Ncr Voyix Corporation · NYSE:VYX
Ncr Voyix — NCR — Q1 2018 Earnings Presentation
41 slides from Ncr Voyix's earnings presentation, May 1, 2018
Slide 1: Q1 2018 Earnings Conference Call
May 1, 2018 MICHAEL HAYFORD, PRESIDENT & CEO BOB FISHMAN, CFO PAUL LANGENBAHN, COO Q1 2018 EARNINGS CONFERENCE CALL
Slide 2: Forward-Looking Statements
2 FORWARD-LOOKING STATEMENTS. Comments made during this conference call and in these materials contain forward-looking statements. 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,
Slide 3: Overview
3 Q1 results EXCEEDED expectations; On track for full year CLOUD revenue growth of 9% and Net ACV of $18 million SERVICES revenue up 8% and gross margin RATE EXPANSION of 230 bps 2018 Guidance REAFFIRMED OVERVIEW $165M of SHARE REPURCHASES completed in Q1 of the $300M planned in 2018
Slide 4: Financial Results
4 Non-GAAP gross margin rate down 80 bps as reported and down 100 bps CC Non-GAAP Diluted EPS flat as reported and down 3% CC Free Cash Flow down due to timing of working capital FX Benefit 20 bps FX Benefit $0.02 $1.48 billion 29.2% 28.4% Q1 2017 Q1 2018 $0.56 Q1 2017 Q1 2018 ($16) million Q1 2017
Slide 5: NCR Solution Ecosystem
5 NCR SOLUTION ECOSYSTEM Branch Transformation Digitizing the Bank Digital Channel Omni-Channel Commerce Payments Consumer Engagement & Experience Travel & Events Transformation Security Restaurant Operations Transformation Outdoor Transformation Store Operations Transformation Store Transactions Tr
Slide 6: Accelerating Our Transformation
6 ACCELERATING OUR TRANSFORMATION Focus on ensuring success in our strategic plan to build share in the most promising growth areas while driving further operating efficiencies Expected P&L Charge of $200 million to $250 million over next 2 years; $16 million in Q1 Expected Cash Costs of $150 millio
Slide 7: Manufacturing Network Redesign
7 STRATEGY ▪ Executing a multi-year strategic initiative to strengthen our global competitive position and accelerate our transformation to a software and services-led, data driven business ACTIONS ▪ Announced the closure of three manufacturing plants ▪ Signed new agreement with contract manufacturi
Slide 8: Segment Results
8 Up 2% Up 8% Down 3% Down 350 bps Up 230 bps Down 190 bps 51.3% 47.8% 21.7% 24.0% Q1 2017 Q1 2018 Q1 2017 Q1 2018 Software Gross Margin Services Gross Margin 16.6% 14.7% Q1 2017 Q1 2018 Hardware Gross Margin $452 million $460 million Q1 2017 Q1 2018 $557 million $601 million Q1 2018Q1 2017 Software
Slide 9: Software Q1 2018 Update
9 Q1 2018 Q1 2017 % Change % Change Constant Currency Software License $70 $85 (18)% (19)% Attached License 21 25 (16)% (22)% Unattached License 49 60 (18)% (18)% Software Maintenance 91 92 (1)% (3)% Cloud 155 142 9% 9% Professional Services 144 133 8% 4% Software Revenue $460 $452 2% —% Software Gr
Slide 10: Services Q1 2018 Update
10 Q1 2018 Q1 2017 % Change % Change Constant Currency Services Revenue $601 $557 8% 4% Services Gross Margin $144 $121 19% 15% Services Gross Margin Rate 24.0% 21.7% +230 bps +230 bps Operating Income $62 $44 41% 40% Operating Income as a % of Revenue 10.3% 7.9% +240 bps +260 bps $ in millions SERV
Slide 11: Hardware Q1 2018 Update
