Slide 1: Q1 2015 Earnings Conference Call
1 Q1 2015 EARNINGS CONFERENCE CALL BILL NUTI, CHAIRMAN AND CEO BOB FISHMAN, CFO April 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: Q1 2015 Financial Results
3 Q1 2015 FINANCIAL RESULTS REVENUE Q1 2014 Q1 2015 $1.52 billion Revenue down 3% y/y, up 3% CC Recurring revenue down 2% y/y, up 4% CC, 45% of total OPERATIONAL GROSS MARGIN Q1 2014 Q1 2015 28.6% 27.6% Down 100 bps y/y, down ~75 bps CC NPOI NPOI down 6% y/y, up 6% CC Non-GAAP EPS down 14% y/y, up 2
Slide 4: Software-Related Revenue Growth
4 SOFTWARE-RELATED REVENUE GROWTH Q1 2015 Q1 2014 $113 Q1 • Q1 Software-related revenue up 5% y/y; up 9% CC Q1 Cloud revenue up 19% y/y; up 20% CC • Q1 Professional Services revenue down 3% y/y; up 3% CC $414 Cloud Professional Services SW Licenses & SW Maintenance $147 (#039;s in Millions) $135 $131 $
Slide 5: NCR Kalpana is here! Making omni-channel a reality
5 NCR Kalpana is here! Making omni-channel a reality NCR Kalpana software enables the best consumer experience at the lowest cost to serve INTEGRATION SECURITY SPEED SAVINGS • Seamlessly integrates the experience across all channels • Enables institutions to run a combination of conventional ATMs an
Slide 6: Q1 2015 Summary
6 Q1 2015 SUMMARY Q1 results in-line with expectations • Improving execution and metrics across NCR • Significant FX headwinds • Well positioned across end markets Financial Services – strong demand for omni-channel solutions Retail Solutions – investment priorities beginning to shift back to omni-c
Slide 7: Q1 Operational Results
7 For the Three Months Ended March 31 2015 2014 As Reported Constant Currency Revenue $1,476 $1,518 (3)% 3% Operational Gross Margin 407 434 (6)% 1% Operational Gross Margin Rate 27.6% 28.6% Expenses (non-GAAP) 261 279 (6)% (2)% % of Revenue 17.7% 18.4% NPOI 146 155 (6)% 6% % of Revenue 9.9% 10.2% -
Slide 8: Q1 GAAP Results
8 For the Three Months Ended March 31 2015 2014 % Change Revenue $1,476 $1,518 (3)% Gross Margin 390 416 (6)% Gross Margin Rate 26.4% 27.4% Expenses 295 308 (4)% % of Revenue 20.0% 20.3% Income from Operations 95 108 (12)% % of Revenue 6.4% 7.1% Interest and other expense (51) (50) 2% GAAP Diluted E
Slide 9: Financial Services Q1 2015 Update
9 FINANCIAL SERVICES Q1 2015 Update • Revenue up 1% as reported and up 9% CC: Growth in Americas, Europe and Middle East Africa driven by increased software-related revenue • Operating income up 2% as reported and up 15% CC due to a higher mix of omni-channel solutions ▪ Performance in key markets ▪
Slide 10: Retail Solutions Q1 2015 Update
10 RETAIL SOLUTIONS Q1 2015 Update • Revenue down 9% as reported and down 4% CC; Decline in all theaters due to reduced spending by retailers • Operating income down 56% as reported and down 44% CC due to lower volume and a less favorable mix of software-related revenue • As expected, challenging re
Slide 11: Hospitality Q1 2015 Update
11 HOSPITALITY Q1 2015 Update • Revenue down 1% as reported and up 1% CC due to higher software-related revenue partially offset by lower hardware revenue • Operating income up 50% as reported due to higher software-related revenue including cloud revenue • International software-related revenue gre
Slide 12: Emerging Industries Q1 2015 Update
12 EMERGING INDUSTRIES Q1 2015 Update • Revenue flat as reported and up 8% CC; Growth driven by Telecom & Technology revenue, up 6% Telecom & Technology ▪ Base expansion wins in new portfolios: Advanced and Managed Services ▪ Added two new Telecom expansion accounts Travel ▪ Delivered a record 40M m
Slide 13: Q1 Supplemental Revenue Information
13 Q1 SUPPLEMENTAL REVENUE INFORMATION For the Periods Ended March 31 Three Months 2015 2014 % Change % Change (Constant Currency) Cloud $134 $113 19% 20% Software License and Software Maintenance 149 147 1% 6% Professional Services 131 135 (3%) 3% Total Software-Related Revenue 414 395 5% 9% Hardwa
Slide 14: Free Cash Flow
