Ncr Voyix Corporation · NYSE:VYX
Ncr Voyix — NCR — Investor Day (November 2013)
107 slides from Ncr Voyix's investor day presentation, Nov 12, 2013
Slide 1: Welcome and Agenda - Investor Day
WELCOME AND AGENDA INVESTOR DAY NOVEMBER 11, 2013 NEW YORK STOCK EXCHANGE Tracy Krumme VP, Investor Relations
Slide 2: Forward-looking statements
Comments made during this meeting and in these materials may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements use words such as “seek,” “potential,” “expect,” “strive,” “continue,” “continuously,” “accelerate,”
Slide 3: 2013 Investor Day Agenda
Time Speaker & Topic 12:40 p.m. Bill Nuti NCR Strategy 1:05 p.m. Andy Heyman Financial Services 1:40 p.m. John Bruno Retail 2:05 p.m. Kim Eaton Hospitality 2:30 p.m. Bob Fishman Financial Review & 3-Year Outlook 2:50 p.m. BREAK 3:00 p.m. - 4:00 p.m. Q&A Panel Bill Nuti, John Bruno, Bob Fishman, Pete
Slide 4: Strategy
STRATEGY INVESTOR DAY NOVEMBER 11, 2013 NEW YORK STOCK EXCHANGE Bill Nuti Chairman, Chief Executive Officer and President
Slide 5: Growth Initiatives 2005-2013
Growth Initiatives 2005 2013 Teradata Spin-off Radiant Acquisition SDM Technology Released NCR launches Silver Scopus Alliance Central Spend Cost Reductions Run the Current Play - Learn the Company Services Consolidation Global Grading Program Phase II Cost Reduction Move to Productivity Management
Slide 6: Consistent Strategic & Operational Execution
Consistent Strategic & Operational Execution “The results of the NCR Reinvention to date” FY ’04* FY’13 Guidance HIGHLIGHTS Revenue $4.6B $6.1B - $6.2B** Exceeded analyst expectations for 15 consecutive quarters Gross Margin(1) 21.1% 28.6% Gross margin has expanded 750 basis points from end of FY ‘0
Slide 7: Strong Track Record of Execution
Strong Track Record of Execution SOURCE: COMPANY PUBLIC FILINGS * Non-GAAP EPS below CAGR due to impact of interest expense related to pension funding FY ‘10 – FY ‘13 Forecast FY ‘13 Guidance Revenue 6-8%CAGR ~9% CAGR NPOI(1) 15-20%CAGR 22-23% CAGR NPOI % of Revenue 9-10% ~11.5% Non-GAAP EPS(1) $2.1
Slide 8: Our Strategy Drives a New Business Model
8 FY '05 FY '06 FY '07 FY '08 FY '09 FY '10 FY '11 FY '12 FY '13 OL NCR REVENUE MIX (%) 44% 44% 43% 43% 48% 48% 47% 44% 45% HARDWARE SOFTWARE(2) SERVICES 6% 6% 6% 6% 7% 7% 8% 10% 12% 50% 50% 51% 51% 45% 45% 45% 46% 43% (e) Our Strategy Drives a New Business Model Doubling our software revenue in jus
Slide 9: Vision and mission
9 Lead how the world connects, interacts and transacts with business. We run the everyday transactions that make your life easier. Partner with our customers to enable the next generation of productivity gains and consumer experience innovation.
