Slide 1: Q2 2016 Earnings Conference Call
1 Q2 2016 EARNINGS CONFERENCE CALL BILL NUTI, CHAIRMAN AND CEO BOB FISHMAN, CFO July 26, 2016
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. Statements that describe or relate to NCR's plans, goals, intentions, strategies or financial outlook, and statements that do not relate to historica
Slide 3: Q2 Update
Q2 UPDATE a2 EXCEEDS expectations on improving execution OMNI-CHANNEL SOFTWARE, CHANNEL TRANSFORMATION, & DIGITAL ENABLEMENT momentum building Significant, STRATEGIC WINS Operating Model Innovation ON TRACK RAISING 2016 revenue & REAFFIRMING Eps and free cash flow guidance jo 2
Slide 4: Q2 2016 Financial Results
4 Q2 2016 FINANCIAL RESULTS Revenue up 1% y/y, up 4% adjusted CC Recurring revenue up 2% y/y, up 3% CC, 43% of total revenue Non-GAAP gross margin rate down 30 bps y/y Non-GAAP EPS up 18% y/y CC FCF as expected due to higher working capital to support increased revenue in later quarters FX Impact ~(
Slide 5: Q2 Operational Results
5 Q2 2016 Q2 2015 As Reported Constant Currency Revenue $1,620 $1,604 1% 4%(1) Gross Margin (non-GAAP) 465 465 —% 1% Gross Margin Rate (non-GAAP) 28.7% 29.0% (30) bps (30) bps Operating Expenses (non-GAAP) 258 265 (3)% (2)% % of Revenue 15.9% 16.5% Operating Income (non-GAAP)(2) 207 200 4% 4% % of R
Slide 6: Q2 GAAP Results
6 Q2 2016 Q2 2015 % Change Revenue $1,620 $1,604 1% Gross Margin (1) 446 146 205% Gross Margin Rate 27.5% 9.1% Operating Expenses (1) 283 412 (31)% % of Revenue 17.5% 25.7% Income from Operations (1) (2) 163 (266) 161% % of Revenue 10.1% (16.6)% Interest and other expense (58) (45) 29% Income Tax Ex
Slide 7: Q2 Revenue by Segment
7Q2 2015 39% 34% 27% Q2 2016 37% 35% 28%n Software n Services n Hardware Q2 REVENUE BY SEGMENT REVENUE $1,604M REVENUE $1,620M Software Revenue Q2 2015 Q2 2016 $440 $452 Services Revenue Q2 2015 Q2 2016 $542 $574 million million Hardware Revenue Q2 2015 Q2 2016 $622 $594 million millionmillionmillio
Slide 8: Q2 Revenue by Region
8 Q2 REVENUE BY REGION Q2 2016 Q2 2015 % Change % ChangeAdjusted CC Americas $919 $878 5% 8% Europe, Middle East Africa 477 489 (2)% —% Asia Pacific 224 237 (5)% (4)% Total Revenue $1,620 $1,604 1% 4% $ in millions
Slide 9: Free Cash Flow
9 FREE CASH FLOW QTD YTD FY 2016e FY 2015 Q2 2016 Q2 2015 Q2 2016 Q2 2015 Cash Provided by Operating Activities $121 $167 $144 $246 $675 - $725 $681 Net capital expenditures (58) (59) (98) (110) (220) (229) Cash used in Discontinued Operations (8) (13) (20) (17) (30) (43) Free Cash Flow $55 $95 $26
Slide 10: Net Debt & EBITDA Metrics
10 NET DEBT & EBITDA METRICS FY 2014 FY 2015 Q2 2016 (1) Debt $3,618 $3,252 $3,457 Cash (511) (328) (332) Net Debt $3,107 $2,924 $3,125 Adjusted EBITDA $963 $1,005 $1,020 (1) Net Debt / Adjusted EBITDA 3.2x 2.9x 3.1x $ in millions, except metrics (1) Adjusted EBITDA for the trailing twelve-month per
Slide 11: Q3 2016 Guidance
11 Q3 2016 GUIDANCE Q3 2016e Q3 2015 Revenue (1) $1,620 - $1,640 $1,613 Diluted EPS (GAAP) $0.57 - $0.62 $0.59 Diluted EPS (non-GAAP) (2) (3) $0.77 - $0.82 $0.78 $ millions, except per share amounts (1) Revenue growth is expected to be approximately 1% as reported and up 7% adjusted CC. The third qu
Slide 12: FY 2016 Guidance
12 2016 Revised Guidance 2016 Previous Guidance 2015 Revenue (1) $6,325 - $6,400 $6,250 - $6,350 $6,373 Diluted EPS (GAAP) (2) $2.25 - $2.35 $2.25 - $2.35 ($0.94) Diluted EPS (non-GAAP) (2) (3) $2.90 - $3.00 $2.90 - $3.00 $2.76 Free Cash Flow $425 - $475 $425 - $475 $409 FY 2016 GUIDANCE $ in millio
Slide 13: 2016 Segment Revenue Guidance
13 2016 SEGMENT REVENUE GUIDANCE Segment 2016e CCGrowth (1) FY 2016 Guidance FY 2015 Software 4 - 5% $1,800 - $1,825 $1,747 Services 3 - 4% $2,240 - $2,270 2,218 Hardware (1) (2) 4 - 5% $2,285 - $2,305 2,408 Total (1) (2) 4 - 5% $6,325 - $6,400 $6,373 $ in millions (1) The 2016 guidance now includes
