NCR Corporation reports 50.1% EBITDA decline in 2018 and 1.7% Revenue decline
02/07/2019 • About NCR Corporation (
$NCR) • By InTwits
NCR Corporation reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- EBITDA Margin is quite volatile: 8.1% in 2018, 16.0% in 2017, 14.4% in 2016, 7.0% in 2015, 9.7% in 2014
- NCR Corporation has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.7%. At the same time it's a lot of higher than industry average of 3.1%.
- CAPEX is quite volatile: $18m in 2018, $26m in 2017, $41m in 2016, $27m in 2015, $18m in 2014
- In the last 5 years the company invested considerably less than D&A: $541m vs. $1,620m. In 2018 this situation was still the same: CAPEX was 143 while D&A was 330
- The company has potentially unprofitable business model: ROIC is 4.6%
- It operates with high leverage: Net Debt/EBITDA is 5.2x while industry average is -2.8x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue decreased slightly on 1.7%. Annual revenue decline showed slowdown in 18Q4 - revenue increased slightly on 1.1%. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin decreased on 7.9 pp from 16.0% to 8.1% in 2018.
Gross Margin decreased on 2.3 pp from 28.5% to 26.2% in 2018. SG&A as a % of Revenue increased slightly on 1.5 pp from 14.2% to 15.7% in 2018. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in 2018. SBC as a % of Revenue followed a growing trend at 0.18 pp per annum in the last 5 years.
Net Income margin decreased on 4.9 pp from 3.6% to -1.4% in 2018.
Investments (CAPEX, working capital and M&A)
In 2018 NCR Corporation had CAPEX/Revenue of 2.2%. The company showed small growth in CAPEX/Revenue of 0.99 pp from 1.2% in 2015 to 2.2% in 2018. Average CAPEX/Revenue for the last three years was 1.8%. During the last 5 years CAPEX as a % of Revenue bottomed in 2016 at 1.1% and was growing since that time.
Accounts receivable as a % of Revenue increased slightly on 1.7 pp from 19.5% to 21.2% in 2018. Inventories as a % of Revenue increased slightly on 0.61 pp from 12.0% to 12.6% in 2018. Accounts payable as a % of Revenue increased on 2.6 pp from 16.3% to 19.0% in 2018.
NCR Corporation has spent
$206m on M&A in 2018 which accounts for 3.2% of revenue.
Return on investment
The company operates at low but positive ROIC (4.6%) and negative ROE (-25.2%). ROIC dropped on 11.7 pp from 16.3% to 4.6% in 2018. ROE dropped on 43.1 pp from 17.9% to -25.2% in 2018.
Leverage (Debt)
Debt level is 5.2x Net Debt / EBITDA and 6.1x Debt / EBITDA. Net Debt / EBITDA surged on 2.8x from 2.3x to 5.2x in 2018. Debt increased on 5.8% while cash dropped on 13.6%.
NCR Corporation has questionable short term financial stability: Interest coverage ratio (ICR) is only 1.1x. NCR Corporation has no short term refinancing risk: cash is higher than short term debt (250.8%).
Average interest expence paid by the company was 5.3% in 2018.
Management team
Michael D Hayford "Mike" is a the company's CEO. Michael D Hayford "Mike" is a founder and has spent 1 year with the company. CEO total compensation was
$34,035,495 in 2018 which included
$996,154 salary and
$1,010,959 annual bonus. NCR Corporation's CFO Andre J Fernandez has spent 0 years with the company.
At the end of financial year the company had 1.5% shares owned by insiders. Insider ownership didn't change in 2018.
The company has 34,000 employees. The number of employees didn't change in 2018. Average revenue per employee in 2018 was
$188,382 and it decreased slightly on 1.7%.
