NCR Voyix Corp quarterly report, Q1 FY2021

NCR Corporation (filing metadata identifies NCR Voyix Corp.) — Q1 2021 Form 10-Q

Reporting period: Three months ended March 31, 2021, compared with the three months ended March 31, 2020. The filing is for NCR Corporation, ticker NCR; it does not identify the registrant as NCR Voyix.

Business context and key financial results

NCR provides software, services and hardware to banking, retail, hospitality, and telecommunications and technology customers. Management’s strategy is to shift toward software- and services-led, recurring revenue and an as-a-Service model.

Metric	Q1 2021	Q1 2020
Total revenue	$1.544 billion	$1.503 billion
Operating income	$110 million	$77 million
Net income attributable to NCR	$30 million	$23 million
Diluted EPS attributable to common stockholders	$0.19	$0.13
Adjusted EBITDA (non-GAAP)	$258 million; 16.7% of revenue	$188 million; 12.5% of revenue
Cash from operating activities	$155 million	$54 million
Free cash flow (non-GAAP)	$98 million	$(20) million

Gross margin was 26.8% of revenue versus 26.4%; excluding specified transformation/restructuring and acquisition-related amortization items, management reported gross margin of 27.5% versus 26.9%. Product gross margin declined to 15.4% from 17.5%, while service gross margin rose to 32.0% from 30.5%.

Revenue mix and segment performance

Service revenue increased 3% to $1.062 billion; product revenue rose 2% to $482 million.
Recurring revenue increased 9% to $874 million, or 56.6% of total revenue, from $802 million, or 53.4%. Software and services revenue was $1.110 billion, essentially unchanged, and represented 71.9% of revenue versus 73.9%.
Banking revenue declined 1% to $756 million, while adjusted EBITDA increased to $154 million from $140 million.
Retail revenue increased 13% to $532 million and adjusted EBITDA rose to $73 million from $37 million.
Hospitality revenue increased 6% to $179 million and adjusted EBITDA rose to $25 million from $7 million.
T&T revenue decreased 22% to $77 million; adjusted EBITDA was $10 million versus $8 million.

Financial position, liquidity and debt

At March 31, cash and cash equivalents were $319 million, total assets $8.702 billion, and total liabilities $7.329 billion. The filing reports total debt of approximately $3.44 billion; the balance sheet lists $52 million of short-term borrowings and $3.349 billion of long-term debt.
Cash and cash equivalents declined from $338 million at year-end 2020. Cash, cash equivalents and restricted cash totaled $391 million at quarter-end.
Reported capacity was approximately $919 million under the revolving credit facility and $172 million under the receivables securitization facility. The latter had $50 million outstanding.
Operating cash flow improved year over year, which management attributed to higher operating earnings and working-capital improvements. Investing cash outflow was $218 million, including $157 million for acquisitions and $51 million for capitalized software.
Management said available cash, operating cash flows and financing were sufficient for expected needs over the next 12 months, including debt service, benefit-plan contributions and environmental payments.

Material changes, outlook and risks

Management cited cost reductions and favorable revenue mix as drivers of margin expansion. SG&A fell to $238 million from $255 million, while operating income increased 43%.
Q1 included $27 million of acquisition-related costs and $17 million of bank-related fees associated with financing for the proposed Cardtronics transaction. The transaction was announced at $39 per Cardtronics share, subject to shareholder and regulatory approvals and other closing conditions; closing was expected in mid-2021.
NCR completed acquisitions of Freshop, Terafina and Dumac for total cash consideration of $126 million. The filing reported $157 million of cash payments for business combinations, including acquisition-related payments.
On April 6, 2021, after quarter-end, NCR issued $1.2 billion of 5.125% senior notes due 2029 to help finance the Cardtronics transaction. The proceeds were to be held in escrow pending release conditions.
Management expected COVID-19 to continue to negatively affect the business in 2021, with hardware revenue expected to be more exposed than recurring revenue. It highlighted ongoing uncertainty around the pandemic, customer demand, installations, and economic conditions.
Environmental contingencies remain significant. The Kalamazoo River reserve was $122 million at March 31, down from $164 million at year-end; estimates remain uncertain, and much remediation work is expected through the 2030s. Fox River net reserve was $28 million and Ebina reserve $19 million.
The company disclosed that a Boston Consulting Group lawsuit seeking more than $80 million was settled in January 2021 and dismissed in April 2021. It also described potential future tax effects from audits and stated that unrecognized tax benefits could decrease by $10 million to $28 million over the next 12 months.
No quantitative full-year revenue or earnings guidance was provided in the supplied filing text. Management’s strategic targets were 80% software and services revenue, 60% recurring revenue, and a 20% adjusted EBITDA margin.

Important facts for investors to verify

Confirm the issuer and security identity: the supplied 10-Q is for NCR Corporation, not an entity named NCR Voyix.
Track Cardtronics transaction approvals, closing status, funding, and the resulting leverage and debt-service burden.
Assess whether recurring-revenue growth and cost savings can sustain the reported margin improvement as COVID-related pressures persist.
Monitor liquidity, working-capital movements, and the distinction between cash and cash equivalents and total cash including restricted amounts.
Review updated estimates, recoveries and payment obligations for Kalamazoo River and other environmental matters.
Note that the filing revised Q1 2020 cash-flow presentation; comparisons should use the revised prior-period figures.