Slide 1: Q1 2016 Earnings Conference Call
1 Q1 2016 EARNINGS CONFERENCE CALL BILL NUTI, PRESIDENT, CEO AND CHAIRMAN BOB FISHMAN, CFO April 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: Q1 Update
Q1 UPDATE QI off toa SOLID start Continued momentum in OMNI-CHANNEL Business TRANSFORMATION Initiative Fast Start RAISING 2016 revenue & EPS guidance °
Slide 4: Q1 2016 Financial Results
4 Q1 2016 FINANCIAL RESULTS REVENUE Q1 2015 Q1 2016 $1.48 billion Revenue down 2% y/y, slightly up CC Recurring revenue up 3% y/y, up 7% CC, 48% of total revenue OPERATIONAL GROSS MARGIN Q1 2015 Q1 2016 27.6% Down 20 bps y/y, down ~60 bps CC 27.4% Non-GAAP EPS down 12% y/y CC; Pension and OIE negati
Slide 5: Q1 Operational Results
5 Q1 2016 Q1 2015 As Reported Constant Currency Revenue $1,444 $1,476 (2)% —% Gross Margin (non-GAAP) 396 407 (3)% (3)% Gross Margin Rate (non-GAAP) 27.4% 27.6% (20) bps (60) bps Operating Expenses (non-GAAP) 257 261 (2)% 1% % of Revenue 17.8% 17.7% Operating Income (non-GAAP)(1) 139 146 (5)% (6)% %
Slide 6: Q1 GAAP Results
6 Q1 2016 Q1 2015 % Change Revenue $1,444 $1,476 (2)% Gross Margin 380 390 (3)% Gross Margin Rate 26.3% 26.4% Operating Expenses 279 295 (5)% % of Revenue 19.3% 20.0% Income from Operations (1) 101 95 6% % of Revenue 7.0% 6.4% Interest and other expense (2) (56) (51) 10% Income Tax Expense 13 2 550%
Slide 7: Q1 Revenue by Segment
7 SOFTWARE REVENUE Q1 2015 Q1 2016 $414 million HARDWARE REVENUE Q1 2015 Q1 2016 $482 million Q1 2016 Q1 2015 SERVICES REVENUE Q1 2015 Q1 2016 n Software n Services n Hardware 29% 33% 38% 28% 35% 37% Q1 REVENUE BY SEGMENT REVENUE $1,476M REVENUE $1,444M $419 million $539 million $523 million $543 mi
Slide 8: Software Q1 2016 Update
8 SOFTWARE Q1 2016 Update • Revenue up 1% as reported and up 3% CC ◦ Software License revenue up 3% CC; negatively impacted by software attach on lower ATM sales ◦ Software Maintenance revenue up 13% CC due to Software License revenue growth in prior periods ◦ Cloud revenue flat due to prior period
Slide 9: Services Q1 2016 Update
9 SERVICES Q1 2016 Update • Revenue up 4% as reported and up 8% CC ◦ Strong growth in hardware maintenance, managed and implementation services • Operating income down $2M due to higher revenue offset by lower margins on implementation services revenue and $4M higher expenses Key Metrics Q1 2016 Q1
Slide 10: Hardware Q1 2016 Update
10 HARDWARE Q1 2016 Update • Revenue down 11% as reported and down 9% CC ◦ ATM revenue down 17% CC; Strong ATM backlog entering Q2 ◦ SCO revenue up significantly due to upgrade cycle and Store Transformation ◦ POS revenue lower as POS shifts to SCO; POS growth in restaurants driven by new wins, cust
Slide 11: Q1 Revenue by Region
11 Q1 REVENUE BY REGION Q1 2016 Q1 2015 % Change % Change Constant Currency Americas $819 $799 3% 5% Europe, Middle East Africa 427 456 (6)% (3)% Asia Pacific 198 221 (10)% (6)% Total Revenue $1,444 $1,476 (2)% —% $ in millions
Slide 12: Free Cash Flow
12 FREE CASH FLOW Q1 2016 Q1 2015 FY 2016e FY 2015 Cash Provided by Operating Activities $23 $79 $675 - $725 $681 Net capital expenditures (40) (51) (220) (229) Cash used in Discontinued Operations (12) (4) (30) (43) Free Cash Flow ($29) $24 $425 - $475 $409 Free Cash Flow as a % of non-GAAP net inc
Slide 13: Net Debt & EBITDA Metrics
13 NET DEBT & EBITDA METRICS FY 2014 FY 2015 Q1 2016 (1) Debt $3,618 $3,252 $3,519 Cash (511) (328) (333) Net Debt $3,107 $2,924 $3,186 Adjusted EBITDA $963 $1,005 $1,008 (1) Net Debt / Adjusted EBITDA 3.2x 2.9x 3.2x $ in millions, except metrics (1) Adjusted EBITDA for the trailing twelve-month per
Slide 14: Q2 2016 Guidance
14 Q2 2016 GUIDANCE Q2 2016e Q2 2015 Revenue (1) $1,560 - $1,580 $1,604 Diluted EPS (GAAP) $0.42 - $0.47 ($2.03) Diluted EPS (non-GAAP) (2) (3) $0.60 - $0.65 $0.66 $ millions, except per share amounts (1) Assuming the sale of Interactive Printer Solutions at end of May 2016, revenue growth is expect
Slide 15: FY 2016 Guidance
15 2016 Revised Guidance 2016 Prior Guidance * 2015 Revenue (1) $6,250 - $6,350 $6,100 - $6,200 $6,373 Diluted EPS (GAAP) $2.25 - $2.35 $2.20 - $2.30 ($0.94) Diluted EPS (non-GAAP) $2.90 - $3.00 $2.85 - $2.95 $2.76 Free Cash Flow $425 - $475 $425 - $475 $409 FY 2016 GUIDANCE $ in millions, except pe
Slide 16: 2016 Segment Revenue Guidance
16 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) 1 - 3% $2,210 - $2,255 2,408 Total 3 - 4% $6,250 - $6,350 $6,373 $ in millions (1) The 2016 expected growth rate has been adju