Financial and operational results
FY ended 12/31/2018
NCR Corporation ($NCR) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 6,591 | 6,373 | 6,543 | 6,516 | 6,405 | -1.7% |
| Gross Profit | 1,732 | 1,469 | 1,782 | 1,855 | 1,675 | -9.7% |
| SG&A | 1,012 | 1,042 | 926 | 923 | 1,005 | 8.9% |
| EBITDA | 637 | 443 | 943 | 1,045 | 521 | -50.1% |
| EBIT | 353 | 135 | 599 | 691 | 191 | -72.4% |
| Interest expence | 181 | 173 | 170 | 163 | 168 | 3.1% |
| Tax | -48 | 55 | 92 | 242 | 73 | -69.8% |
| Net Income | 191 | -178 | 270 | 232 | -88 | -137.9% |
| Stock Based Compensation | 31 | 42 | 61 | 77 | 72 | -6.5% |
Balance Sheet
|
|---|
| Cash | 511 | 328 | 498 | 537 | 464 | -13.6% |
| Accounts Receivable | 1,404 | 1,251 | 1,282 | 1,270 | 1,356 | 6.8% |
| Inventory | 669 | 643 | 699 | 780 | 806 | 3.3% |
| Accounts Payable | 712 | 657 | 781 | 762 | 897 | 17.7% |
| Short Term Debt | 187 | 13 | 50 | 52 | 185 | 255.8% |
| Long Term Debt | 3,431 | 3,239 | 3,001 | 2,939 | 2,980 | 1.4% |
Cash flow
|
|---|
| Capex | 118 | 79 | 73 | 128 | 143 | 11.7% |
| Acquisitions | 1,647 | | | 8 | 206 | 2,475.0% |
Ratios
|
|---|
| Revenue growth | 7.6% | -3.3% | 2.7% | -0.4% | -1.7% | |
| EBITDA growth | -27.1% | -30.5% | 112.9% | 10.8% | -50.1% | |
|
|---|
| Gross Margin | 26.3% | 23.1% | 27.2% | 28.5% | 26.2% | -2.3% |
| EBITDA Margin | 9.7% | 7.0% | 14.4% | 16.0% | 8.1% | -7.9% |
| EBIT Margin | 5.4% | 2.1% | 9.2% | 10.6% | 3.0% | -7.6% |
| SG&A, % of revenue | 15.4% | 16.4% | 14.2% | 14.2% | 15.7% | 1.5% |
| SBC, % of revenue | 0.5% | 0.7% | 0.9% | 1.2% | 1.1% | -0.1% |
| Net Income Margin | 2.9% | -2.8% | 4.1% | 3.6% | -1.4% | -4.9% |
| CAPEX, % of revenue | 1.8% | 1.2% | 1.1% | 2.0% | 2.2% | 0.3% |
|
|---|
| ROIC | 6.9% | 2.8% | 13.9% | 16.3% | 4.6% | -11.7% |
| ROE | 10.5% | -14.2% | 32.4% | 17.9% | -25.2% | -43.1% |
| Net Debt/EBITDA | 4.9x | 6.6x | 2.7x | 2.3x | 5.2x | 2.8x |
| Interest coverage ratio (ICR) | 2.0x | 0.8x | 3.5x | 4.2x | 1.1x | -3.1x |
| Interest expence / Average debt | 5.0% | 5.0% | 5.4% | 5.4% | 5.3% | -0.1% |
People
|
|---|
| Insider ownership | 1.5% | 1.5% | 1.5% | 1.5% | 1.5% | 0.0% |
| Employees | 30,200 | 32,600 | 33,500 | 34,000 | 34,000 | 0.0% |
| Revenue/Employee, th. $ | 218 | 195 | 195 | 192 | 188 | -1.7% |
NCR Corporation ($NCR) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 1,517 | 1,537 | 1,550 | 1,801 | | 2.6% | -3.5% | -6.8% | 1.1% |
| EBITDA | 195 | -21 | 203 | 144 | | -3.5% | -108.0% | -30.2% | -50.9% |
| Net Income | 20 | -145 | 84 | -47 | | -64.9% | -242.2% | -28.8% | |
Balance Sheet
|
|---|
| Cash | 348 | 343 | 334 | 464 | | -13.2% | -9.0% | -17.5% | -13.6% |
| Short Term Debt | 34 | 160 | 246 | 185 | | -86.5% | -40.1% | -8.6% | 255.8% |
| Long Term Debt | 3,038 | 2,952 | 2,881 | 2,980 | | -1.2% | -2.1% | -3.5% | 1.4% |
Ratios
|
|---|
| Gross Margin | 27.7% | 26.2% | 26.5% | 24.5% | | -0.3% | -2.7% | -2.0% | -4.1% |
| EBITDA Margin | 12.9% | -1.4% | 13.1% | 8.0% | | -0.8% | -17.8% | -4.4% | -8.4% |
| Net Income Margin | 1.3% | -9.4% | 5.4% | -2.6% | | -2.5% | -15.8% | -1.7% | -0.1% |
Peers in Technology Hardware, Storage &
