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NCR seeks a return to profitability in 2019

With a tumultuous 2018 behind them, the new executive team at NCR Corp. believes that the stage is set to finally make headway this year toward the long-elusive goal of positive revenue performance.

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February 11, 2019 by Suzanne Cluckey — Owner, Suzanne Cluckey Communications

NCR objective, 2018: Take care of customers; improve execution around new product introductions; begin to build a stronger and more efficient NCR.

NCR objective, 2019: Return to growth.

Pretty straightforward, really — as are the questions that naturally follow: 

1. Did they? 
2. Can they?

Mike Hayford, NCR Corp. president and CEO of nine months, offered his take on the answers to these questions in the company's Q4 and full-year earnings report late Thursday afternoon. 

Most notably, he said, a 26 percent increase in ATM revenues for the fourth quarter indicated that the company has worked out kinks on the hardware side that cost both money and time last year. 

In 2018, the company encountered supply chain problems that impeded a smooth rollout for its well-received NCR 80 Series ATMs. 

NCR also weathered the inevitable disruption of closing two of its own manufacturing plants and helping a third-party manufacturing partner to ramp up production and work through any issues that might surface. 

Additionally, the company also faced the task of scaling a new distribution center.

"As we enter 2019, we believe these issues are largely behind us," Hayford assured analysts on the earnings call.

If this is the case, it must be a huge relief to a brand new leadership team at NCR that, while dealing with these tactical projects, was simultaneously trying to wrap its arms around a larger strategic goal — mapping the future of a company that, like all ATM-related businesses, has been under intense pressure to transition quickly to a digitally driven model.

Hayford pointed out that, despite upheavals in 2018 at NCE, the company's fourth quarter was in line with expectations and the full year was consistent with (downwardly revised) guidance the company provided in its Q2 earnings call. 

"The results demonstrate the progress we are making, improving our execution and stabilizing our business," Hayford said. 

Those results — the NCR services business continued to generate improved margins; NCR grew its recurring revenue in the quarter and for the full year; and the manufacturing network restructuring, resulted in "a significant ramp up of hardware production and lower costs than in the third quarter."

For 2019, NCR has defined six strategic growth platforms for investment: digital-first banking; digital-first restaurant; digital-first retail; digital connected services; digital convenience and fuel; and digital small business essentials.

Hayford said the company will increase investment in its Digital Insight business to "recapture market share. We will also accelerate investments in our next generation multivendor ATM software solution as well as in our transaction processing software."

Other investments will bolster digital connected services, including remote and predictive diagnostics, to increase the efficiency and profitability of its services division.

As a software and services driven company enabled by hardware, NCR also intends to maintain a keen focus on returning hardware to profitability. 

Though the company fell short in its effort to reach break-even for hardware in 2018, management believes that last year's changes to the manufacturing network and improvements to supply chain logistics will improve profitability over time.

In response to an analyst's question, Hayford said that from what he is seeing, "the market is still holding up" for ATMs. 

NCR Chief Operating Officer Owen Sullivan agreed. "We're getting good tailwinds from both Windows 10 and from some of the competitive activity out there," he said. "Across the regions, I would say the U.S. market continues to be very strong. Europe is flat to slightly up … and [it's] probably down in the Asia Pacific market. … [I]f we keep executing out in the field and keep producing at the level we are, we should have a good ATM performance in 2019. 

Hayford concluded the call on an up note:

We spent the better part of 2018 getting back to basics. We refocused on our customers, organized our company around profit centers, delivered critical products to the marketplace and strengthened our management team. … While there is much work left to be done, I believe we are on the right path to reinvigorating our business and elevating the competitive differentiation we offer customers around the world.

View the earnings call slide presentation.

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.