Slide 14: Revenue, OI and EPS Trending
14 REVENUE, OI AND EPS TRENDING Q3 YTD Fourth Quarter $ % of Total $ % of Total Revenue 2016 Guidance (mid-point) $4,694 74% $1,668 26% Last 3 years $4,656 73% $1,706 27% Last year $4,693 74% $1,680 26% Operating Income (non-GAAP) 2016 Guidance (mid-point) $561 68% $264 32% Last 3 years $542 69% $24
Slide 15: Omni-Channel Market
OMNI-CHANNEL MARKET NCR's strategic offers include: = NCR’s Omni. id Omni-Channel digital channels Software One, Customer (cxP), Aloha Enterprise, NCR Silver : : . g! ly gain: from p Channel Store Venue Transformation = Drives edge offerings: ATMs, SCO, mPOS, ePOS, Peripherals = Drives service oueng
Slide 16: Software Q2 2016 Update
16 SOFTWARE Q2 2016 Update • Revenue up 3% on an as reported and CC basis ◦ Software License revenue up 2% CC; unattached license CC growth of 9% offset by attached hardware unit volume ◦ Software Maintenance revenue up 6% CC due to Software License revenue growth in prior periods ◦ Cloud revenue do
Slide 17: Services Q2 2016 Update
17 SERVICES Q2 2016 Update • Revenue up 6% as reported and up 8% CC ◦ Strong growth in hardware maintenance, managed and implementation services • Operating income up $1M due to higher revenue, partially offset by $5M higher expenses which were flat as a percentage of revenue year-over-year Key Metr
Slide 18: Hardware Q2 2016 Update
18 HARDWARE Q2 2016 Update • Revenue down 5% as reported and flat CC ◦ ATM revenue down 4% CC, improving from down 17% in Q1 2016; Strong ATM backlog entering Q3 ◦ SCO revenue up significantly due to an upgrade cycle and Store Transformation ◦ POS revenue growth lower as POS shifts to SCO; POS growt
Slide 19: Q2 Summary
19 ▪ Solid first half; improving execution ▪ NCR's vision and strategy aligned with major trends and customer activity ▪ Strong backlog and key metrics point to a successful year; raising revenue guidance & reaffirming previous EPS and FCF guidance ▪ Focused on sales funnel, orders, and revenue grow
Slide 20: Supplementary Non-GAAP Materials
SUPPLEMENTARY NON-GAAP MATERIALS
Slide 21: Non-GAAP Measures
21 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 22: Non-GAAP Measures: Adjusted EBITDA
22 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 23: Net Income to Adjusted EBITDA
23 Net Income from Continuing Operations Attributable to NCR (GAAP) to Adjusted EBITDA (non-GAAP) in millions 2014 2015 Q2 2016LTM Net Income from Continuing Operations Attributable to NCR (GAAP) $181 ($154) $258 Pension Mark-to-Market Adjustments 149 454 30 Restructuring/Transformation Costs 163 74
Slide 24: Q2 QTD 2016 GAAP to Non-GAAP
24 in millions (except per share amounts) Q2 QTD 2016 GAAP Restructuring / Transformation Costs Acquisition- related amortization of intangibles Acquisition- related costs Divestiture and Liquidation Losses Q2 QTD 2016 non-GAAP Product revenue $676 $— $— $— $— $676 Service revenue 944 — — — — 944 To
Slide 25: GAAP to Non-GAAP Reconciliation Q2 2016 QTD
25 in millions (except per share amounts) Q2 QTD 2016 GAAP Q2 QTD 2016 non-GAAP Income (loss) from continuing operations attributable to NCR common stockholders: Income (loss) from continuing operations (attributable to NCR) $76 $111 Dividends on convertible preferred shares — — Income (loss) from c
Slide 26: Q2 QTD 2015 GAAP to Non-GAAP
26 in millions (except per share amounts) Q2 QTD 2015 GAAP Restructuring / Transformation Costs Acquisition- related amortization of intangibles Acquisition- related costs Pension mark-to- market adjustments Q2 QTD 2015 non- GAAP Product revenue $703 $— $— $— $— $703 Service revenue 901 — — — — 901
Slide 27: Q2 YTD 2016 GAAP to Non-GAAP
