Ncr Voyix Corporation · NYSE:VYX
Ncr Voyix — NCR — Q4 2017 Earnings Presentation
45 slides from Ncr Voyix's earnings presentation, Feb 8, 2018
Slide 1: Q4 2017 Earnings Conference Call
February 8, 2018 BILL NUTI, CHAIRMAN & CEO MARK BENJAMIN, PRESIDENT & COO BOB FISHMAN, CFO Q4 2017 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: Q4 results in line with expectations
3 Q4 results IN LINE WITH EXPECTATIONS Improving CLOUD revenue growth; Net ACV of $67M, up 46% full year Gross Margin RATE EXPANSION driven by strength in Services 2018 GUIDANCE Revenue growth 0% - 3%; Non-GAAP EPS of $3.30 - $3.45; Free cash flow conversion rate of ~90% OVERVIEW $300M SHARE REPURCH
Slide 4: Q4 2017 Financial Results
4 Non-GAAP gross margin rate up 20 bps as reported and down 10 bps CC Non-GAAP Diluted EPS down 14% as reported and down 20% CC Strong performance in FY 2017; Q4 2016 benefited from $100m working capital improvement FX Benefit 30 bps FX Benefit $0.08 $1.80 billion 29.4% 29.6% Q4 2016 Q4 2017 $0.92 Q
Slide 5: FY 2017 Financial Results
5 Non-GAAP gross margin rate up 70 as reported and CC Non-GAAP Diluted EPS up 6% as reported and 4% CC 92% FCF conversion rate in 2017; FY 2016 benefited from $100m working capital improvement in Q4 No FX impact FX Benefit $0.06 $6.54 billion 28.8% 29.5% 2016 2017 $3.20 2016 2017 $628 million 2016 $
Slide 6: NCR Solution Ecosystem
6 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 7: Transformation Progress
7 TRANSFORMATION PROGRESS What we said we would do What we did IMPROVING SALES EXECUTION INCREASING CUSTOMER SERVICES PRODUCTIVITY AND LOYALTY MAKING SOFTWARE OUR BUSINESS OPTIMIZING OUR COST STRUCTURE Created Industry Solutions Group to optimize solution offers World Class Customer Services based o
Slide 8: Accelerating Our Transformation
8 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 Expected Cash Costs of $150 million to $200 million o
Slide 9: Segment Results Q4 2017
9 Flat CC Up 2% CC Down 9% CC Down 80 bps CC Up 280 bps CC Down 330 bps CC53.8% 53.1% 22.2% 25.0% Q4 2016 Q4 2017 Q4 2016 Q4 2017 Software Gross Margin Services Gross Margin 18.1% 15.6% Q4 2016 Q4 2017 Hardware Gross Margin $502 million $508 million Q4 2016 Q4 2017 $598 million $619 million Q4 2017Q
Slide 10: Software Q4 2017 Update
10 Q4 2017 Q4 2016 % Change % Change Constant Currency Software License $95 $103 (8)% (10)% Attached License 37 45 (18)% (21)% Unattached License 58 58 —% —% Software Maintenance 96 96 —% (2)% Cloud 156 147 6% 6% Professional Services 161 156 3% 1% Software Revenue $508 $502 1% —% Software Gross Mar
Slide 11: Services Q4 2017 Update
11 Q4 2017 Q4 2016 % Change % Change Constant Currency Services Revenue $619 $598 4% 2% Services Gross Margin $155 $133 17% 16% Services Gross Margin Rate 25.0% 22.2% +280 bps +280 bps Operating Income $79 $62 27% 27% Operating Income as a % of Revenue 12.8% 10.4% +240 bps +260 bps $ in millions SER
Slide 12: Hardware Q4 2017 Update
12 Q4 2017 Q4 2016 % Change % Change Constant Currency ATMs $303 $385 (21)% (22)% Self-Checkout (SCO) 131 132 (1)% (1)% Point-of-Sale (POS) 218 177 23% 20% Interactive Printer Solutions (IPS) 3 8 (63)% (63)% Hardware Revenue $655 $702 (7)% (9)% Hardware Gross Margin $102 $127 (20)% (25)% Hardware Gr