11 Q1 2018 Q1 2017 % Change % Change Constant Currency ATMs $195 $209 (7)% (11)% Self-Checkout (SCO) 77 101 (24)% (24)% Point-of-Sale (POS) 184 154 19% 15% Interactive Printer Solutions (IPS) — 5 (100)% (100)% Hardware Revenue $456 $469 (3)% (6)% Hardware Gross Margin $67 $78 (14)% (23)% Hardware Gr
Slide 12: Free Cash Flow, Net Debt & EBITDA
12 Free Cash Flow Q1 2018 Q1 2017 Cash Provided by Operating Activities ($24) $39 Total capital expenditures (1) (71) (52) Cash used in Discontinued Operations (4) (3) Free Cash Flow ($99) ($16) $ in millions (1) Capital expenditures in Q1 2018 and Q1 2017 included $20 million and $1 million, respec
Slide 13: FY and Q2 2018 Guidance
13 FY 2018 Guidance Revenue Growth 0% - 3% GAAP Diluted EPS $2.08 - $2.48 Non-GAAP Diluted EPS $3.30 - $3.45 Free Cash Flow ~90% Conversion Rate FY and Q2 2018 GUIDANCE Q2 2018 Guidance Revenue Growth (1)%- 1% GAAP Diluted EPS $0.12 - $0.30 Non-GAAP Diluted EPS $0.60 - $0.65
Slide 14: Revenue and EPS Trending
14 First Half Second Half $ % of Total $ % of Total Revenue 2018 Guidance (mid-point) $3,112 47% $3,504 53% 2017 Results $3,071 47% $3,445 53% 2016 Results $3,064 47% $3,479 53% 2015 Results $3,080 48% $3,293 52% 3 year average $3,072 47% $3,406 53% Diluted EPS (non-GAAP) 2018 Guidance (mid-point) $
Slide 15: Non-GAAP EPS Guidance Bridge
15 Non-GAAP EPS GUIDANCE BRIDGE 1H 2018 Revenue Expansion & Mix Cost Takeout Tax Rate 2H 2018 $1.19 $0.70 $0.50 $2.19 Incremental Revenue Cost Reductions Tax Rate ($0.20)
Slide 16: Looking Forward
16 Focused on sales funnel, go to market offers, orders and Net ACV growth to drive momentum Accelerate recurring revenue; primarily cloud Accelerate transformation initiatives to generate targeted run-rate savings of $150 million by 2020 Services transformation well under way; Hardware transformati
Slide 17: Supplementary Materials
17 SUPPLEMENTARY MATERIALS
Slide 18: Q1 2018 Operational Results
18 Q1 2018 Q1 2017 % Change As Reported % Change Constant Currency Revenue $1,517 $1,478 3% —% (1) Gross Margin (non-GAAP) 431 431 —% (4)% Gross Margin Rate (non-GAAP) 28.4% 29.2% (80) bps (100) bps Operating Expenses (non-GAAP) 283 273 4% —% % of Revenue 18.7% 18.5% Operating Income (non-GAAP) 148
Slide 19: Q1 2018 GAAP Results
19 Q1 2018 Q1 2017 % Change As Reported Revenue $1,517 $1,478 3% Gross Margin 420 412 2% Gross Margin Rate 27.7% 27.9% Operating Expenses 311 297 5% % of Revenue 20.5% 20.1% Operating Income 109 115 (5)% % of Revenue 7.2% 7.8% Interest and other expense (46) (44) 5% Income Tax Expense 7 14 (50)% Eff
Slide 20: Non-GAAP Measures
20 While NCR reports its results in accordance with generally accepted accounting principles (GAAP) in the United States, comments made during this conference call and in these materials will include non-GAAP measures. These measures are included to provide additional useful information regarding NC
Slide 21: Constant Currency, Net Debt and Adjusted EBITDA
21 Constant Currency. NCR presents certain financial measures, such as period-over-period revenue growth, on a constant currency basis, which excludes the effects of foreign currency translation by translating prior period results at current period monthly average exchange rates. Due to the overall
Slide 22: Net Income to Adjusted EBITDA
