes an expected 6% unfavorable foreign currency impact. Additionally, the Company expects non-pension operating income (NPOI) to be in the range of $210 million to $220 million, compared to $204 million in the third quarter of 2014, and income from operations to be in the range of $158 million to $168 million, compared to $41 million in the third quarter of 2014. The unfavorable foreign currency impact on NPOI is expected to be approximately $17 million in the third quarter of 2015. NCR expects its third quarter 2015 effective income tax rate to be approximately 23% and other expense, net including interest expense to be approximately $55 million.
2015 Second Quarter Earnings Conference Call
A conference call is scheduled for today at 4:30 p.m. (EDT) to discuss the second quarter 2015 results and guidance for third quarter and full-year 2015. Access to the conference call and accompanying slides, as well as a replay of the call, are available on NCR's web site at http://investor.ncr.com/. Additionally, the live call can be accessed by dialing 800-210-9006 and entering the participant passcode 5768506.
More information on NCR’s Q2 2015 earnings, including additional financial information and analysis, is available on NCR’s Investor Relations website at http://investor.ncr.com/.
About NCR Corporation
NCR Corporation (NYSE: NCR) is the global leader in consumer transaction technologies, turning everyday interactions with businesses into exceptional experiences. With its software, hardware, and portfolio of services, NCR enables nearly 550 million transactions daily across the financial, retail, hospitality, travel, telecom and technology industries. NCR solutions run the everyday transactions that make your life easier.
NCR is headquartered in Duluth, Georgia with over 30,000 employees and does business in 180 countries. NCR is a trademark of NCR Corporation in the United States and other countries. NCR encourages investors to visit its web site which is updated regularly with financial and other important information about NCR.
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News Media Contact
Lou Casale
NCR Corporation
212.589.8415
lou.casale@ncr.com
Investor Contact
Gavin Bell
NCR Corporation
212.589.8468
gavin.bell@ncr.com
NCR Corporation (NYSE: NCR) is a leader in transforming, connecting, and running technology platforms for self-directed banking, stores, and restaurants. NCR is headquartered in Atlanta, Georgia, with 35,000 employees globally. NCR is a trademark of NCR Corporation in the United States and other countries.
NCR VOYIX Corporation (NYSE: VYX) is a leading global provider of digital commerce solutions for the retail, restaurant and digital banking industries. NCR VOYIX transforms retail stores, restaurant systems and digital banking experiences with comprehensive, platform-led SaaS and services capabilities. NCR VOYIX is headquartered in Atlanta, Georgia, with approximately 16,000 employees in 35 countries across the globe.
This release contains forward-looking statements. Forward-looking statements use words such as “expect,” “anticipate,” “outlook,” “intend,” “plan,” “confident,” “believe,” “will,” “should,” “would,” “potential,” “positioning,” “proposed,” “planned,” “objective,” “likely,” “could,” “may,” and words of similar meaning, as well as other words or expressions referencing future events, conditions or circumstances. Statements that describe or relate to NCR’s or NCR VOYIX’s plans, goals, intentions, strategies, financial outlook, NCR’s or NCR VOYIX’s expectations regarding the Spin-Off, NCR’s or NCR VOYIX’s intention to consummate the offering and issue the Notes or the intended use of proceeds from the offering of the Notes and enter into the new senior secured credit facilities, and statements that do not relate to historical or current fact, are examples of forward-looking statements. Forward-looking statements are based on our current beliefs, expectations and assumptions, which may not prove to be accurate, and involve a number of known and unknown risks and uncertainties, many of which are out of the NCR’s and NCR VOYIX’s control. Forward-looking statements are not guarantees of future performance, and there are a number of important factors that could cause actual outcomes and results to differ materially from the results contemplated by such forward-looking statements. Additional information concerning these and other factors can be found in NCR and NCR VOYIX’s filings with the U.S. Securities and Exchange Commission, including NCR’s most recent annual report on Form 10-K, most recent quarterly report on Form 10-Q and current reports on Form 8-K and NCR VOYIX’s registration statement on Form 10, most recent quarterly report on Form 10-Q and current reports on Form 8-K. Any forward-looking statement speaks only as of the date on which it is made. Neither NCR nor NCR VOYIX undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Michael Nelson
NCR Corporation
678-808-6995
michael.nelson@ncr.com
Scott Sykes
NCR Corporation
scott.sykes@ncr.com