Slide 10: Our Business Strategy
NCR BUSINESS SYSTEM DRIVING A CONTINUOUS IMPROVEMENT CULTURE WE ARE NCR INVEST IN OUR PEOPLE SOFTWARE & SAAS GROW AVAILABLE MARKET WIN IN MARKET ADJACENCIES DRIVE ECOSYSTEM LEADERSHIP GROW MARKET SHARE EXPAND INTO UNDERPENETRATED GEOGRAPHIES GROW ALL INDUSTRY TIERS AND SMALL BUSINESS TRU
Slide 11: Opportunity: Integrating Omni-Channel and Omni-Commerce
Omni- Channel Omni- Commerce Cash Check Debit Credit Loyalty Promotions Mobile OnlineSocial Tablet mPoS Kiosk Our Unique Value Driving productivity gains and consumer experience innovation for our customers Opportunity: Integrating Omni-Channel and Omni-Commerce ‘Next Normal’: Evolution of connect,
Slide 12: Growing our Available Market
$20B $37B $82B NCR Available Market ATM POS Self-Checkout ATM POS Self-Checkout Enterprise Software Managed Services Cash Management ATM POS Self-Checkout Enterprise Software Managed Services Cash Management Payments & Processing Promotions & Loyalty Small Business Branch / Store Automation Growing
Slide 13: Clear Vision for Future State Business Model
Clear Vision for Future State Business Model Well positioned for long-term and sustainable growth FY 2016 Revenue $7.3 - $7.7 billion Gross Margin Rate(1) Expansion ~300 basis points from FY ‘13 Expense as % of Revenue ~17% NPOI(1) as % of Revenue 14% -15% Software(2) Revenue $1.2 - $1.3 billion or
Slide 14: Today's Themes
Today’s Themes 2013 Investor Day The new NCR…hardware-enabled & software-driven Geographic, Industry and Revenue diversity Innovation…Cloud, Mobile, Big Data and Branch Continuous Improvement / productivity remains center stage Successfully navigating legacy issues and growth initiatives 1
Slide 15: Today's Agenda and Objectives
Today’s Agenda Andy Heyman SVP and GM, Financial Services John Bruno EVP, Corporate Development & CTO Kim Eaton SVP and GM, Hospitality Our Objectives for Today Bob Fishman SVP, CFO and Chief Accounting Officer Provide a deeper understanding of our strategy, markets, solutions and financial outcom
Slide 16: Footnotes
Footnotes (1) This is a non-GAAP measure. An explanation of non-GAAP measures and a reconciliation of GAAP to non-GAAP measures are included in the non-GAAP supplementary materials and/or on the investor relations page of NCR’s website. (2) Software includes software, software as a service (SaaS) an
Slide 17: Financial Services
FINANCIAL SERVICES INVESTOR DAY NOVEMBER 11, 2013 NEW YORK STOCK EXCHANGE Andy Heyman SVP, Financial Services
Slide 18: Agenda
NCR Confidential Agenda Key Industry Trends Retail Banking Transformation Strategy & Execution NCR State of Business 18
Slide 19: Global Financial Services Technology Leader
Global leader in ATMs and Multi-Vendor ATM software Globally diversified business, supporting the growth of cash usage FinTech leader in multi- channel software High availability and managed services leader globally THE Global Financial Services Technology Leader 625K ATMs globally powered by NCR AP
Slide 20: State of Business
$‐ $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 2009 2010 2011 2012 2013(e) Rest of World NAMER State of Business Rest of world steadily growing NAMER business declined in 2013 vs. 2012 SW/PS mix as % of revenue estimated to improve by 60 bps in 2013 vs. 2012 Backlog gross margin expansion
Slide 21: Financial Services Landscape
Financial Services Landscape Driver Characteristic Our customers • Regulation and compliance increase costs and limit fee income • Customer relationships are crucial • Branch infrastructure expected to change • Interest rate expansion represents potential revenue tailwind Our customers’ customers •
Slide 22: Geographic Impact of Trends
Geographic Impact of Trends 22Relevance of trends in a region Source: Forrester Research, Gartner, IMF, RBR, NCR Research
Slide 23: Key Drivers Transforming NCR Business
Key Drivers Transforming NCR Business 7+ Years2013 (e) SW/PS as % of Revenue 14% 20% Consumer Driven Revenue $10M $100M Available Market $13.6B $25B NPOI% 10.8%* 15% - 17% * Q3 2013 YTD actual results Source: RBR, UK Telegraph Finance, ameinfo.com, Australian Bankers Assoc. NCR Estimates 23
Slide 24: Financial Industry Technology Spend
Financial Industry Technology Spend $200B 24 Financial Industry Eco System Rankings & Spend Total Market $34.1B Available $13.6B Addressable $7.8B Source: RBR, CEB, Gartner, IMF GDP Data, NCR Estimates, American Banker
Slide 25: Economics of a Traditional Network
The Economics of a Traditional Network 2016 (e) Revenue Target segment/ micro market Traditional Existing Branch Estate 10 “Traditional Format” Branches 25