Slide 17: Revenue, OI and EPS Trending
17 REVENUE, OI AND EPS TRENDING First Half Second Half $ % of Total $ % of Total Revenue 2016 Guidance (mid-point) $3,014 48% $3,286 52% Last 3 years $3,067 48% $3,295 52% Last year $3,080 48% $3,293 52% Operating Income (non-GAAP) 2016 Guidance (mid-point) $324 39% $501 61% Last 3 years $341 43% $4
Slide 18: Q1 Summary
18 ▪ Q1 results met or exceeded internal/external expectations ▪ Incrementally more positive due to solid orders, software mix, higher backlog and a fast start on transformation initiatives ▪ Continued maturation of omni-channel validated by: ▪ Order and revenue growth directly attributed to Branch,
Slide 19: Supplementary Non-GAAP Materials
SUPPLEMENTARY NON-GAAP MATERIALS
Slide 20: Non-GAAP Measures
20 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 21: Non-GAAP Measures: Adjusted EBITDA
21 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 22: Net Income to Adjusted EBITDA Reconciliation
22 Net Income from Continuing Operations Attributable to NCR (GAAP) to Adjusted EBITDA (non-GAAP) in millions 2014 2015 Q1 2016LTM Net Income from Continuing Operations Attributable to NCR (GAAP) $181 ($154) ($162) Pension Mark-to-Market Adjustments 149 454 454 Restructuring/Transformation Costs 163
Slide 23: Q1 2016 GAAP to Non-GAAP Reconciliation
23 in millions (except per share amounts) Q1 QTD 2016 GAAP Restructuring / Transformation Costs Acquisition- related amortization of intangibles Acquisition- related costs Q1 QTD 2016 non-GAAP Product revenue $548 $— $— $— $548 Service revenue 896 — — — 896 Total revenue 1,444 — — — 1,444 Cost of pr
Slide 24: GAAP to Non-GAAP Reconciliation Q1 2016 EPS
24 in millions (except per share amounts) Q1 QTD 2016 GAAP Q1 QTD 2016 non-GAAP Income (loss) from continuing operations attributable to NCR common stockholders: Income (loss) from continuing operations (attributable to NCR) $32 $61 Dividends on convertible preferred shares (11) — Income (loss) from
Slide 25: Q1 2015 GAAP to Non-GAAP Reconciliation
25 in millions (except per share amounts) Q1 2015 GAAP Restructuring plan Acquisition- related amortization of intangibles Acquisition- related costs OFAC and FCPA Investigations Q1 2015 non-GAAP Product revenue $604 $— $— $— $— $604 Service revenue 872 — — — — 872 Total revenue 1,476 — — — — 1,476
Slide 26: Q2 2015 GAAP to Non-GAAP Reconciliation
26 in millions (except per share amounts) Q2 QTD 2015 GAAP Restructuring plan 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 Total revenue 1,604 — —
Slide 27: FY 2015 GAAP to Non-GAAP Reconciliation
27 in millions (except per share amounts) FY 2015 GAAP Restructuring plan 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 adjustments FY 2015
Slide 28: GAAP to Non-GAAP Reconciliation FY 2015 EPS
28 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 29: GAAP to Non-GAAP Reconciliation: Guidance EPS
29 GAAP TO NON-GAAP RECONCILIATION 2016 Revised Guidance 2016 Prior Guidance Q2 2016e Diluted EPS (GAAP) (1) $2.25 - $2.35 $2.20 - $2.30 $0.42 - $0.47 Restructuring Plan 0.10 0.10 0.03 Acquisition-Related Amortization of Intangibles 0.50 0.50 0.14 Acquisition-Related Costs 0.05 0.05 0.01 Non-GAAP Di
Slide 30: Revenue Growth GAAP to Constant Currency
30 GAAP TO NON-GAAP RECONCILIATION Revenue Growth % (GAAP) to Revenue Growth % on a Constant Currency Basis (non-GAAP) Q1 2016 QTD Revenue Growth % (GAAP) Favorable (unfavorable) FX impact Constant Currency Revenue Growth % (non- GAAP) Software License 2% (1)% 3% Software Maintenance 11% (2)% 13% Cl
Slide 31: Operating Income Growth % to Constant Currency
31 GAAP TO NON-GAAP RECONCILIATION Operating Income Growth % (GAAP) to Operating Income Growth % on a Constant Currency Basis (non-GAAP) Q1 2016 QTD Operating Income Growth % Reported Favorable (unfavorable) FX impact Constant Currency Operating Income Growth % (non-GAAP) Software (2)% (3)% 1% Servi
Slide 32: Operating Income Growth bps to Constant Currency
32 GAAP TO NON-GAAP RECONCILIATION Operating Income Growth bps (GAAP) to Operating Income Growth bps on a Constant Currency Basis (non-GAAP) Q1 2016 QTD Operating Income bps Growth Reported Favorable (unfavorable) FX impact Constant Currency Operating Income bps Growth (non- GAAP) Software -90 bps -
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