Below we provide NCR Corporation benchmarking against other companies in Technology Hardware, Storage & industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Crossroads Systems Inc ($CRSS) | | -90.6% | -35.5% | -89.5% | 39,959.5% |
| Immersion Corporation ($IMMR) | | 19.8% | -9.9% | -38.7% | 217.0% |
| Veritec Inc ($VRTC) | | -42.2% | -28.0% | -52.2% | 53.1% |
| Boxlight Corporation ($BOXL) | | -88.5% | 503.2% | 26.4% | 47.0% |
| Pure Storage, Inc. ($PSTG) | | 308.2% | 152.4% | 67.9% | 38.6% |
| |
|---|
| Median (30 companies) | -16.9% | -3.2% | -5.0% | 2.1% | 5.6% |
|---|
| NCR Corporation ($NCR) | | -3.3% | 2.7% | -0.4% | -1.7% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Immersion Corporation ($IMMR) | 99.1% | 99.3% | 99.7% | 99.4% | 99.8% |
| Pure Storage, Inc. ($PSTG) | 43.5% | 55.5% | 61.9% | 65.9% | 65.5% |
| NetApp, Inc. ($NTAP) | 62.0% | 62.6% | 60.8% | 61.3% | 62.7% |
| Avid Technology, Inc. ($AVID) | 61.4% | 60.9% | 65.0% | 57.8% | 57.9% |
| Datasea Inc ($DTSS) | | | | 39.3% | 54.4% |
| |
|---|
| Median (29 companies) | 38.6% | 36.3% | 39.3% | 39.6% | 38.8% |
|---|
| NCR Corporation ($NCR) | 26.3% | 23.1% | 27.2% | 28.5% | 26.2% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Immersion Corporation ($IMMR) | 12.3% | 9.0% | -25.1% | -127.0% | 48.6% |
| Apple Inc. ($AAPL) | 33.1% | 35.3% | 32.7% | 31.2% | 30.8% |
| Western Digital Corporation ($WDC) | 20.1% | 18.7% | 12.5% | 21.4% | 27.5% |
| NetApp, Inc. ($NTAP) | 16.9% | 16.7% | 11.3% | 15.4% | 22.9% |
| Seagate Technology PLC ($STX) | 19.3% | 21.1% | 11.3% | 16.7% | 20.0% |
| |
|---|
| Median (29 companies) | 7.1% | 6.6% | 3.8% | 3.5% | 7.9% |
|---|
| NCR Corporation ($NCR) | 9.7% | 7.0% | 14.4% | 16.0% | 8.1% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Hewlett Packard Enterprise Company ($HPE) | 6.6% | 6.4% | 10.8% | 10.9% | 9.6% |
| Pure Storage, Inc. ($PSTG) | 28.7% | 24.2% | 8.9% | 10.4% | 6.3% |
| 3D Systems Corporation ($DDD) | 3.5% | 3.4% | 2.6% | 4.8% | 5.9% |
| Apple Inc. ($AAPL) | 5.2% | 4.8% | 5.9% | 5.4% | 5.0% |
| Western Digital Corporation ($WDC) | 4.2% | 4.2% | 4.5% | 3.0% | 4.0% |
| |
|---|
| Median (29 companies) | 2.7% | 3.0% | 2.0% | 1.8% | 2.4% |
|---|
| NCR Corporation ($NCR) | 1.8% | 1.2% | 1.1% | 2.0% | 2.2% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Avid Technology, Inc. ($AVID) | | | | | 252.4% |
| Ionix Technology Inc ($IINX) | | | | 23.9% | 204.5% |
| Immersion Corporation ($IMMR) | 7.6% | 5.8% | -21.5% | -138.9% | 96.8% |
| HP Inc. ($HPQ) | 8.0% | 8.7% | 15.8% | 60.8% | 72.9% |
| NetApp, Inc. ($NTAP) | 12.5% | 14.8% | 7.3% | 14.0% | 28.1% |
| |
|---|
| Median (37 companies) | 5.9% | 5.7% | -2.6% | 0.2% | 2.2% |
|---|
| NCR Corporation ($NCR) | 6.9% | 2.8% | 13.9% | 16.3% | 4.6% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| CPI Card Group Inc. ($PMTS) | 3.4x | 3.5x | 5.8x | | 12.4x |
| Avid Technology, Inc. ($AVID) | -0.7x | 3.1x | 1.7x | 5.6x | 4.8x |
| Xerox Corporation ($XRX) | 3.5x | 3.5x | 3.1x | 3.0x | 3.0x |
| Electronics for Imaging, Inc. ($EFII) | -0.2x | 1.4x | 1.3x | 1.6x | 1.7x |
| Hewlett Packard Enterprise Company ($HPE) | -0.1x | 1.1x | 0.4x | 1.2x | 1.6x |
| |
|---|
| Median (19 companies) | -0.4x | 0.3x | 0.1x | 0.2x | 0.2x |
|---|
| NCR Corporation ($NCR) | 4.9x | 6.6x | 2.7x | 2.3x | 5.2x |