Slide 13: Segment Results FY 2017
13 n Software 51.1% GM rate n Services 24.7% GM rate n Hardware 16.4% GM rate YTD 2017 Operating Income Mix Software 65% Services 24% Up 3% CC Up 3% CC Down 2% Adj. CC $1.84 billion $1.90 bilion FY 2016 FY 2017 $2.31 billion $2.37 billion Software Revenue Services Revenue $2.40 billion $2.24 billion
Slide 14: Free Cash Flow
14 QTD YTD Q4 2017 Q4 2016 Q4 2017 Q4 2016 Cash Provided by Operating Activities $484 $525 $755 $894 Total capital expenditures (1) (88) (67) (294) (227) Cash used in Discontinued Operations 6 (9) (8) (39) Free Cash Flow $402 $449 $453 $628 Free Cash Flow Conversion Rate (2) 92% 132% $ in millions (
Slide 15: Net Debt and EBITDA Metrics
15 FY 2016 Q3 2017 FY 2017 Debt $3,051 $3,253 $2,991 Cash (498) (405) (537) Net Debt $2,553 $2,848 $2,454 Adjusted EBITDA (1) $1,057 $1,129 $1,124 Net Debt / Adjusted EBITDA 2.4x 2.5x 2.2x $ in millions, except metrics(1) Adjusted EBITDA for the trailing twelve-month period. NET DEBT AND EBITDA METR
Slide 16: FY and Q1 2018 Guidance
16 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 Q1 2018 GUIDANCE Q1 2018 Guidance Revenue Growth (1%) - 2% GAAP Diluted EPS $0.16 - $0.29 Non-GAAP Diluted EPS $0.41 - $0.47
Slide 17: Looking Forward
17 Improving execution and operational efficiencies 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 tra
Slide 18: Supplementary Materials
18 SUPPLEMENTARY MATERIALS
Slide 19: Q4 & FY 2017 GAAP Results
19 Q4 2017 Q4 2016 % Change As Reported FY 2017 FY 2016 % Change As Reported Revenue $1,782 $1,802 (1)% $6,516 $6,543 —% Gross Margin 515 479 8% 1,864 1,782 5% Gross Margin Rate 28.9% 26.6% 28.6% 27.2% Operating Expenses 334 333 —% 1,188 1,183 —% % of Revenue 18.7% 18.5% 18.2% 18.1% Operating Income
Slide 20: Q4 & FY 2017 Non-GAAP Results
20 Q4 2017 Q4 2016 % Change As Reported % Change Constant Currency FY 2017 FY 2016 % Change As Reported % Change Adjusted Constant Currency Revenue $1,782 $1,802 (1)% (3)% (1) $6,516 $6,543 —% 1% (1) Gross Margin (non-GAAP) 527 530 (1)% (3)% 1,924 1,882 2% 2% Gross Margin Rate (non-GAAP) 29.6% 29.4%
Slide 21: Software FY 2017
21 SOFTWARE FY 2017 FY 2016 % Change % Change Constant Currency Software License $336 $341 (1)% (2)% Attached License 121 149 (19)% (20)% Unattached License 215 192 12% 12% Software Maintenance 374 372 1% —% Cloud 592 556 6% 6% Professional Services 598 572 5% 5% Software Revenue $1,900 $1,841 3% 3%
Slide 22: Services FY 2017
22 SERVICES FY 2017 FY 2016 % Change % Change Constant Currency Services Revenue $2,373 $2,306 3% 3% Services Gross Margin $586 $497 18% 20% Services Gross Margin Rate 24.7% 21.6% +310 bps +340 bps Operating Income $288 $201 43% 50% Operating Income as a % of Revenue 12.1% 8.7% +340 bps +370 bps in
Slide 23: Hardware FY 2017
23 HARDWARE FY 2017 FY 2016 % Change % Change Constant Currency ATMs $1,012 $1,221 (17)% (18)% Self-Checkout (SCO) 407 351 16% 16% Point-of-Sale (POS) 806 674 20% 19% Interactive Printer Solutions (IPS) 18 150 (88)% (32)% Hardware Revenue $2,243 $2,396 (6)% (2)% Hardware Gross Margin $368 $432 (15)%
Slide 24: Non-GAAP Measures
