Slide 1: Q2 2015 Earnings Conference Call
1 Q2 2015 EARNINGS CONFERENCE CALL BILL NUTI, CHAIRMAN AND CEO BOB FISHMAN, CFO July 28, 2015
Slide 2: Notes to Investors: Forward-Looking Statements
2 NOTES TO INVESTORS FORWARD-LOOKING STATEMENTS. Comments made during this conference call and in these materials contain forward- looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that describe or relate to NCR's future plans, goals, intention
Slide 3: Q2 2015 Financial Results
3 Q2 2015 FINANCIAL RESULTS REVENUE Q2 2014 Q2 2015 $1.66 billion Revenue down 3% y/y, up 4% CC Recurring revenue down 3% y/y, up 3% CC, 42% of total revenue OPERATIONAL GROSS MARGIN Q2 2014 Q2 2015 30.0% 29.1% Down 90 bps y/y, down ~100 bps CC NPOI NPOI down 4% y/y, up 4% CC Non-GAAP EPS down 3% y/
Slide 4: Software-Related Revenue Growth
4 SOFTWARE-RELATED REVENUE GROWTH Q2 2015 Q2 2014 $125 QTD • QTD Software-related revenue down 1% y/y; up 3% CC • QTD Cloud revenue up 8% y/y; up 9% CC • QTD Professional Services revenue down 8% y/y; down 2% CC $440 Cloud Professional Services SW Licenses & SW Maintenance $172 Q2 2015 $854 Q2 2014
Slide 5: NCR Commerce Hub: Retail ONE
5 NCR Commerce Hub: Retail ONE Empowers retailers of all sizes to bridge the physical and digital sales channels PARTNER & INDUSTRY SUPPORT Open ecosystem of applications & data Omni-channel software platform DELIVER A SUPERIOR & INTEGRATED SHOPPING EXPERIENCE • Implement via the cloud, on-premise s
Slide 6: Q2 2015 Summary
6 Q2 2015 SUMMARY Q2 results in-line with expectations • Balanced performance across businesses • Continued significant FX headwinds • On track to achieve full year goals Financial Services – omni-channel solutions generating strong market demand Retail Solutions – revenue growth driven by shifts in
Slide 7: Q2 Operational Results
7 For the Three Months Ended June 30 2015 2014 As Reported Constant Currency Revenue $1,604 $1,658 (3)% 4% Operational Gross Margin 467 498 (6)% —% Operational Gross Margin Rate 29.1% 30.0% Expenses (non-GAAP) 265 288 (8)% (3)% % of Revenue 16.5% 17.4% NPOI 202 210 (4)% 4% % of Revenue 12.6% 12.7% -
Slide 8: Q2 GAAP Results
8 For the Three Months Ended June 30 2015 2014 % Change Revenue $1,604 $1,658 (3)% Gross Margin (1) 146 480 (70)% Gross Margin Rate 9.1% 29.0% Expenses (1) 412 311 32% % of Revenue 25.7% 18.8% (Loss) Income from Operations (1) (266) 169 (257)% % of Revenue (16.6)% 10.2% Interest and other expense (4
Slide 9: Financial Services
9 FINANCIAL SERVICES Q2 2015 Update • Revenue down 7% as reported and up 1% CC (Up 4% CC excluding Russia & China); CC growth in Americas, Western Europe & MEA offset by Russia/China • Operating income down 10% as reported and down 2% CC due to a less favorable mix of revenue in North America & Euro
Slide 10: Retail Solutions
10 RETAIL SOLUTIONS Q2 2015 Update • Revenue flat as reported and up 7% CC; CC growth in North America and Europe • Operating income down 13% as reported & down 4% CC due to a less favorable mix of revenue in North America • Operating income as a % of revenue was up significantly from Q1 2015 • Cont
Slide 11: Hospitality
11 HOSPITALITY Q2 2015 Update • Revenue up 1% as reported and up 4% CC due to higher software-related revenue partially offset by lower hardware revenue • Operating income up 17% as reported due to higher software-related revenue including cloud and professional services revenue • Successful launch
Slide 12: Emerging Industries
12 EMERGING INDUSTRIES Q2 2015 Update • Revenue up 2% as reported and up 11% CC; CC growth driven by Telecom & Technology revenue Telecom & Technology ▪ Operating income increase due to improved onboarding of prior contract wins Travel ▪ Redesigning check-in experiences around the world - record 45M
Slide 13: Q2 Supplemental Revenue Information