Slide 26: Economics of a Traditional Network (Expansion)
The Economics of a Traditional Network 2016 (e) Revenue Target segment/ micro market Traditional Traditional Expansion Expanded Branch Estate 15 “Traditional Format” Branches 26
Slide 27: Traditional Network Growth Model
Traditional Network Growth Model Existing Network $16M $2.7M $0.5M Existing 10 Branches 15 Branches Traditional Network Expansion $6.3M• Pre Tax Operating Income (PTOI) $9.6M 33%• PTOI as % of Total Revenue 33% • Credit balance & Loan balance revenue • Service & product based fee income • Lending fe
Slide 28: Economics of a New Retail Network
The Economics of a New Retail Network Target segment/ micro market Traditional Iconic Express Micro NCR Transformed Estate 25 ‘Profitable’ Branch formats compared to Traditional Branches 28
Slide 29: NCR Technology Enables Profitable Growth
NCR Technology Enables Profitable Growth Traditional Network Expansion $24M $4.1M $0.9M 15 Branches 25 Branches NCR Network Expansion $9.6M• Pre Tax Operating Income (PTOI) $16.6M 33%• PTOI as % of Total Revenue 49% • Credit balance & Loan balance revenue • Service & product based fee income • Lendi
Slide 30: Playbook for Retail Bank Transformation
The “Playbook” for Retail Bank Transformation Key Performance Metrics NPS + Profit per square foot = Market Share Sales and Service • Interactive Banker • Interactive Expert • Digital Expert Customer Experience • Interactive Teller • Mobile Cash Withdrawal Transaction Automation • Intelligent Deposi
Slide 31: Consumer Experience Banking (CxB)
NCR – Consumer Experience Banking (CxB) Software EXTERNAL Services ENTERPRISE Services Core Banking Teller Systems Payment ATM Switch Service Platform Check Cashing P2P Payments SMB Payments ESB – Unified Integration Layer Financial Transaction Hub Bill Payments Relationship Marketing & Loyalty Paym
Slide 32: Execution of our Branch Transformation Vision
2013 – Execution of our Branch Transformation Vision 32 75+ APTRATM Interactive Teller Customers We have built industry mindshare and leadership Launch of APTRATM Interactive Banking Interactive Teller has been installed in over 30 states, provinces and countries
Slide 33: Execution of our Branch Transformation Vision
33 2013 – Execution of our Branch Transformation Vision 33 We are transforming retail banking through Consumer Experience and Industrial Design to impact banking processes APTRATM Interactive Banking We have built industry mindshare and leadership 75+ APTRATM Interactive Teller customers
Slide 34: Branch Transformation: Press Coverage
2013 – Execution of our Branch Transformation Vision 34 We have built industry mindshare and leadership APTRATM Interactive Banking 75+ APTRATM Interactive Teller customers A New Era of Branch Wars at Nation’s Big Banks “[APTRA Interactive Teller is] a multimillion-dollar project but a fairly quick
Slide 35: Financial Services Revenue Guidance
$‐ $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 2009 2010 2011 2012 2013(e) 2016 (e) Rest of World NAMER ($’s in Millions) 9.6% 9.5% 10.2%10.4% 10.8%** ~12-14% OI Margin= Operating income as a percent of revenue * 2013(e) in constant currency **Q3 2013 YTD actual results Financial Services
Slide 36: Key Takeaways
Key Takeaways Upside exists through acceleration of retail network transformation 2013 (e) 2016 (e) Available market size $13.6B $20B SW/PS as a % of revenue 14% 17% Operating margin 10.8%* 12% - 14% *Q3 2013 YTD actual results Global funnel has grown over 20% to $5.1B since the end of 2012 36
Slide 37: Retail
37 RETAIL INVESTOR DAY NOVEMBER 11, 2013 NEW YORK STOCK EXCHANGE John Bruno EVP, Corporate Development & CTO
Slide 38: Agenda
Market Opportunity Growth Opportunity Retail Strategy & Solutions Agenda Who We Are 38
Slide 39: Who We Are: Global Leadership
GARTNER CRM VENDOR LANDSCAPE #1 Multi-channel Customer Analytics GARTNER SERVICES REPORT #1 Market Share IT Services RBR ranks NCR #1 Self-checkout Shipments & Install base (70% global & 79% U.S. ship share) Who We Are Global Leadership Source: Market Share IT Services, March 2013 RBR: Global Self-C
Slide 40: Industry Leaders Choose NCR Retail
Industry Leaders Choose NCR Retail Serve 24 of the World’s Top 30 Retailers Food & Drug Mass Merchandise Petrol Convenience Retail Department, Specialty Retail 40
Slide 41: Retail Market Opportunity
Retail Market Opportunity Addressable Market Expands with Retalix +$3B Greatest Opportunities for Growth • Software/SaaS • Geographic Expansion • Channel Expansion 2013-2016 Expected CAGR Total: 5.2% Available: 7.5% Addressable: 8.8% $23.1 $28.4 $13.5 $18.0 $9.3 $13.1 0.0 5.0 10.0 15.0 20.0 25.0 30.