27 in millions (except per share amounts) Q2 YTD 2016 GAAP Restructuring / Transformation Costs Acquisition- related amortization of intangibles Acquisition- related costs Divestiture and Liquidation Losses Q2 YTD 2016 non-GAAP Product revenue $1,224 $— $— $— $— $1,224 Service revenue 1,840 — — — —
Slide 28: GAAP to Non-GAAP Reconciliation Q2 2016 YTD
28 in millions (except per share amounts) Q2 YTD 2016 GAAP Q2 YTD 2016 non-GAAP Income (loss) from continuing operations attributable to NCR common stockholders: Income (loss) from continuing operations (attributable to NCR) $108 $172 Dividends on convertible preferred shares (24) — Income (loss) fr
Slide 29: Q2 YTD 2015 GAAP to Non-GAAP
29 in millions (except per share amounts) Q2 YTD 2015 GAAP Restructuring / Transformation Costs Acquisition- related amortization of intangibles Acquisition- related costs OFAC and FCPA Investigations Pension mark to market adjustments Q2 YTD 2015 non-GAAP Product revenue $1,307 $— $— $— $— $— $1,30
Slide 30: Q3 QTD 2015 GAAP to Non-GAAP
30 in millions (except per share amounts) Q3 QTD 2015 GAAP Restructuring / Transformation Costs Acquisition- related amortization of intangibles Acquisition- related costs Pension mark-to- market adjustments Q3 QTD 2015 non-GAAP Product revenue $688 — — — — $688 Service revenue 925 — — — — 925 Total
Slide 31: FY 2015 GAAP to Non-GAAP
31 in millions (except per share amounts) FY 2015 GAAP Restructuring / Transformation Costs Acquisition- related amortization of intangibles Acquisition- related costs Reserve related to a subcontract in MEA Loss on pending sale of IPS business OFAC and FCPA Investigations Pension mark-to- market ad
Slide 32: GAAP to Non-GAAP Reconciliation FY 2015
32 in millions (except per share amounts) FY 2015 GAAP FY 2015 non-GAAP Income (loss) from continuing operations attributable to NCR common stockholders: Income (loss) from continuing operations (attributable to NCR) ($154) $476 Dividends on convertible preferred shares (4) — Income (loss) from cont
Slide 33: GAAP to Non-GAAP Reconciliation: 2016 Guidance EPS
33 GAAP TO NON-GAAP RECONCILIATION 2016 Guidance Q3 2016e Diluted EPS (GAAP) (1) $2.25 - $2.35 $0.57 - $0.62 Restructuring Plan 0.13 0.05 Acquisition-Related Amortization of Intangibles 0.47 0.14 Acquisition-Related Costs 0.02 0.01 Divestiture and Liquidation Losses 0.03 — Non-GAAP Diluted EPS $2.90
Slide 34: GAAP to Non-GAAP: Revenue Growth Adjusted Constant Currency
34 GAAP TO NON-GAAP RECONCILIATION Revenue Growth % (GAAP) to Revenue Growth Adjusted Constant Currency % (non-GAAP) Q2 2016 QTD Revenue Growth % (GAAP) Favorable (unfavorable) FX impact Divestiture impact Revenue Growth Adjusted Constant Currency % (non-GAAP) Software License 1% (1)% —% 2% Software
Slide 35: GAAP to Non-GAAP: Revenue Growth by Region
35 GAAP TO NON-GAAP RECONCILIATION Revenue Growth % (GAAP) to Revenue Growth Adjusted Constant Currency % (non-GAAP) Q2 2016 QTD Revenue Growth % (GAAP) Favorable (unfavorable) FX impact Divestiture impact Revenue Growth Adjusted Constant Currency % (non-GAAP) Americas 5% (1)% (2)% 8% Europe, Middle
Slide 36: GAAP to Non-GAAP: Operating Income Growth %
36 GAAP TO NON-GAAP RECONCILIATION Operating Income Growth % (GAAP) to Operating Income Growth % on a Constant Currency Basis (non-GAAP) Q2 2016 QTD Operating Income Growth % Reported Favorable (unfavorable) FX impact Constant Currency Operating Income Growth % (non-GAAP) Software 11% (1)% 12% Servi
Slide 37: GAAP to Non-GAAP: Operating Income Growth bps
37 GAAP TO NON-GAAP RECONCILIATION Operating Income Growth bps (GAAP) to Operating Income Growth bps on a Constant Currency Basis (non-GAAP) Q2 2016 QTD Operating Income bps Growth Reported Favorable (unfavorable) FX impact Constant Currency Operating Income bps Growth (non- GAAP) Software +240 bps
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