DULUTH, Ga.--(BUSINESS WIRE)--Apr. 26, 2016-- NCR Corporation (NYSE: NCR) reported financial results today for the three months ended March 31, 2016. First quarter revenue of $1.44 billion was down 2% year-over-year. Excluding the impact of foreign currency, first quarter revenue was slightly up. First quarter diluted EPS (non-GAAP) of $0.38 was down from $0.43, and GAAP diluted EPS of $0.16 was down from $0.23. First quarter diluted EPS (non-GAAP) included $0.04 of negative impact relating to unfavorable foreign currency and pension expense.
?Our first quarter results either met or exceeded our expectations and mark a good start to 2016,? said Chairman and CEO Bill Nuti. ?We generated revenue growth in Software and Services due to improved traction in our strategic solutions, global Omni-Channel leadership, and getting off to a fast start with regard to our business transformation initiative. We saw significant growth in our self checkout business, despite continued macroeconomic challenges and new product introduction in the remainder of our Hardware segment. Looking ahead, we remain excited about the growing Omni-Channel market and our customers' focus on solving for the issues they are facing. Our focus remains centered on helping our customers strengthen and grow their businesses by powering how they connect, interact and transact with consumers in continuously evolving markets.?
In this release, we use certain non-GAAP measures including presenting certain measures on a constant currency basis. These measures include operating gross margin, free cash flow and others with the words "non-GAAP" in their titles. These non-GAAP measures are listed, described and reconciled to their most directly comparable GAAP measures under the heading "Non-GAAP Financial Measures" later in this release. Additionally, effective January 1, 2016, NCR began management of its business on a solution basis, changing from the previous model of management on a line of business basis, which resulted in a corresponding change to our reportable segments. Prior results have been recast under the new segment model for comparison purposes.
First Quarter 2016 Operating Results
Revenue: First quarter revenue of $1.44 billion was down 2% year-over-year. On a constant currency basis, first quarter revenue was slightly up.
Software: Revenue increased 1% to $419 million from $414 million. On a constant currency basis, first quarter Software revenue was up 3%.
Services: Revenue increased 4% to $543 million from $523 million. On a constant currency basis, first quarter Services revenue was up 8%.
Hardware: Revenue decreased 11% to $482 million from $539 million. On a constant currency basis, first quarter Hardware revenue was down 9%.
Gross Margin :First quarter gross margin of $380 million decreased from $390 million. First quarter gross margin (non-GAAP) of $396 million decreased from $407 million, with a decrease in Hardware partially offset by an increase in Services.
Expenses: First quarter operating expenses of $279 million decreased from $295 million. First quarter operating expenses (non-GAAP) of $257 million decreased from $261 million.
Operating Income: First quarter operating income of $101 million increased from $95 million. First quarter operating income (non-GAAP) of $139 million decreased from $146 million. First quarter operating income (non-GAAP) was negatively impacted by an additional $5 million of pension expense.
Other (Expense): First quarter other (expense) of $56 million increased from $51 million. First quarter other (expense) includes $4 million for the write-off of deferred financing fees as a result of the amendment of the credit facility.
Income Tax Expense: First quarter income tax expense of $13 million increased from $2 million. First quarter income tax expense (non-GAAP) of $22 million increased from $20 million.
Net Income from Continuing Operations Attributable to NCR: First quarter net income from continuing operations attributable to NCR of $32 million decreased from $40 million. First quarter net income from continuing operations attributable to NCR (non-GAAP) of $61 million decreased from $73 million. The decrease is primarily due to an additional $5 million of pension expense and the write-off of $4 million of deferred financing fees.
Free Cash Flow: First quarter cash provided by operating activities of $23 million decreased from $79 million. Free cash outflow was $29 million in the first quarter of 2016 as compared to free cash flow of $24 million. The decrease was due to higher working capital as we plan for increased revenues later in the year.
Share Repurchase Program: NCR repurchased approximately 8.6 million shares of its common stock for approximately $213 million during the first quarter under its previously disclosed authorized share repurchase programs.