13 Q2 SUPPLEMENTAL REVENUE INFORMATION For the Periods Ended June 30 Three Months 2015 2014 % Change % Change (Constant Currency) Cloud $135 $125 8% 9% Software License and Software Maintenance 168 172 (2%) 3% Professional Services 137 149 (8%) (2%) Total Software-Related Revenue 440 446 (1%) 3% Har
Slide 14: Free Cash Flow
14 FREE CASH FLOW QTD YTD FY 2015e FY2014Q2 2015 Q2 2014 Q2 2015 Q2 2014 Cash Provided by Operating Activities (1) $167 $80 $246 $111 $620 - $650 $524 Net capital expenditures (59) (73) (110) (139) (215) - (235) (258) Cash used In Discontinued Operations (13) (22) (17) (38) (35) (1) Pension discreti
Slide 15: UK London Transaction Completed
15 UK LONDON TRANSACTION COMPLETED • Final transaction of Pension Phase III completed • UK London transaction announced in November 2013 and settlement completed in Q2 2015 with transfer of the plan to an insurer • We have taken positive steps to help de-risk the global pension portfolio for investo
Slide 16: Restructuring Progress Update
16 RESTRUCTURING PROGRESS UPDATE Expected Savings • $18M in 2014, ~$70M in 2015 and ~$105M in 2016 • ~50% of the savings benefiting NPOI in each year GAAP Income Statement Impact • Total charge of $200M to $225M from 2014 through 2015; • $24M YTD Q2 2015 • ~$15M to ~$40M remaining in FY 2015 Cash Im
Slide 17: Net Debt & EBITDA Metrics
17 NET DEBT & EBITDA METRICS Q2 2014 Q4 2014 Q2 2015 Debt $3,923 $3,659 $3,474 Cash 483 511 425 Net Debt $3,440 $3,148 $3,049 Adjusted EBITDA $941 (1) $1,000 $992 (1) Net Debt / Adjusted EBITDA 3.7x 3.1x 3.1x $ in millions, except metrics (1) Adjusted EBITDA for the trailing twelve-month period. Goa
Slide 18: FY 2015 Guidance
18 2015 Guidance 2014 Revenue $6,525 - $6,675 $6,591 Year-over-Year Revenue Growth (1%) to 1% 8% Constant Currency Year-Over-Year Revenue Growth 5% to 7% (1) 10% Income from Operations (GAAP)(2) $194 - $259 (3) $353 Non-Pension Operating Income (NPOI) $830 - $870 $820 Adjusted EBITDA $1,040 - $1,080
Slide 19: 2015 Segment Revenue Guidance
19 2015 SEGMENT REVENUE GUIDANCE Segment 2015e 2015e Constant Currency FY 2014 Financial Services (2%) to 0% 4% to 6% $3,561 Retail Solutions (1%) to 1% 4% to 6% $2,008 Hospitality 3% to 7% 5% to 9% $659 Emerging Industries (6%) to (1%) 0% to 5% $363 Total (1%) to 1% 5% to 7% $6,591 $ in millions
Slide 20: Q3 2015 Guidance
20 Q3 2015 GUIDANCE Q3 2015e Q3 2014 Revenue $1,630 - $1,650 (1) $1,647 Income from Operations (GAAP) $158 - $168 (2) $41 Non-Pension Operating Income (Non-GAAP) $210 - $220 (3) $204 Tax rate 23% 22% Other expense ~$55 $57 $ millions(1) Includes an estimated unfavorable foreign currency impact of ap
Slide 21: Supplementary Non-GAAP Materials
SUPPLEMENTARY NON-GAAP MATERIALS
Slide 22: Non-GAAP Measures
22 NON-GAAP MEASURES 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 inform
Slide 23: Non-GAAP Measures: Adjusted EBITDA
23 NON-GAAP MEASURES Adjusted EBITDA. NCR believes that Adjusted EBITDA (adjusted earnings before interest, taxes, depreciation and amortization) provides useful information to investors because it is an indicator of the strength and performance of the Company's ongoing business operations, includin
Slide 24: GAAP to Non-GAAP Reconciliation: Income from Operations and Adjusted EBITDA
24 Income from Operations (GAAP) to Non-Pension Operating Income (non-GAAP) and Adjusted EBITDA (non-GAAP) in millions Q2 2014 LTM FY 2014 Q2 2015 LTM Q1 2015 LTM FY 2015e Q3 2015e Q3 2014 (Loss) Income from Operations (GAAP) $719 $353 ($95) $340 $194 - $259 $158 - $168 $41 Pension Expense (Benefit)
Slide 25: Q2 QTD 2015 GAAP to Non-GAAP Reconciliation
25 in millions (except per share amounts) Q2 QTD 2015 GAAP Restructuring plan Acquisition- related amortization of intangibles Acquisition- related costs Acquisition- related purchase price adjustments OFAC and FCPA Investigations Pension (expense) benefit Q2 QTD 2015 non-GAAP Product revenue $703 $
Slide 26: Q2 QTD 2014 GAAP to Non-GAAP Reconciliation
