NCR’s New CEO Started Eyeing Payments Soon After Taking the Company’s Reins

Payment processing is something NCR Corp. president and chief executive officer Michael D. Hayford thought the ATM manufacturer and point-of-sale software provider should add to its menu of services since he took the company’s top post six months ago. He’ll get his wish if NCR’s $184 million deal to acquire merchant processor JetPay Corp. goes through as planned.

Hayford is quite familiar with electronic payments, having previously held senior posts at processors Fidelity National Information Services Inc. (FIS) and Metavante Technologies Inc., which FIS acquired in 2009. During NCR’s third-quarter earnings conference call Tuesday afternoon, Hayford explained his rationale for the JetPay deal when an analyst asked if it was a defensive play in a consolidating industry. 

“I would not characterize it as a defensive move,” Hayford said, noting that board members and senior managers told him upon taking NCR’s reins that they wondered why the company wasn’t doing more in payments. Atlanta-based NCR has a suite of POS software products, including Aloha and NCR Silver, for retailers and the hospitality industry, but nothing directly in payment processing. 

“Literally they wondered why we aren’t taking advantage of initiating payments, and processing the payments through the end of the merchant,” Hayford said. “So we literally started in May looking for how we can monetize the transactions that we start.”

Hayford believes NCR is well-positioned to offer payment processing in concert with its software products. The combination gives merchants a fuller menu of services, and he said it produces stickier relationships with businesses than strictly payments. 

“It’s really hard to move the POS enterprise software systems that we have in place,” he said. “It’s much easier to shift the acquiring payment. I think we have a very good starting point.”

If the JetPay acquisition closes by year’s end as expected, NCR will become even more of a software and services company than it already is, and less reliant on the more cyclical ATM and POS hardware market. Hardware generated only 29% of NCR’s third-quarter revenues, some $454 million, down 20% year-over-year on a constant-currency basis, the company reported. The segment posted an operating loss of $56 million. ATMs generated $237 million in hardware revenues, off 10% on a constant-currency basis.

A big reason for the decline was supply constraints, NCR’s top brass told analysts on the conference call. NCR is reconfiguring its worldwide supply chain to address the problem. Despite those issues, chief financial officer Andre Fernandez said ATM orders are up 10% from a year ago and have risen for three straight quarters. 

Services is NCR’s biggest segment, bringing in $616 million in third-quarter revenues, up 4% on a constant-currency basis, and operating income of $90 million, up 6%. Software produced $480 million in revenue, up 2% on a constant-currency basis, but segment operating income fell 13%. The recurring revenues produced by software and services account for 48% of NCR’s revenues.

In all, NCR reported total revenues of $1.55 billion, down 5% on a constant-currency basis. Net income fell 28% to $85 million.