Slide 42: Market Expansion
Market Expansion NAMER 2013-2016 Expected CAGR Addressable 7.6% CLA/Brazil 2013-2016Expected CAGR Addressable 16% EMEA 2013-2016Expected CAGR Addressable 12.5% APAC 2013-2016Expected CAGR Addressable 11.5% Japan 2013-2016Expected CAGR Addressable 3.3% Source: IDC, RBR, Gartner, and Internal Analysis
Slide 43: Critical Drivers of Growth
Global Expansion High Value Professional and Managed Services Software / SaaS Growth Strategy Execution Critical Drivers of Growth 43
Slide 44: Market Factors Informing Our Strategy
Market Factors Informing Our Strategy 50% of Millennials use mobile devices to research products and reviews 55% of conversions (store visit, phone call or purchase) are triggered within 1 hour 90% of all the growth in the IT market will be driven by cloud, mobile, social and Big Data from 2013-2020
Slide 45: Strategic Themes
POWER OF ONE SOLUTION- LED SERVICES CUSTOMER SUCCESS Strategic Themes The New NCR Retail 45
Slide 46: Retail Strategy Segments
Retail Strategy Segments Revenue growth and margin expansion Software and Saas Professional Services Managed Services 46
Slide 47: Retailer Challenges
Control Costs & Inventory Management Engaging Consumers Digital Consumer Across Channels Customer Loyalty Disruptive Competition Theft Prevention Sales Growth and Costs Lack of Centralized Data Operating Efficiently Speed of Service Labor Optimization Cash Management Retailer Challenges 47
Slide 48: Delivering Integrated Solutions
F u l l y i n t e g r a t e d H W / S W m o d e l Integrated Solutions Integrated End-to-End Portfolio Delivering Integrated Solutions The most comprehensive value proposition in the retail market 48
Slide 49: From Point Solutions to Unified Commerce Platform
49 From Isolated Point Solutions to Unified Commerce Platform POS Mobile App Self Checkout eCommerce GUI GUI GUI GUI Business Logic Business Logic Business Logic Business Logic Data Data Data DataUnified Commerce Platform Unified Business Logic Layer Software Services and Business Processes Exposed
Slide 50: Integrated, Seamless Omni-Channel Experience
Integrated, Seamless Omni-Channel Experience Before During After Commerce Made Complete At the Checkout Product Search es ON THE GO Ads, Flyers Shopping Lists Social Networks IN STORE Digital Signage Digital Promotions AT HOME We make it easier for retailers to engage and influence customers in new
Slide 51: Portfolio Strategy and Evolution
Beautification Hardware Platforming Availability Service Model POS SELF CHECKOUT Portfolio Strategy and Evolution 51 SILVER
Slide 52: Anatomy of a Sale
Anatomy of a Sale *Complete POS, SCO lane configuration, average, based on attachment across all stores. ** Modelled view of solution includes POS (4) and SCO (8) lanes , SW, and Payments. Does not include customization, development, freight and start up, etc. Supermarket Example Average Supermarket
Slide 53: Retalix Integration Update
Retalix Integration Update Global Leadership Position in Software and Services POWER OF VALUE CREATION • Demonstrated leadership in OMNI-CHANNEL and INNOVATION • Improved Revenue mix – SW/Services • Integration underway; expected to complete in Q4 2014 • Q3 YTD revenue growth exceeding expectations
Slide 54: Retail Revenue Guidance
0 500 1,000 1,500 2,000 2,500 3,000 2009 2010 2011 2012 2013 (e) 2016 (e) ~13-15% OI Margin +6% +4% +8-10% CAGR (6%)* 4.0% OI Margin 6.1% OI Margin 9.3%*** OI Margin +24-26%** OI Margin= Operating income as a percent of revenue *Excluding shift of customer accounts from Retail to Hospitality, growth
Slide 55: Key Takeaways
Key Takeaways Create High Value, Market-Driven Solutions Global Growth with Segment Focus Addressable Market Expansion Revenue Growth Grow Retail to $2.5B+ Gross Margin Expansion Customer Experience 55
Slide 56: Hospitality
HOSPITALITY INVESTOR DAY NOVEMBER 11, 2013 NEW YORK STOCK EXCHANGE Kim Eaton SVP & GM, Hospitality
Slide 57: Agenda
