NCR’s Digital Banking Revenues Surge 5% as Spinoff Looms

With a spinoff ahead, NCR seeks to “run the store, run the restaurant and run self-directed banking.”

Those words, from CEO Michael Hayford during the company’s earnings call Tuesday (Feb. 7), crystalize a strategy where hardware and software meet and there’s ample opportunity to cross-sell and upsell additional services to its clients.

And in an omnichannel world, self-checkout is gaining ground.

As he noted to analysts, “across all five of our business segments, our products are winning in the marketplace.” The company continues to make strides in realizing its strategy to become a “software-led, as a service company.”

Tim Oliver, CFO, said on the call that recurring revenue was up 7% year on year when adjusted for FX. “We continue to have success transitioning from one time, perpetual sales to multi-year, subscription based revenue streams,” he said.

Recurring revenue growth, he said, outpaced the company’s total revenue growth, up 20% when adjusted for FX and now makes up 62% of revenues.

Supplemental materials from the earnings presentation show that digital banking revenues gained 5% year on year to $139 million and that registered users were also up 5% to 26.9 million in the latest period.

Active users were 18.9 million. Management said on the call that there had been 40 renewals in the quarter and there was strong demand for digital-first-banking solutions for retail banking. Through that solution, the company integrates a banks retail channel using NCR’s channel services platform.

Payments and Network sales were up 11% in constant currency, and self-service banking was up 2% in the fourth quarter from a year ago. 90% of the firm’s SMB clients have selected NCR’s integrated payments solutions, the CEO disclosed on the call. CFO Oliver added access points in the payments and network segment were up 24% year on year in FY 22 to 128,000 on growth in Allpoint ATM and merchant acquiring terminals. ATM as a service unit gained 226% year on year to more than 14,200, driven by growth in India and incremental growth in the U.S.

Platform of Choice

In retail, he said NCR is seeing momentum in becoming the “retail platform of choice” as retailers have been choosing self-checkout and other offerings to enhance their omnichannel presence.

The company noted in its filings that the self-checkout revenues in FY 2022 were $1 billion, up 3% year on year (driven by grocery and big box retailers, convenience and fuel). The number of platform “lanes” stood at more than 52,800, where the tally had been just under 17,000 in FY 2021 and up more than 200%.

Oliver said elsewhere on the call that while platform lanes represent less than 4% of the company’s “total” lanes, “we are seeing accelerating momentum for conversion of our traditional lanes and have a substantial lane conversion backlog.”

“Our customers are embracing self-checkout usage,” Hayford said, “to help them mitigate increased labor costs.”

In the Hospitality segment, where revenues were up 5%, there’s been strong demand across enterprise and SMB customers.

Hayford noted that the gains came even against a macro backdrop that saw supply chain disruptions and higher component costs amid accelerating interest rates.

Looking ahead, Hayford said that there are expectations for a “moderate recession in the U.S. and abroad.”

But headwinds aside, management said the company is “on track” to separate two independent, publicly traded companies. As has been reported, one firm will be focused on digital commerce, the other entity will be focused on ATMs.