In 2016, revenue is now expected to be $6.25 billion to $6.35 billion (previous guidance $6.1 billion to $6.2 billion), GAAP diluted earnings per share is expected to be $2.25 to $2.35 (previous guidance $2.20 to $2.30), non-GAAP diluted earnings per share is expected to be $2.90 to $3.00 (previous guidance $2.85 to $2.95), and free cash flow is expected to be $425 million to $475 million (same as previous guidance). The 2016 guidance includes the impact of the pending divestiture of the Interactive Printer Solutions business, expected foreign currency headwinds, and ongoing pension expense.
For the second quarter of 2016, revenue is expected to be $1.56 billion to $1.58 billion, GAAP diluted earnings per share is expected to be $0.42 to $0.47, and non-GAAP diluted earnings per share is expected to be $0.60 to $0.65. The second quarter 2016 guidance includes the impact of the pending divestiture of the Interactive Printer Solutions business, expected foreign currency headwinds and ongoing pension expense.
NCR will provide additional information regarding its 2016 second quarter guidance during its first quarter first earnings conference call and webcast.
2016 First Quarter Earnings Conference Call
A conference call is scheduled for today at 4:30 p.m. (EDT) to discuss the first quarter 2016 results and guidance for second quarter and full-year 2016. Access to the conference call and accompanying slides, as well as a replay of the call, are available on NCR's web site at http://investor.ncr.com/. Additionally, the live call can be accessed by dialing 866-719-0110 and entering the participant passcode 6421324.
More information on NCR?s Q1 2016 earnings, including additional financial information and analysis, is available on NCR?s Investor Relations website at http://investor.ncr.com/.
About NCR Corporation
NCR Corporation (NYSE: NCR) is the global leader in consumer transaction technologies, turning everyday interactions with businesses into exceptional experiences. With its software, hardware, and portfolio of services, NCR enables nearly 550 million transactions daily across the financial, retail, hospitality, travel, telecom and technology industries. NCR solutions run the everyday transactions that make your life easier.
NCR is headquartered in Duluth, Georgia with over 30,000 employees and does business in 180 countries. NCR is a trademark of NCR Corporation in the United States and other countries. NCR encourages investors to visit its web site which is updated regularly with financial and other important information about NCR.
Note to Investors
This release contains forward-looking statements. Forward-looking statements use words such as ?expect,? ?anticipate,? ?outlook,? ?intend,? ?believe,? ?will,? ?should,? ?would,? ?could? and words of similar meaning. Statements that describe or relate to NCR?s plans, goals, intentions, strategies or financial outlook, and statements that do not relate to historical or current fact, are examples of forward-looking statements. The forward-looking statements in this release include statements about omni-channel opportunities for NCR and its customers; expectations for the growth of revenue in future quarters in 2016; market and economic conditions affecting NCR and its business and NCR's full-year and second quarter financial outlook (including the section entitled "2016 Outlook") and the expected type and magnitude of the non-operational adjustments included in any forward-looking non-GAAP measures.