57 Agenda Market Opportunity Who We Are Our Solution Vision Strategy & Execution 57
Slide 58: NCR Hospitality
NCR Hospitality Fast Casual Table ServiceQuick Service Table Service Theaters Sports Venues #1 global provider of restaurant technology solutions Over 140,000 active installations in 75 countries Approximately 125,000 SaaS apps implemented and growing 20+% y/y Customers include: 7 of the 1
Slide 59: Industry Leaders Choose NCR Hospitality
Industry Leaders Choose NCR Hospitality 59
Slide 60: Hospitality Market Opportunity
Hospitality Market Opportunity Expanding Available and Addressable Markets $19.2 $20.6 $6.6 $9.1 $5.5 $7.7 $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 $22 2013 2016 B i l l i o n s Total Available Addressable 2013-2016 Expected CAGR Total: 2.3% Available: 11.3% Addressable: 12.4% Greatest Opportunities f
Slide 61: Market Expansion
Market Expansion NAMER 2013-2016 Expected CAGR Available 3.6% Addressable 3.0% CLA/BRAZIL 2013-2016 Expected CAGR Available 21.0% Addressable 36.6% ASPAC 2013-2016 Expected CAGR Available 48.6% Addressable 102.0% Source: Euromonitor, Technomic, Internal Analysis EMEA 2013-2016 Expected CAGR Availabl
Slide 62: Our Market Potential
Our Market Potential 9M+ sites = $19.2B total market 1M+ sites $5.5B addressable today Growing to $7.7B in 2016 Source: NCR internal data and customer feedback 62
Slide 63: Restaurant Challenges
Engaging Consumers Operating Efficiently Managing a Profitable Business The Digital Consumer Cultivating Customer Loyalty Competition from Grocery & C-Store Employee Theft Rising Costs of Food and Labor Lack of Centralized Data Speed of Service High-Quality Food Production Employee Satisfaction Rest
Slide 64: The Hospitality Evolution
The Hospitality Evolution Category 1999 – 2005 2006 - 2012 2013 and Beyond Focus Area Store Front End Store Operations & Marketing Customer Revenue Growth Offering POS-driven Solution-driven SaaS-driven Architecture Local Enterprise Mobile/Cloud Available Market $2 billion $5 billion $7+ billion Add
Slide 65: The Value We Create
The Value We Create* NCR Improvements +2,000/year +$1/guest $122,000 -2% ($22,440) -2% ($22,440) -0.50% ($5,610) 0% ($0) 4.5% $56,590 Average Restaurant Guests 100,000/year Spend $10/guest Total Sales $1M Food Cost 30% $300,000 Labor Cost 30% $300,000 IT Cost 2%$20,000 OH Cost 33%$330,000 Profit 5%$
Slide 66: Anatomy of a Sale
Anatomy of a Sale SMB Example Avg. One-Time New Site Revenue 2010 2013+ Hardware (3.5 terminals per site) Peripherals POS Software Interactive Printer Solutions Programming, training and installation $14,000 $15,500 Annual Avg. Recurring Revenue Per Site 2010 2013+ Hardware Maintenance $300 $200 $50
Slide 67: Strategy Execution: Critical Drivers of Growth
Strategy Execution Critical Drivers of Growth Global Expansion • Localized POS and SaaS solutions • Sales and channel partner coverage SMB • Lower-tier solutions • Sales coverage SaaS Acceleration • Solution innovation & mobility • SaaS sales specialists 67
Slide 68: Hospitality Revenue Guidance
Hospitality Revenue Guidance OI Margin= Operating income as a percent of revenue * Actual results from acquisition date, August 24, 2011 to December 31, 2011 ** 2013 (e) in constant currency *** Q3 2013 YTD actual results Estimated Revenue Growth (2013-2016) • International - 25 - 30%+ • SMB - 18 –
Slide 69: Key Takeaways
Key Takeaways 15.6% - OI % of Revenue 16.3% - OI % of Revenue 16.4% - OI % of Revenue *** High-Value, Market-Driven Solutions Global Solution Expansion SaaS and Global Sales CoverageGrow Hospitality Business to $1B Revenue Growth Gross Margin Expansion Customer Experience 69
Slide 70: Financial Strategy
FINANCIAL STRATEGY INVESTOR DAY NOVEMBER 11, 2013 NEW YORK STOCK EXCHANGE Bob Fishman Chief Financial Officer
Slide 71: Creating Shareholder Value - Going Forward
Creating Shareholder Value – Going Forward Build a Sustainable & Leading Cost Structure Free Cash Flow Generation Profitable Revenue Growth 71