22 Net Income from Continuing Operations (GAAP) to Adjusted EBITDA (non-GAAP) in millions Q1 2017 LTM Q1 2018 LTM Net Income from Continuing Operations (GAAP) $312 $239 Pension Mark-to-Market Adjustments 85 28 Transformation/Restructuring Costs 35 32 Acquisition-Related Amortization of Intangibles 1
Slide 23: Q1 2018 GAAP to Non-GAAP Reconciliation
23 in millions (except per share amounts) Q1 QTD 2018 GAAP Transformation Costs Acquisition- related amortization of intangibles Q1 QTD 2018 non-GAAP Product revenue $526 $— $— $526 Service revenue 991 — — 991 Total revenue 1,517 — — 1,517 Cost of products 420 — (4) 416 Cost of services 677 (4) (3)
Slide 24: Q1 2018 Diluted EPS Reconciliation
24 in millions (except per share amounts) Q1 QTD 2018 GAAP Q1 QTD 2018 non-GAAP Income from continuing operations attributable to NCR common stockholders: Income from continuing operations (attributable to NCR) $55 $85 Dividends on convertible preferred shares (12) — Income from continuing operation
Slide 25: Q1 2017 GAAP to Non-GAAP Reconciliation
25 in millions (except per share amounts) Q1 QTD 2017 GAAP Transformation Costs Acquisition- related amortization of intangibles Acquisition- related costs Q1 QTD 2017 non-GAAP Product revenue $554 $— $— $— $554 Service revenue 924 — — — 924 Total revenue 1,478 — — — 1,478 Cost of products 424 (2) (
Slide 26: Q1 2017 Diluted EPS Reconciliation
26 in millions (except per share amounts) Q1 QTD 2017 GAAP Q1 QTD 2017 non-GAAP Income from continuing operations attributable to NCR common stockholders: Income from continuing operations (attributable to NCR) $57 $87 Dividends on convertible preferred shares (12) — Deemed dividend on modification
Slide 27: FY 2017 GAAP to Non-GAAP Reconciliation
27 in millions (except per share amounts) FY 2017 GAAP Transformation Costs Acquisition- related amortization of intangibles Acquisition- related costs Pension mark- to-market adjustments Impact of U.S. Tax Reform FY 2017 non-GAAP Product revenue $2,579 $— $— $— $— $— $2,579 Service revenue 3,937 —
Slide 28: FY 2017 Diluted EPS Reconciliation
28 in millions (except per share amounts) FY 2017 GAAP FY 2017 non-GAAP Income from continuing operations attributable to NCR common stockholders: Income from continuing operations (attributable to NCR) $237 $494 Dividends on convertible preferred shares (47) — Deemed dividend on modification of con
Slide 29: Q2 2017 GAAP to Non-GAAP Reconciliation
29 GAAP TO NON-GAAP RECONCILIATION Q2 2017 QTD in millions (except per share amounts) FY 2017 GAAP Transformation Costs Acquisition- related amortization of intangibles Acquisition- related costs FY 2017 non-GAAP Product revenue $618 $— $— $— $618 Service revenue 975 — — — 975 Total revenue 1,593 —
Slide 30: Q2 2017 Diluted EPS Reconciliation
30 in millions (except per share amounts) FY 2017 GAAP FY 2017 non-GAAP Income from continuing operations attributable to NCR common stockholders: Income from continuing operations (attributable to NCR) $97 $122 Income from continuing operations attributable to NCR common stockholders $97 $122 Weigh
Slide 31: Gross Margin Reconciliation Q1 2018
31 Gross Margin and Gross Margin Rate (non-GAAP) to Gross Margin and Gross Margin Rate (GAAP) Q1 2018 QTD Gross Margin Gross MarginRate % Software 220 47.8% Services 144 24.0% Hardware 67 14.7% Total Gross Margin (non-GAAP) 431 28.4% Less: Transformation Costs 4 0.2% Acquisition-related amortization