26 in millions (except per share amounts) Q2 QTD 2014 GAAP Acquisition- related amortization of intangibles Acquisition- related costs Acquisition- related purchase price adjustments OFAC and FCPA Investigations Pension (expense) benefit Q2 QTD 2014 non-GAAP Product revenue $722 — — — — — $722 Servi
Slide 27: Q2 YTD 2015 GAAP to Non-GAAP Reconciliation
27 in millions (except per share amounts) Q2 YTD 2015 GAAP Restructuring plan Acquisition- related amortization of intangibles Acquisition- related costs Acquisition- related purchase price adjustments OFAC and FCPA Investigations Pension (expense) benefit Q2 YTD 2015 non-GAAP Product revenue $1,307
Slide 28: Q2 YTD 2014 GAAP to Non-GAAP Reconciliation
28 in millions (except per share amounts) Q2 YTD 2014 GAAP Acquisition- related amortization of intangibles Acquisition- related costs Acquisition- related purchase price adjustments OFAC and FCPA Investigations Pension (expense) benefit Q2 YTD 2014 non-GAAP Product revenue $1,356 — — — — — $1,356 S
Slide 29: Q3 QTD 2014 GAAP to Non-GAAP Reconciliation
29 in millions (except per share amounts) Q3 QTD 2014 GAAP Restructuring plan Acquisition- related amortization of intangibles Acquisition- related costs Acquisition- related purchase price adjustments OFAC and FCPA Investigations Pension (expense) benefit Q3 QTD 2014 non-GAAP Product revenue $721 —
Slide 30: FY 2014 GAAP to Non-GAAP Reconciliation
30 in millions (except per share amounts) FY 2014 GAAP Restructuring plan Acquisition- related amortization of intangibles Acquisition- related costs Acquisition- related purchase price adjustments OFAC and FCPA Investigations Pension (expense) benefit FY 2014 non-GAAP Product revenue $2,892 — — — —
Slide 31: GAAP to Non-GAAP Reconciliation: FY 2015e Diluted EPS
31 GAAP TO NON-GAAP RECONCILIATION FY 2015e Diluted EPS (GAAP) ($0.40) - ($0.70) Pension Expense (Benefit) 2.51 Restructuring Plan 0.18 - 0.28 Acquisition-Related Costs 0.04 Acquisition-Related Amortization of Intangibles 0.47 Acquisition-Related Purchase Price Adjustment — OFAC and FCPA Investigati
Slide 32: Revenue Growth to Constant Currency: Segments Q2 QTD
32 GAAP TO NON-GAAP RECONCILIATION Revenue Growth % (GAAP) to Revenue Growth % on a Constant Currency Basis (non-GAAP) Q2 2015 QTD Revenue Growth % (GAAP) Favorable (unfavorable) FX impact Constant Currency Revenue Growth % (non-GAAP) Financial Services (7)% (8)% 1% Retail Solutions —% (7)% 7% Hospi
Slide 33: Revenue Growth to Constant Currency: Software and Hardware Q2 QTD
33 GAAP TO NON-GAAP RECONCILIATION Revenue Growth % (GAAP) to Revenue Growth % on a Constant Currency Basis (non-GAAP) Q2 2015 QTD Revenue Growth % (GAAP) Favorable (unfavorable) FX impact Constant Currency Revenue Growth % (non-GAAP) Cloud 8% (1)% 9% Software License/ Software Maintenance (2)% (5)%
Slide 34: Revenue Growth to Constant Currency: Q2 YTD
34 GAAP TO NON-GAAP RECONCILIATION Revenue Growth % (GAAP) to Revenue Growth % on a Constant Currency Basis (non-GAAP) Q2 2015 YTD Revenue Growth % (GAAP) Favorable (unfavorable) FX impact Constant Currency Revenue Growth % (non-GAAP) Cloud 13% (1)% 14% Professional Services (6)% (6)% —% Total Softw
Slide 35: Operating Income Growth % to Constant Currency
35 GAAP TO NON-GAAP RECONCILIATION Operating Income Growth % (GAAP) to Operating Income Growth % on a Constant Currency Basis (non-GAAP) Q2 2015 QTD Operating Income Growth % Reported Favorable (unfavorable) FX impact Constant Currency Operating Income Growth % (non- GAAP) Financial Services (10)% (
Slide 36: Operating Income Growth bps to Constant Currency
36 GAAP TO NON-GAAP RECONCILIATION Operating Income Growth bps (GAAP) to Operating Income Growth bps on a Constant Currency Basis (non-GAAP) Q2 2015 QTD Operating Income bps Growth Reported Favorable (unfavorable) FX impact Constant Currency Operating Income bps Growth (non- GAAP) Financial Services
Slide 37: 37
37