Slide 72: Revenue Profile - Balanced Global Growth
$4,579 $4,711 $5,291 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 2009 2010 2011 2012 2013 (e) $5,730 +8% +3% Revenue Profile – Balanced Global Growth ($’s in Millions); *2013(e) in constant currency 9%-11%*+12%Revenue Growth Revenue Diversity (2012) AMEA 25% (USA 38%) Americas 49% Europe 26% Financi
Slide 73: Revenue and Gross Margin by Products and Services
Strong revenue growth. Gross margin expanded in products and services as a result of higher volume, improved mix and cost reductions. Revenue and Gross Margin(1) by Products and Services Revenue Growth 2009 2010 2011 2012 Q3 2013 YTD Products $2,208 $2,301 $2,592 $2,854 6% Services $2,371 $2,410 $2,
Slide 74: Revenue and Operating Income by Segment
Revenue growth and segment operating margin improvement led by higher volume, improved mix and cost reductions. Revenue and Operating Income (OI) by Segment Revenue 2009 2010 2011 2012 2013(e)* Financial Services $2,614 $2,645 $2,999 $3,201 Roughly Flat Retail Solutions $1,627 $1,717 $1,778 $1,667 +
Slide 75: NPOI: Consistently Strong Growth
$321 $383 $483 0 100 200 300 400 500 600 700 800 2009 2010 2011 2012 2013 (e) NPOI: Consistently Strong Growth ($’s in Millions) $700 - $720 +19% NPOI: Non-Pension Operating Income (1) +26% +19-22% $589 +22% 7.0% of Revenue 8.1% of Revenue 9.1% of Revenue 10.3% of Revenue ~11.5% of Revenue 75
Slide 76: Revenue and NPOI Growth
$5,730 9%-11% * 6-8% CAGR 2012 2013 (e) 2016 (e) $7,300 - $7,700 Revenue and NPOI Growth Revenue $589 $700 - $720 14-18% CAGR 2012 2013 (e) 2016 (e) $1,000 - $1,100NPOI (1) ($’s in Millions ); *2013(e) in constant currency, which includes 2% unfavorable foreign currency fluctuations ~11.5% of Revenu
Slide 77: Revenue Growth and Higher Margin Opportunity
Revenue Growth and Higher Margin Opportunity Products Services Software (2) $475 $450 $525 2013 (e) Revenue ($’s in Millions) 2016 (e) Revenue 77
Slide 78: Software and Recurring Revenue Growth
$560 29%-38% 16-18% CAGR 2012 2013 (e) 2016 (e) $1,200 – $1,300 Software and Recurring Revenue Growth Software(2) 2012 2013 (e) 2016 (e) 6 – 7% CAGR ~6% $2,150 Recurring Revenue(3) ($’s in Millions) 38% of Revenue 37% of Revenue 37% of Revenue $725-$775 78
Slide 79: Software Revenue Growth by Type
Software Revenue Growth by Type Software Software as a Service (SaaS) Software Maintenance $175 $100 $175 2013 (e) Software Revenue ($’s in Millions) 2016 (e) Software Revenue (2) (2) 79
Slide 80: Software Revenue Growth by Segment
Software Revenue Growth by Segment 2013 (e) Software Revenue ($’s in Millions) 2016 (e) Software Revenue Financial Services Hospitality Retail Solutions $80 $210 $10 Emerging Industries $150 (2) (2) 80
Slide 81: Managing for Margin
Increasing productivity Reducing our cost structure Simplifying our processes Giving time back to sales Improving the customer experience Key Initiatives: • Cost reduction and value engineering • Product lifecycle management • Solution complexity reduction program • Quote to Cash and Sourc
Slide 82: Continued EPS Expansion
$1.42 $1.73 $2.08 $2.70-$2.80 $4.10 - $4.50 $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 2009 2010 2011 2012 2013 (e) 2014 (e)* 2015 (e) 2016 (e) $3.60-$3.85 $2.49 Continued EPS Expansion EPS: Excluding Pension and Special Items (1) 14-18% CAGR * Guidance to be provided during the Q4
Slide 83: Forecast Revenue Growth and OI Margin by Segment
Forecast Revenue Growth and OI Margin Expansion by Segment * Estimated Segment OI (segment operating income excluding pension and special items) as a percentage of revenue by segment Segment Revenue’13 – ’16 CAGR 2016(e) OI%* Financial Services CAGR 4-6% 12-14% Retail Solutions CAGR 8-10% 13-15% Hos
Slide 84: Strategic Trajectory of Pension Transformation
Strategic Trajectory of Pension Transformation METRICS • Funding gap • NPOI – FCF conversion • Size of liability • Differential between GAAP/Non- GAAP EPS GOALS • Eliminate US underfunding • Create $50-70M (net of interest) of annual FCF • Remove ~$1B of liability • Pension expenses declines to $20M