14 FREE CASH FLOW Q1 2015 Q1 2014 FY 2015e FY 2014 Cash Provided by Operating Activities (1) $79 $31 $595 - $625 $524 Net capital expenditures (51) (66) (215) - (235) (258) Cash used In Discontinued Operations (4) (16) (35) (1) Pension discretionary contributions and settlements — — — 48 Free Cash F
Slide 15: Restructuring Progress Update
15 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; • $16M in Q1 2015 • ~$21M to ~$46M remaining in FY 2015 Cash Im
Slide 16: Net Debt & EBITDA Metrics
16 NET DEBT & EBITDA METRICS Q1 2014 Q4 2014 Q1 2015 Debt $3,949 $3,659 $3,615 Cash 515 511 462 Net Debt $3,434 $3,148 $3,153 Adjusted EBITDA $904 (1) $1,000 $996 (1) Net Debt / Adjusted EBITDA 3.8x 3.1x 3.2x $ in millions, except metrics (1) Adjusted EBITDA for the trailing twelve-month period. Goa
Slide 17: FY 2015 Guidance
17 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) $625 - $690 $353 Non-Pension Operating Income (NPOI) $830 - $870 $820 Adjusted EBITDA $1,047 - $1,087 $1,
Slide 18: 2015 Segment Revenue Guidance
18 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 19: Q2 2015 Guidance
19 Q2 2015 GUIDANCE Q2 2015e Q2 2014 Income from Operations (GAAP) $140 - $150 (1) $169 Non-Pension Operating Income (Non-GAAP) $190 - $200 (2) $210 Tax rate 28% 27% Other expense ~$55 $49 $ millions(1) Includes an estimated pre-tax charge of $14M in Q2 2015 related to the ongoing restructuring plan
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: GAAP to Non-GAAP Reconciliation: Operating Income and Adjusted EBITDA
23 Income from Operations (GAAP) to Non-Pension Operating Income (non-GAAP) and Adjusted EBITDA (non-GAAP) in millions Q1 2014 LTM FY 2014 Q1 2015 LTM FY 2015e Q2 2015e Q2 2014 Income from Operations (GAAP) $689 $353 $340 $625 -$690 $140 - $150 $169 Pension Expense (Benefit) (86) 152 153 3 1 2 Restr
Slide 24: Q1 2015 GAAP to Non-GAAP Reconciliation
24 in millions (except per share amounts) Q1 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 Q1 QTD 2015 non-GAAP Product revenue $604 $
Slide 25: Q1 2014 GAAP to Non-GAAP Reconciliation
25 in millions (except per share amounts) Q1 2014 GAAP Acquisition- related amortization of intangibles Acquisition- related costs Acquisition- related purchase price adjustments OFAC and FCPA Investigations Pension (expense) benefit Q1 2014 non-GAAP Product revenue $634 — — — — — $634 Service reven
Slide 26: Q2 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: FY 2014 GAAP to Non-GAAP Reconciliation
27 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 28: GAAP to Non-GAAP Reconciliation: FY 2015e Diluted EPS
28 GAAP TO NON-GAAP RECONCILIATION FY 2015e Diluted EPS (GAAP) $1.80 - $2.10 Pension Expense (Benefit) 0.01 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 Investigations(
Slide 29: Revenue Growth by Segment, Constant Currency
29 GAAP TO NON-GAAP RECONCILIATION Revenue Growth % (GAAP) to Revenue Growth % on a Constant Currency Basis (non-GAAP) Q1 2015 Revenue Growth % (GAAP) Favorable (unfavorable) FX impact Constant Currency Revenue Growth % (non-GAAP) Financial Services 1% (8)% 9% Retail Solutions (9)% (5)% (4)% Hospita
Slide 30: Revenue Growth by Type, Constant Currency
30 GAAP TO NON-GAAP RECONCILIATION Revenue Growth % (GAAP) to Revenue Growth % on a Constant Currency Basis (non-GAAP) Q1 2015 Revenue Growth % (GAAP) Favorable (unfavorable) FX impact Constant Currency Revenue Growth % (non-GAAP) Cloud 19% (1)% 20% Software License/ Software Maintenance 1% (5)% 6%
Slide 31: Operating Income Growth, Constant Currency
31 GAAP TO NON-GAAP RECONCILIATION Operating Income Growth % (GAAP) to Operating Income Growth % on a Constant Currency Basis (non-GAAP) Q1 2015 Operating Income Growth % Reported Favorable (unfavorable) FX impact Constant Currency Operating Income Growth % (non- GAAP) Financial Services 2% (13)% 15
Slide 32: Operating Income bps Growth, 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 2015 Operating Income bps Growth Reported Favorable (unfavorable) FX impact Constant Currency Operating Income bps Growth (non- GAAP) Financial Services +20
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