24 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 25: Constant Currency, IPS Divestiture and Adjusted Constant Currency
25 Constant Currency, IPS Divestiture and Adjusted 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 mo
Slide 26: Net Income to Adjusted EBITDA
26 Net Income from Continuing Operations (GAAP) to Adjusted EBITDA (non-GAAP) in millions FY 2016 Q3 2017 LTM FY 2017 Net Income from Continuing Operations (GAAP) $287 $345 $240 Pension Mark-to-Market Adjustments 85 85 28 Transformation/Restructuring Costs 26 29 29 Acquisition-Related Amortization o
Slide 27: Q4 QTD 2017 GAAP to Non-GAAP
27 in millions (except per share amounts) Q4 QTD 2017 GAAP Transformation Costs Acquisition- related amortization of intangibles Acquisition - related costs Pension mark-to- market adjustments Impact of U.S Tax Reform Q4 QTD 2017 non-GAAP Product revenue $750 $— $— $— $— $— $750 Service revenue 1,03
Slide 28: Q4 QTD 2017 EPS Reconciliation
28 in millions (except per share amounts) Q4 QTD 2017 GAAP Q4 QTD 2017 non-GAAP Income (loss) from continuing operations attributable to NCR common stockholders: Income from continuing operations (attributable to NCR) $(35) $142 Dividends on convertible preferred shares ($11) — Income from continuin
Slide 29: Q4 QTD 2016 GAAP to Non-GAAP
29 in millions (except per share amounts) Q4 QTD 2016 GAAP Restructuring / Transformation Costs Acquisition- related amortization of intangibles Acquisition - related costs Pension mark-to- market adjustments Divestiture and Liquidation Losses Q4 QTD 2016 non-GAAP Product revenue $805 $— $— $— $— $—
Slide 30: Q4 QTD 2016 EPS Reconciliation
30 in millions (except per share amounts) Q4 QTD 2016 GAAP Q4 QTD 2016 non-GAAP Income from continuing operations attributable to NCR common stockholders $68 $168 Weighted average outstanding shares: Weighted average diluted shares outstanding 128.6 128.6 Weighted as-if converted preferred shares 28
Slide 31: FY 2017 GAAP to Non-GAAP
31 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 32: FY 2017 EPS Reconciliation
32 in millions (except per share amounts) Q4 YTD 2017 GAAP Q4 YTD 2017 non-GAAP Income (loss) 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 modi
Slide 33: FY 2016 GAAP to Non-GAAP
33 in millions (except per share amounts) FY 2016 GAAP Restructuring / Transformation Costs Acquisition- related amortization of intangibles Acquisition- related costs Divestiture and Liquidations Losses Pension mark- to-market adjustments FY 2016 non-GAAP Product revenue $2,737 $— $— $— $— $— $2,73
Slide 34: FY 2016 EPS Reconciliation
34 in millions (except per share amounts) FY 2016 GAAP FY 2016non-GAAP Income from continuing operations attributable to NCR common stockholders $283 $475 Weighted average outstanding shares: Weighted average diluted shares outstanding 129.2 129.2 Weighted as-if converted preferred shares 28.2 28.2
Slide 35: Gross Margin Reconciliation Q4 2017
35 Gross Margin and Gross Margin Rate (non-GAAP) to Gross Margin and Gross Margin Rate (GAAP) Q4 2017 QTD Q4 2017 YTD Gross Margin Gross Margin Rate % Gross Margin Gross Margin Rate % Software 270 53.1% 970 51.1% Services 155 25.0% 586 24.7% Hardware 102 15.6% 368 16.4% Total Gross Margin (non-GAAP)