Slide 85: Pension Funding Gap Progression
Pension Funding Gap Progression NCR PENSION NET FUNDED STATUS ($ MILLIONS) * * Assumes US prefunds and no material change to international plan structure 85
Slide 86: Pension Strategy Impacts
2010 2011 2012 2013 ** 2014(e) ** PENSION FUNDING GAP $997M $1.443B $461M $250M $100M PENSION EXPENSE (BENEFIT) $59M $582M ($224M) $26M* $20M* PENSION LIABILITY $5.5B $6.2B $5.7B $5.1B $4.5B % OF ASSETS IN FIXED INCOME ~40% ~60% ~75% ~85% 80%-90% IMPACT ON FREE CASH FLOW (1) ($105M) ($125M) ($152M)
Slide 87: Using NCR's Balance Sheet More Effectively
2013 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Credit Facility Term Loan ‐$ ‐$ 700$ 700$ 700$ 700$ 850$ 850$ 832$ 815$ 1,115$ Revolving Credit ‐ ‐ 350 140 115 25 ‐ ‐ 145 230 ‐ 4.625% Notes due 2021 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 500 500 500 500 5.00% Notes due 2022 ‐ ‐ ‐ ‐ ‐ ‐ 600 600 600 600 600 Other Debt 11 11 12 13 12 15
Slide 88: NCR Debt Maturities
NCR Debt Maturities NCR DEBT MATURITY SCHEDULE ($ MILLIONS) Note: Does not include activity under NCR’s corporate revolving credit facility and certain immaterial capital lease maturities No material debt maturities through 2017 88
Slide 89: NCR Capital Structure
NCR Capital Structure ($’s Millions except as indicated) 1. NCR Credit Facility interest rate is subject to a leverage-based pricing grid. Interest rate shown is as of the end of Q3 2013. As of September 30, 2013, approximately half of the Term Loan balance is subject to a floating-to-fixed interest
Slide 90: Net Debt
Net Debt ($ Millions) 2011 2012 2013E ( 700 ) ( 850 ) ( 1,115 )(a) Term Loan ( 140 ) - -(b) Revolver - ( 500 ) ( 500 )(c) 8 Yr. Bonds - ( 600 ) ( 600 )(d) 10 Yr. Bonds ( 13 ) ( 13 ) ( 41 )(e) Other Debt ( 853 ) ( 1,963 ) ( 2,256 )Total Debt ( a + b + c + d + e ) 398 1,069 650Cash 98 769 350(f) Exces
Slide 91: Free Cash Flow Bridge - Full Year
Free Cash Flow Bridge – Full Year ($ Millions) FY 2013 (e) Net PP&E (97) Working Capital (10) Free Cash Flow (1) $225Pension & Postretirement* (107) Other (127) Cash Interest (71) FY 2012 Net PP&E (40) Working Capital 53 Free Cash Flow (1) $146 Pension & Postretirement* (171) Other (238) Cash Intere
Slide 92: Core Working Capital Metrics
Core Working Capital Metrics 2011 2012 2013 Core Working Capital Metrics Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 946 980 1,128 1,032 1,065 1,078 1,124 1,086 1,193 1,266 1,349( a ) Accounts Receivable DRO ( Internal ) * 53 53 52 49 59 57 58 53 59 63 69 793 810 850 774 802 798 826 797 847 825 842( b ) Invent
Slide 93: Free Cash Flow Generation
Free Cash Flow Generation * Assumes US prefunds and no material change to international plan structure 146 225 640 152 87 35 114 58 4014 40 0 426 410 715 0 100 200 300 400 500 600 700 800 2012 2013(e) 2016(e) Free Cash Flow Pension Disc Ops Special Items Adjusted Cash Flow 2012 2013(e) 2016(e) (A) F
Slide 94: Effective Tax Rate and Cash Tax Rate Analysis
Effective Tax Rate and Cash Tax Rate Analysis 27% 28% 25% 23% 27% 27% 27% 9% 12% 6% 13% 13% 13% 13% 5% 10% 15% 20% 25% 30% 35% 2010 2011 2012 2013(e) 2014(e) 2015(e) 2016(e) Effective Tax Rate Cash Tax Rate 94
Slide 95: Financial Policy
Financial Policy Maintain strong liquidity Currently ~$700 million of unused revolver and $460 million of cash Extended revolver term to 5 years in July 2013 Support NCR’s growth strategy with disciplined approach to M&A and capital investments Increasing investments in SaaS technology P
Slide 96: Key Takeaways
Execute on Phase III of pension strategy Free Cash Flow generation expected to improve driven by higher margin revenue Continue to manage the balance sheet for flexibility and liquidity, continued focus on working capital Cash generated to be used for organic growth and strategic opportunities Growt
Slide 97: Questions?