Forward-looking statements are based on our current beliefs, expectations and assumptions, which may not prove to be accurate, and involve a number of known and unknown risks and uncertainties, many of which are out of NCR's control. Forward-looking statements are not guarantees of future performance, and there are a number of important factors that could cause actual outcomes and results to differ materially from the results contemplated by such forward-looking statements, including those factors relating to: domestic and global economic and credit conditions including, in particular, market conditions and spending trends in the financial services industry, fluctuations in oil and commodity prices and their effects on local, regional and global market conditions, and economic and market conditions in Russia, China and emerging markets; the impact of our indebtedness and its terms on our financial and operating activities; the impact of the terms of our strategic relationship with Blackstone and our Series A Convertible Preferred Stock; foreign currency fluctuations; our ability to successfully introduce new solutions and compete in the information technology industry; the transformation of our business model and our ability to sell higher-margin software and services; our ability to improve execution in our sales and services organizations; defects or errors in our products or problems with our hosting facilities; compliance with data privacy and protection requirements; manufacturing disruptions; collectability difficulties in subcontracting relationships in Emerging Industries; the historical seasonality of our sales; the availability and success of acquisitions, divestitures and alliances; our pension strategy and underfunded pension obligation; the success of our ongoing restructuring plan; tax rates; reliance on third party suppliers; development and protection of intellectual property; workforce turnover and the ability to attract and retain skilled employees; environmental exposures from our historical and ongoing manufacturing activities; and uncertainties with regard to regulations, lawsuits, claims and other matters across various jurisdictions. Additional information concerning these and other factors can be found in the Company's filings with the U.S. Securities and Exchange Commission, including the Company?s most recent annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Any forward-looking statement speaks only as of the date on which it is made. The Company does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Non-GAAP Financial Measures While NCR reports its results in accordance with Generally Accepted Accounting Principles in the United States, or GAAP, in this release NCR also uses the non-GAAP measures listed and described below.
Diluted EPS (non-GAAP), Gross Margin (non-GAAP), Operating Expenses (non-GAAP), Operating Income (non-GAAP), Income Tax Expense (non-GAAP), and Net Income Attributable to Continuing Operations (non-GAAP). NCR?s non-GAAP diluted earnings per share, gross margin (non-GAAP), operating expenses (non-GAAP), operating income (non-GAAP), income tax expense (non-GAAP), and net income attributable to continuing operations (non-GAAP) are determined by excluding pension mark-to-market adjustments, pension settlements, pension curtailments and pension special termination benefits and other special items, including amortization of acquisition related intangibles, from NCR?s GAAP gross margin, expenses, income (loss) from operations, income tax expense and net income attributable to continuing operations.
Due to the non-operational nature of these other special items, NCR's management uses these non-GAAP measures to evaluate year-over-year operating performance. NCR also uses operating income (non-GAAP) and diluted EPS (non-GAAP), to manage and determine the effectiveness of its business managers and as a basis for incentive compensation. NCR believes these measures are useful for investors because they provide a more complete understanding of NCR's underlying operational performance, as well as consistency and comparability with NCR's past reports of financial results.
Free Cash Flow. NCR defines free cash flow as net cash provided by/used in operating activities and cash flow provided by/used in discontinued operations less capital expenditures for property, plant and equipment, additions to capitalized software, discretionary pension contributions and settlements. NCR's management uses free cash flow to assess the financial performance of the Company and believes it is useful for investors because it relates the operating cash flow of the Company to the capital that is spent to continue and improve business operations. In particular, free cash flow indicates the amount of cash generated after capital expenditures which can be used for, among other things, investment in the Company's existing businesses, strategic acquisitions, strengthening the Company's balance sheet, repurchase of Company stock and repayment of the Company's debt obligations. Free cash flow does not represent the residual cash flow available for discretionary expenditures since there may be other nondiscretionary expenditures that are not deducted from the measure. Free cash flow does not have a uniform definition under GAAP and, therefore, NCR's definition may differ from other companies' definitions of this measure.
Constant Currency. NCR presents certain measures, such as period-over-period revenue growth, on a constant currency basis, which excludes the effects of foreign currency translation. Due to the continuing strengthening of the U.S. dollar against foreign currencies and the overall variability of foreign exchange rates from period to period, NCR?s management uses these measures on a constant currency basis to evaluate period-over-period operating performance. Measures presented on a constant currency basis are calculated by translating prior period results at current period monthly average exchange rates.
NCR's definitions and calculations of these non-GAAP measures may differ from similarly-titled measures reported by other companies and cannot, therefore, be compared with similarly-titled measures of other companies. These non-GAAP measures should not be considered as substitutes for, or superior to, results determined in accordance with GAAP. These non-GAAP measures are reconciled to their most directly comparable GAAP measures in the tables below or, in the case of quarterly free cash flow, in the body of this release.
For schedules and other detail, see NCR?s Investor Relations website at http://investor.ncr.com/.