DULUTH, Ga., 2017-Apr-21 — /EPR Retail News/ — NCR Corporation (NYSE: NCR) reported financial results today for the three months ended March 31, 2017. First quarter highlights include:
- Revenue of $1.48 billion, up 2% as reported and up 9% excluding FX and the IPS divestiture
- Software revenue up 8%, software license growth of 29% and cloud growth of 6%; Net ACV of $18 million in the quarter, up 29%
- GAAP gross margin rate expanded 160 basis points to 27.9%; Non-GAAP gross margin rate expanded 210 basis points constant currency to 29.2%
- GAAP diluted EPS of $(0.14), down from $0.16 in the prior year due to impact of the deemed dividend from the Q1 Blackstone transaction; Non-GAAP diluted EPS of $0.56, up from $0.38 in the prior year
- $350 million of share repurchases completed; New $300 million share repurchase authorization approved
- 2017 GAAP diluted EPS adjusted due to impact of the Q1 Blackstone transaction; 2017 Revenue and Non-GAAP diluted EPS guidance raised; Maintaining our 2017 cash flow guidance
“We are off to a strong start in 2017, with results that exceeded expectations and position us well to accomplish our full year goals,” said Chairman and CEO Bill Nuti. “We generated solid revenue growth and gross margin expansion across each of our business segments driven by our leading portfolio of global omni-channel and channel transformation solutions. In Software, we experienced continued strong demand, including for our cloud solutions while also benefiting from improved efficiency and scale. Our Services business expanded its recurring and implementation revenues and we further advanced our business process improvement initiatives. Store transformation momentum drove further growth in self-checkout revenue in our Hardware business and we are gaining scale as we introduce new products across key markets. Looking ahead, we will remain a global leader in omni-channel software, channel transformation and digital enablement and our solutions support customers of all sizes as they effectively transform their businesses and compete in the digital world. Our focus remains centered on strong execution, innovation, and driving customer success.”
In this release, we use certain performance metrics as well as certain non-GAAP measures, including presenting certain measures on a constant currency and adjusted constant currency basis. The performance metrics include net annual contract value (or Net ACV) and the non-GAAP measures include free cash flow and others with the words “non-GAAP,” “adjusted,” or “constant currency” in their titles. The performance metrics are listed and described, and the non-GAAP measures are listed, described and reconciled to their most directly comparable GAAP measures, under the heading “Performance Metrics and Non-GAAP Financial Measures” later in this release.
First Quarter 2017 Operating Results
First quarter revenue of $1.48 billion was up 2% year-over-year. On an adjusted constant currency basis, first quarter revenue was up 9%. Foreign currency fluctuations and the IPS divestiture had an unfavorable impact on the revenue comparison of 1% and 6%, respectively.
The following table shows the revenue by segment for the first quarter:
|$ in millions||2017||2016||% Change||
First quarter gross margin of $413 million increased 9% from $380 million. First quarter gross margin (non-GAAP) of$432 million increased 9% from $396 million. The increase in gross margin was due to a favorable mix of software and continued focus on productivity improvements, particularly in our Services segment.
First quarter operating expenses of $296 million increased from $279 million. First quarter operating expenses (non-GAAP) of $272 million increased from $257 million. The increase in expenses was a result of increased investment in research and development and higher employee related expenses.
First quarter operating income of $117 million increased 16% from $101 million. First quarter operating income (non-GAAP) of $160 million increased 15% from $139 million. The increase in operating income was a result of higher revenue and gross margin rate expansion.
First quarter other (expense) and other (expense) (non-GAAP) of $46 million decreased 18% from $56 million. The decrease was primarily due to a more favorable foreign currency impact and lower interest expense compared to the prior year period.
Income Tax Expense
First quarter income tax expense of $14 million increased from $13 million. First quarter income tax expense (non-GAAP) of $27 million increased from $22 million. The increase in income tax expense was due to higher income before taxes in the quarter. In addition, the effective income tax rates improved due to more favorable discrete benefits in the current quarter.
Net Income from Continuing Operations Attributable to NCR
First quarter net income from continuing operations attributable to NCR of $57 million increased from $32 million. First quarter net income from continuing operations attributable to NCR (non-GAAP) of $87 million increased from $61 million.
First quarter cash provided by operating activities of $43 million increased from $23 million. Free cash outflow was $12 million in the first quarter of 2017 as compared to $29 million in the first quarter of 2016. Improvements in cash flow were due primarily due to higher operating income.
Share Repurchase Programs
During the first quarter of 2017, NCR repurchased approximately 7.4 million shares of its common stock for $350 million.
Additionally, on March 12, 2017, the Company’s board of directors authorized a new $300 million share repurchase program to succeed its 2016 program. The timing and amount of any repurchases under the new program will depend upon market conditions. Repurchases under the new program may be made from time to time in the open market, private transactions, accelerated stock repurchase programs, issuer self-tenders or otherwise, and may be discontinued at any time.
We are raising our full year 2017 revenue and non-GAAP diluted earnings per share guidance. Revenue is expected to be $6.63 billion to $6.75 billion, up from previous guidance of $6.60 billion to $6.72 billion, due to improving foreign exchange rates. We expect revenue growth of 1% to 3% as reported and 5% to 7% adjusted constant currency. The 2017 revenue guidance now includes expected foreign currency headwinds of $65 million in revenue versus our prior guidance of $95 million. The 2017 expected growth rates also exclude approximately $143 million of IPS revenue from 2016 due to the IPS divestiture in May 2016.
We are lowering our GAAP diluted earnings per share guidance to $2.20 to $2.32 versus prior guidance of $2.56 to $2.69, due to the impact of the Blackstone transaction in March where NCR repurchased preferred shares at a price in excess of the carrying value which is considered a deemed dividend for GAAP EPS purposes. Our non-GAAP diluted earnings per share is expected to be $3.32 to $3.42, up from previous guidance of $3.27 to $3.37. Our non-GAAP diluted earnings guidance is expected to be up 10% to 14% constant currency. The 2017 non-GAAP diluted earnings per share guidance now includes an expected foreign currency headwind of $0.01 versus our previous guidance of a $0.03 headwind.
Additionally, we continue to expect net cash provided by operating activities to be $805 million to $830 million and free cash flow to be $500 million to $525 million, or approximately 95% to 100% of non-GAAP net income.
Q2 2017 Outlook
For the second quarter of 2017, revenue is expected to be $1.59 billion to $1.62 billion, GAAP diluted earnings per share is expected to be $0.53 to $0.60, and non-GAAP diluted earnings per share is expected to be $0.72 to $0.77. The second quarter 2017 guidance includes expected foreign currency headwinds of $30 million in revenue and $0.01 in diluted earnings per share.
NCR will provide additional information regarding its second quarter and full year 2017 guidance during its first quarter earnings conference call and webcast.
2017 First Quarter Earnings Conference Call
A conference call is scheduled for today at 4:30 p.m. (EDT) to discuss the first quarter 2017 results and guidance for second quarter and full-year 2017. 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 888-820-9413 (United States/Canada Toll-free) or 913-312-0415 (International Toll) and entering the participant passcode 4228682.
More information on NCR’s Q1 2017 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 omni-channel solutions, 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 33,000 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.
Source: NCR Corporation