QUESTIONS?
Slide 98: Footnotes
Footnotes 1) This is a non-GAAP measure. An explanation of non-GAAP measures and the reconciliation of GAAP to non- GAAP measures are included in the supplementary non-GAAP materials in this presentation and/or on the investor relations page of NCR’s website. 2) Software includes software, software
Slide 99: Supplementary Non-GAAP Materials
SUPPLEMENTARY NON-GAAP MATERIALS 99
Slide 100: Non-GAAP Measures
Non-GAAP Measures While NCR reports its results in accordance with generally accepted accounting principles in the United States, or GAAP, certain materials presented during this event will include non-GAAP measures in an effort to provide additional useful information regarding NCR’s financial resu
Slide 101: Non-GAAP Measures: NPOI and Non-GAAP EPS
Non-GAAP Measures NPOI and Non-GAAP EPS. The non-GAAP income from operations (i.e., non-pension operating income, or NPOI) and non-GAAP earnings per share included in these materials exclude the impact of pension expense and certain special items. Due to the significant change in its pension expense
Slide 102: Income from Operations to Non-Pension Operating Income
Income (Loss) from Operations (GAAP) to Non-Pension Operating Income (non-GAAP) 2009 2010 2011 2012 2013 (e) 2016 (e) Income (Loss) from Operations (GAAP) $348 $298 $(148) $748 $546 - $566 $907 - $1,007 Pension expense (benefit) (55) 59 582 (224) 26 30 Impairment of assets related to an equity inves
Slide 103: Diluted EPS (GAAP) to Non-GAAP EPS
Diluted Earnings (Loss) Per Share from Continuing Operations (GAAP) to Diluted Earnings Per Share from Continuing Operations (non-GAAP) 2009 2010 2011 2012 2013 (e) 2015 (e) 2016 (e) Diluted Earnings Per Share from Continuing Operations (GAAP) $1.14 $1.72 $(0.61) $2.90 $2.08 - $2.18 $3.25 - $3.50 $3
Slide 104: Operating Cash Flow to Free Cash Flow
Cash Provided by (Used in) Operating Activities (GAAP) to Free Cash Flow (non-GAAP) 2012 2013 (e) 2016 (e) Cash provided by (used in) Operating Activities (GAAP) $(180) $329 $995 Cash provided by (used in) discontinued operations (114) * (58) (40) Net capital expenditures (160) (226) (315) Pension d
Slide 105: Gross Margin (GAAP) to Gross Margin Excluding Pension and Special Items
2009 2010 2011 2012 Q3 2013 YTD 2013 (e) Gross Margin as a % of Revenue (GAAP) 22.0% 22.9% 18.0% 28.7% 27.2% 27.4% Pension expense (benefit) (0.5%) 0.6% 6.8% (2.2)% 0.3% 0.3% Impairment of assets related to an equity investment 0.5% - - - - - Acquisition-related purchase price adjustments - - - - 0.
Slide 106: Income from Operations to Adjusted EBITDA
Income (loss) from Operations (GAAP) to Adjusted EBITDA (non-GAAP) 2011 2012 2013 (e) Income (loss) from Operations (GAAP) $(148) $748 $556 Plus: Pension expense (benefit) 582 (224) 26 Plus: Special Items * 49 65 128 Non-Pension Operating Income (non-GAAP) 483 589 $710 Plus: Depreciation and amortiz
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