Slide 36: Gross Margin Reconciliation Q4 2016
36 Gross Margin and Gross Margin Rate (non-GAAP) to Gross Margin and Gross Margin Rate (GAAP) Q4 2016 QTD Q4 2016 YTD Gross Margin Gross Margin Rate % Gross Margin Gross Margin Rate % Software 270 53.8% 953 51.8% Services 133 22.2% 497 21.6% Hardware 127 18.1% 432 18.0% Total Gross Margin (non-GAAP)
Slide 37: Operating Income Reconciliation Q4 2017
37 Operating Income and Operating Income Rate (non-GAAP) to Operating Income and Operating Income Rate (GAAP) Q4 2017 QTD Q4 2017 YTD Operating Income Operating Income Rate Operating Income Operating Income Rate Software 166 32.7% 567 29.8% Services 79 12.8% 288 12.1% Hardware (2) (0.3)% (2) (0.1)%
Slide 38: Operating Income Reconciliation Q4 2016
38 Operating Income and Operating Income Rate (non-GAAP) to Operating Income and Operating Income Rate (GAAP) Q4 2016 QTD Q4 2016 YTD Operating Income Operating Income Rate Operating Income Operating Income Rate Software 172 34.3% 577 31.3% Services 62 10.4% 201 8.7% Hardware 30 4.3% 62 2.6% Total O
Slide 39: Revenue Growth to Adjusted Constant Currency
39 Revenue Growth % (GAAP) to Revenue Growth Adjusted Constant Currency % (non-GAAP) Q4 2017 QTD Q4 2017 YTD Revenue Growth % (GAAP) Favorable (unfavorable) FX impact Revenue Growth Constant Currency % (non-GAAP) Revenue Growth % (GAAP) Favorable (unfavorable) FX impact Divestiture impact Revenue Gr
Slide 40: Gross Margin Growth % Constant Currency
40 Gross Margin Growth % (GAAP) to Gross Margin Growth % on a Constant Currency Basis (non-GAAP) Q4 2017 QTD 2017 YTD Gross Margin Growth % Reported Favorable (unfavorable) FX impact Constant Currency Gross Margin Growth % (non-GAAP) Gross Margin Growth % Reported Favorable (unfavorable) FX impact C
Slide 41: Operating Income Growth % Constant Currency
41 Operating Income Growth % (GAAP) to Operating Income Growth % on a Constant Currency Basis (non-GAAP) Q4 2017 QTD 2017 YTD Operating Income Growth % Reported Favorable (unfavorable) FX impact Constant Currency Operating Income Growth % (non-GAAP) Operating Income Growth % Reported Favorable (unfa
Slide 42: Gross Margin Growth bps Constant Currency
42 GAAP TO NON-GAAP RECONCILIATION Gross Margin Growth bps (GAAP) to Gross Margin Growth bps on a Constant Currency Basis (non-GAAP) Q4 2017 QTD 2017 YTD Gross Margin bps Growth Reported Favorable (unfavorable) FX impact Constant Currency Gross Margin bps Growth (non-GAAP) Gross Margin bps Growth Re
Slide 43: Operating Income Growth bps Constant Currency
43 Operating Income Growth bps (GAAP) to Operating Income Growth bps on a Constant Currency Basis (non-GAAP) Q4 2017 QTD 2017 YTD Operating Income bps Growth Reported Favorable (unfavorable) FX impact Constant Currency Operating Income bps Growth (non- GAAP) Operating Income bps Growth Reported Favo
Slide 44: Diluted EPS GAAP to Non-GAAP 2018 Guidance
44 GAAP TO NON-GAAP RECONCILIATION Diluted Earnings per Share (GAAP) to Diluted Earnings per Share (non-GAAP) 2018 Guidance Q1 2018 Guidance Diluted EPS (GAAP) (1) (2) $2.08 - $2.48 $0.16 - $0.29 Restructuring/Transformation costs 0.50 - 0.75 0.05 - 0.09 Acquisition-Related Amortization of Intangibl
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