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NCR posts strong Q4, forecasts further growth in 2014

An increase of 26 percent in ATM orders for Q4 2013 generates 'some good momentum' going into 2014.

February 10, 2014 by Suzanne Cluckey — Owner, Suzanne Cluckey Communications

Buoyed by a 27 percent increase in software revenue, NCR Corp. finished strong in Q4 2013, with reported revenue of $1.67 billion, an increase of 2 percent from the same period in 2012.

"I am very proud of the NCR team's many accomplishments in 2013, highlighted by record financial results and outstanding progress on our strategic priorities," said NCR chairman and CEO Bill Nuti, in a late-afternoon earnings call on Thursday, Feb. 6. 

"We continue to execute at a high level as we reinvent NCR and transform our company into a software- and services-led business, with an accelerated path to higher margin, sustainable growth, and a more predictable revenue model."

Financial services results

NCR's financial services segment generated fourth quarter revenue of $852 million, a decrease of 7 percent from Q4 of 2012. The decrease was primarily driven by declines in the Americas combined with an unfavorable impact of 2 percent due to foreign currency fluctuations.

Operating income for the business segment was $111 million in the fourth quarter of 2013 as compared with $100 million in the fourth quarter of 2012. The increase in operating income was driven by a favorable mix of revenues, including a higher mix of software revenue and reduced expenses.

"[P]rimarily because of the challenges we've had in North America financial, for the year, North America financial was down 15 percent," Nuti said. But he said he saw indications of a rebound in 2014.

"l point to the North America financial orders being up 26 percent in Q4, which means backlog is up low single digits going into the first quarter of 2014, so some good momentum for financial services going into the 2014 year."

Financial services highlights

On Dec. 2, NCR completed the acquisition of Alaric Systems Ltd., a provider of secure transaction switching and fraud prevention software. On Jan. 10, the company completed its acquisition of online and mobile banking solutions provider Digital Insight, which was financed using the net proceeds from NCR's December 2013 offering of $1.1 billion of senior notes, $250 million in incremental term loans under its senior secured credit facility and approximately $300 million under the revolving portion of its senior secured credit facility.

NCR greatly strengthened its financial services software offerings through these acquisitions, said John Bruno, EVP of industry and field operations and corporate development.

"These investments are driving improved balance and diversification of our revenue streams," Bruno said.

Also driving growth: branch transformation.

"On the full year, branch transformation delivered over $80 million in orders, and that number does not include any post­sale customer support or other managed services," he said, adding that of those orders, $25 million came from outside of the U.S., indicating growing traction across banking tiers and markets.

Bruno said NCR was encouraged by software growth, backlog and revenue, which demonstrated customers' interest in what the company has been building in retail bank transformation initiatives.

Lastly, he said, "[W]e're pleased with the overall geographical balance of this business, with two-thirds of revenues being outside North America, demonstrating solid execution against our global strategy."

Other highlights from the quarter included:

• certification of Aptra Interactive Teller by e-commerce and payment processing provider First Data, meaning that FIs may now use Aptra Interactive Teller for standard ATM transaction processing;
• selection by the Royal Bank of Scotland to install more than 2,000 NCR SelfServ ATMs across the U.K. over the next three years, and by Finnish ATM network operator Automatia to replace 600 older ATMs with new NCR SelfServ 25 and 26 ATMs; and
• establishment of a professional services engagement with the Bank of China to develop new ATM applications.

Other segments

NCR's retail segment generated revenue of $536 million in Q4 2013, an increase of 9 percent over the same period in 2012. Currency fluctuations had an unfavorable impact of 3 percent year over year.

The hospitality segment generated revenue of $176 million in Q4 2013, an increase of 17 percent over Q4 2012. Foreign currency fluctuations had an unfavorable impact of 1 percent year over year.

The company's emerging industries business generated revenue of $106 million in Q4 2013, an increase of 31 percent from the same period in 2012. Foreign currency fluctuations had an unfavorable impact of 2 percent year over year.

Full-year 2014 guidance

Nuti said the company expected continuing healthy growth in 2014, with another strong year of software growth and a better balance across all lines of business.

Q1 2014 outlook

For Q1 2014, NCR expects non-pension operating income of $155 million to $165 million, compared with $129 million in the first quarter of 2013, and income from operations of $105 million to $115 million, compared with $85 million in the first quarter of 2013.

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photo: rennett stowe

About Suzanne Cluckey

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Suzanne’s editorial career has spanned three decades and encompassed all B2B and B2C communications formats. Her award-winning work has appeared in trade and consumer media in the United States and internationally.