NCR Corporation Form 10-Q — Quarter Ended March 31, 2022
The filing is for NCR Corporation, the issuer’s name at the time; the supplied company label, NCR Voyix Corp, does not match the filing cover. The report covers the three months ended March 31, 2022, compared with the same quarter of 2021. NCR provides software, services, payments and technology for banking, retail and hospitality. It realigned its reporting segments effective January 1, 2022.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $1.866 billion | $1.544 billion |
| Gross margin | $411 million; 22.0% of revenue | $414 million; 26.8% |
| Operating income | $33 million; 1.8% of revenue | $110 million; 7.1% |
| Continuing-operations net income attributable to NCR | Loss of $33 million | Income of $30 million |
| Net income (loss) attributable to common stockholders | Loss of $38 million; diluted EPS loss of $0.28 | Income of $26 million; diluted EPS of $0.19 |
| Adjusted EBITDA (non-GAAP) | $271 million; 14.5% of revenue | $258 million; 16.7% |
| Cash from operating activities | $38 million | $155 million |
| Free cash flow (non-GAAP) | Outflow of $10 million | Inflow of $93 million |
Revenue rose 21%, driven primarily by service revenue, which increased 27% to $1.350 billion; product revenue increased 7% to $516 million. Recurring revenue rose 35% to $1.179 billion, or 63.2% of revenue, compared with 56.6% a year earlier. Product gross margin fell to $24 million from $74 million; service gross margin increased to $387 million from $340 million.
At March 31, 2022, cash and cash equivalents were $412 million and total current assets were $2.976 billion against current liabilities of $2.830 billion. Total debt was approximately $5.66 billion excluding deferred financing fees; the revolving facility had $861 million of available borrowing capacity. Operating cash flow declined principally due to lower operating earnings and unfavorable working-capital movements.
Material changes and segment results
- Payments & Network revenue was $299 million versus $22 million, and Adjusted EBITDA was $98 million versus $3 million, principally reflecting the 2021 Cardtronics acquisition; Q1 2022 also included LibertyX.
- Digital Banking revenue increased 11% to $136 million and Adjusted EBITDA increased 4% to $56 million.
- Self-Service Banking revenue decreased 3% to $611 million and Adjusted EBITDA decreased 18% to $112 million, reflecting lower ATM hardware sales and cost pressures.
- Retail revenue increased 5% to $546 million, while Adjusted EBITDA decreased 32% to $67 million, reflecting product mix, labor costs and supply-chain challenges.
- Hospitality revenue increased 18% to $211 million and Adjusted EBITDA increased 14% to $41 million.
Interest expense increased 40% to $63 million, mainly due to higher debt following the Cardtronics acquisition. NCR acquired cryptocurrency software provider LibertyX in January for approximately $69 million of total consideration, primarily NCR shares.
Outlook, management commentary and risks
- NCR’s stated 2026 aspirations include annual recurring revenue of 80%, annual non-GAAP EPS growth of 15%, and annual non-GAAP free cash flow of $1 billion. These are goals, not quarterly guidance; the filing provides no specific Q2 or full-year 2022 numerical guidance.
- The Board began a comprehensive strategic review in February 2022, considering alternatives that could include a sale, merger, spin-off or other structural changes. There is no announced timetable and no assurance of a transaction.
- NCR recognized a $19 million charge associated with winding down Russian operations, including asset and liability write-downs, severance and collectability assessments. Russia-related impacts were excluded from management’s non-GAAP segment presentation.
- Management cited COVID-19, supply constraints, higher component, fuel, labor and freight costs, inflation, geopolitical disruption and interest-rate increases as near-term pressures. It warned that actual effects remain uncertain.
- Remaining performance obligations were approximately $4.2 billion; NCR expected to recognize about three-quarters over the next 12 months, subject to customer needs and schedules.
- Environmental matters remain material uncertainties: reserves were $96 million for Kalamazoo River, $26 million net for Fox River, and $15 million for Ebina. Kalamazoo remediation costs and co-obligor recoveries remain uncertain; the filing states that alternative assumptions could more than double the reported Kalamazoo reserve.
- Management said it believed liquidity was sufficient for expected obligations. The report also identifies leverage and covenant compliance, cybersecurity, foreign exchange, variable interest rates, customer credit and execution of the strategic review as risks. Disclosure controls were assessed as effective, with no material change in internal control reported.
Important facts for investors to verify
- Whether revenue and recurring-revenue growth can translate into stronger GAAP margins and cash generation amid cost and supply-chain pressures.
- How much reported growth and segment performance reflects the Cardtronics acquisition, and whether acquisition-related costs and synergies evolve as expected.
- Debt repayment capacity, covenant headroom, interest-rate exposure and the sustainability of available revolving-credit capacity.
- Developments and any disclosure from the strategic review; the filing gives no outcome or timetable.
- Potential changes to environmental reserves, especially Kalamazoo, and the timing and collectability of expected contributions and indemnities.
- Whether the 2026 aspirations remain management’s objectives and how progress will be measured; they are non-GAAP or otherwise company-defined targets.