Image source: NCR.
NCR (NCR 0.88%) reported second-quarter results last week. The maker of business tools for retailers, telecoms, financial services, and more exceeded expectations and raised its full-year guidance targets. Let's dig a little deeper into NCR's report.
NCR's Q2 results: The raw numbers
|
Q2 2016 Actuals |
Q2 2015 Actuals |
Growth (year-over-year) | |
|---|---|---|---|
|
Revenue |
$1.62 billion |
$1.60 billion |
1.3% |
|
Net Income From Continuing Operations |
$74 million |
($343 million) |
N/A |
|
GAAP EPS (diluted) |
$0.49 |
($2.03) |
N/A |
|
Free Cash Flow |
$55 million |
$95 million |
(42%) |
Source: NCR.
What happened with NCR this quarter?
If the year-ago quarter looks rough here, it's because NCR took a $426 million non-cash charge for mark-to-market pension adjustments in that period. Backing out that large item and some one-time costs related to restructuring and acquisitions, NCR's adjusted earnings rose from $0.66 to $0.72 per diluted share.
- Recurring sales now account for 43% of NCR's total revenue, as the company pushes for long-term deals over snapshot sales. That's up from 42% in the year-ago quarter.
- Hardware revenue decreased 5% year-over-year, which amounts to holding flat if adjusted for currency exchange effects. The software and services divisions grew by single-digit percentages, with or without currency adjustments.
- Free cash flow fell back as NCR invested cash now to pave the way for higher sales in the second half of 2016. Full-year cash flow guidance was unchanged, remaining at roughly $450 million.
Heartened by a strong order flow in the second quarter, management raised their revenue target for the full year.
- The full-year revenue goal increased from approximately $6.3 billion to $6.36 billion. The expected improvement comes from stronger hardware orders and a shrinking impact from currency headwinds.
- Earnings guidance for the full fiscal year was untouched, much like the cash flow forecast. Management remains "confident" that the current target of $2.95 per share is reachable.
What management had to say
CEO Bill Nuti saw the first half of 2016 as a springboard to greater achievements in the back half of the year.
This year has been marked by improving execution and a number of large, strategic wins in the omnichannel software, channel transformation, and digital enablement space. ...
Our clear-cut focus will be on sales funnel and order growth, backlog conversion, margin expansion driven by software, a competitive and more strategically aligned cost structure, and capturing the developing customer opportunities in the omnichannel channel transformation, and digital enablement markets.
-- Bill Nuti
Nuti sees omnichannel and digital sales as primary value creators between now and 2025, across NCR's many client industries.
Looking ahead
NCR has been riding a rocky road in recent quarters, missing its own revenue targets more often than not. This quarter was a sharp break from that negative trend.
Management has a clear long-term plan in mind. The challenge now becomes executing against these long-term goals. NCR is off to a good-looking start, but the second half of 2016 had better deliver on Nuti's cash-intensive strategic vision.