Slide 32: Gross Margin Reconciliation Q1 2017
32 Gross Margin and Gross Margin Rate (non-GAAP) to Gross Margin and Gross Margin Rate (GAAP) Q1 2017 QTD Gross Margin Gross MarginRate % Software 232 51.3% Services 121 21.7% Hardware 78 16.6% Total Gross Margin (non-GAAP) 431 29.2% Less: Transformation Costs 6 0.4% Acquisition-related amortization
Slide 33: Operating Income Reconciliation Q1 2018
33 Operating Income and Operating Income Rate (non-GAAP) to Operating Income and Operating Income Rate (GAAP) Q1 2018 QTD Operating Income Operating Income Rate Software 109 23.7% Services 62 10.3% Hardware (23) (5.0)% Total Operating Income (non-GAAP) 148 9.8% Less: Transformation Costs 16 1.1% Acq
Slide 34: Operating Income Reconciliation Q1 2017
34 Operating Income and Operating Income Rate (non-GAAP) to Operating Income and Operating Income Rate (GAAP) Q1 2017 QTD Operating Income Operating Income Rate Software 124 27.4% Services 44 7.9% Hardware (10) (2.1)% Total Operating Income (non-GAAP) 158 10.7% Less: Transformation Costs 13 0.9% Acq
Slide 35: Revenue Growth to Constant Currency Reconciliation
35 Revenue Growth % (GAAP) to Revenue Growth Constant Currency % (non-GAAP) Q1 2018 QTD Revenue Growth % (GAAP) Favorable (unfavorable) FX impact Revenue Growth Constant Currency % (non-GAAP) Software License (18)% 1% (19)% Attached License (16)% 6% (22)% Unattached License (18)% —% (18)% Software M
Slide 36: Gross Margin Growth % Constant Currency
36 Gross Margin Growth % (GAAP) to Gross Margin Growth % on a Constant Currency Basis (non-GAAP) Q1 2018 QTD Gross Margin Growth % Reported Favorable (unfavorable) FX impact Constant Currency Gross Margin Growth % (non-GAAP) Software (5)% 2% (7)% Services 19% 4% 15% Hardware (14)% 9% (23)% Total Gro
Slide 37: Operating Income Growth % Constant Currency
37 Operating Income Growth % (GAAP) to Operating Income Growth % on a Constant Currency Basis (non-GAAP) Q1 2018 QTD Operating Income Growth % Reported Favorable (unfavorable) FX impact Constant Currency Operating Income Growth % (non- GAAP) Software (12)% —% (12)% Services 41% 1% 40% Hardware (130)
Slide 38: Gross Margin Growth bps Constant Currency
38 GAAP TO NON-GAAP RECONCILIATION Gross Margin Growth bps (GAAP) to Gross Margin Growth bps on a Constant Currency Basis (non-GAAP) Q1 2018 QTD Gross Margin bps Growth Reported Favorable (unfavorable) FX impact Constant Currency Gross Margin bps Growth (non- GAAP) Software (350) bps (20) bps (330)
Slide 39: Operating Income Growth bps Constant Currency
39 Operating Income Growth bps (GAAP) to Operating Income Growth bps on a Constant Currency Basis (non-GAAP) Q1 2018 QTD Operating Income bps Growth Reported Favorable (unfavorable) FX impact Constant Currency Operating Income bps Growth (non- GAAP) Software (370) bps (40) bps (330) bps Services 240
Slide 40: Diluted EPS GAAP to Non-GAAP 2018 Guidance
40 GAAP TO NON-GAAP RECONCILIATION Diluted Earnings per Share (GAAP) to Diluted Earnings per Share (non-GAAP) 2018 Guidance Q2 2018 Guidance Diluted EPS (GAAP) (1) (2) $2.08 - $2.48 $0.12 - $0.30 Transformation costs 0.50 - 0.75 0.19 - 0.28 Acquisition-Related Amortization of Intangibles 0.42 0.10 A
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