Slide 1: Q4 2013 Earnings Conference Call
NCR Confidential Q4 2013 EARNINGS CONFERENCE CALL BILL NUTI, CHAIRMAN AND CEO JOHN BRUNO, EVP BOB FISHMAN, CFO February 6, 2014
Slide 2: Notes to Investors
NCR Confidential 2 NOTES TO INVESTORS Forward-looking Statements: Comments made during this conference call 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,”
Slide 3: Non-GAAP Measures
NCR Confidential 3 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 the related presentation materials will include the following “non-GAAP” measures: non-pension ope
Slide 4: Q4 2013 Financial Highlights
NCR Confidential Q4 2013 FINANCIAL HIGHLIGHTS (1) Post AT&T Spin-off, excluding Teradata. (2) NPOI as a percentage of revenue. 4 REVENUE Q4 2012 Q4 2013 $1.64 billion $1.67 billion Up 2% y/y 4% on a constant currency basis OPERATIONAL GROSS MARGIN Q4 2012 Q4 2013 26.4% 29.0% Up 260 bps y/y NPOI Up 2
Slide 5: FY 2013 Financial Highlights
NCR Confidential FY 2013 FINANCIAL HIGHLIGHTS 5 REVENUE FY 2012 FY 2013 $5.73 billion $6.12 billion Up 7% y/y; up 9% on a constant currency basis Recurring revenue up 6%; 38% of total OPERATIONAL GROSS MARGIN FY 2012 FY 2013 26.8% 28.5% Up 170 bps y/y NPOI Up 22% y/y Record (1) annual NPOI margin (2
Slide 6: Strong Software & Professional Services Growth
NCR Confidential $145 ~$500 $94 ~$575 ~$725 STRONG SOFTWARE & PROF. SVCS GROWTH FY 2013 FY 2014e ($ in Millions) FY 2012 Q4 2013 Q4 2012 $39 $28 Q4 FY 6 Q4 Prof. Svcs revenue up 49% Q4 SaaS revenue up 39% $153 $103 $510 $345 $268 $362 $905 $1,271 $1,775- $1,825 SaaS Prof. Svcs SW Licenses & SW Maint
Slide 7: Line of Business Q4 2013 and FY 2013 Highlights
NCR Confidential LOB Q4 2013 FY 2013 Financial Record operating margin driven by favorable software mix, higher professional services revenue, and expense management North America order growth of 26% y/y led by strong results in Branch Transformation Branch Transformation orders of $33M 22 n
Slide 8: Transforming Financial Services
NCR Confidential 8 TRANSFORMING FINANCIAL SERVICES Completed Acquisitions of Digital Insight and Alaric Systems Strategic Rationale Completes fully integrated omni-channel portfolio Furthers high-margin software revenue and adds market-leading SaaS platform Positions NCR for long-term growth,
Slide 9: Acquisition Update
NCR Confidential OBJECTIVE: Uniquely positions NCR software within the FinTech industry, creating an end-to-end technology platform for seamless banking services across both physical and digital channels Demonstrates commitment to be the global leader in omni-channel retail banking transformatio
Slide 10: Strategic priorities and outlook
NCR Confidential Further strengthening & diversification of our operating assets All Lines of Business are poised for growth, higher margins and improved balance i.e., geographic, product mix We will noticeably “move the needle” on software/SaaS and Services growth We will continue our strong
Slide 11: Financial Performance & Guidance
NCR Confidential FINANCIAL PERFOMANCE & GUIDANCE February 6, 2014
Slide 12: Q4 & Full-Year Operational Results
NCR Confidential 12 Revenue $1,670 $1,642 2%(1) / 4%(2) $6,123 $5,730 7%(1) / 9%(2) Operational Gross Margin 484 433 12% 1,745 1,536 14% Operational Gross Margin Rate 29.0% 26.4% 28.5% 26.8% Expenses (non-GAAP) 263 252 4% 1,028 947 9% % of Revenue 15.7% 15.3% 16.8% 16.5% NPOI 221 181 22% 717 589 22%
Slide 13: Q4 & Full-Year GAAP Results
NCR Confidential 13 Revenue $1,670 $1,642 2% $6,123 $5,730 7% Gross Margin 530 574 (8%) 1,740 1,645 6% Gross Margin Rate 31.7% 35.0% 28.4% 28.7% Expenses 233 163 43% 1,074 897 20% % of Revenue 14.0% 9.9% 17.5% 15.7% Income from Operations(1) 297 411 (28%) 666 748 (11%) % of Revenue 17.8% 25.0% 10.9%
Slide 14: Revenue by Segment
NCR Confidential 14 REVENUE BY SEGMENT Financial Services $ 852 $ 921 (7)% (5)% $3,115 $3,201 (3)% (1)% Retail Solutions 536 490 9% 12% $2,034 $1,667 22% 25% Hospitality 176 150 17% 18% 626 522 20% 21% Emerging Industries 106 81 31% 33% 348 340 2% 3% Total Revenue $ 1,670 $ 1,642 2% 4% $6,123 $5,730
Slide 15: Operating Income by Segment
NCR Confidential 15 OPERATING INCOME BY SEGMENT Financial Services $ 111 $ 100 $ 356 $ 327 % of Revenue 13.0% 10.9% 11.4% 10.2% Retail Solutions 65 44 205 102 % of Revenue 12.1% 9.0% 10.1% 6.1% Hospitality 26 22 100 85 % of Revenue 14.8% 14.7% 16.0% 16.3% Emerging Industries 19 15 56 75 % of Revenue
Slide 16: Free Cash Flow (FCF)
NCR Confidential FREE CASH FLOW (FCF) 16 $ millions 2014e 2013 NPOI $900 - $920 $717 plus: Depreciation and Amortization (1) ~155 143 less: Cash Taxes ~(90) - (95) (70) less: Capital Expenditures ~(250) – (260) (226) less: Pension Contributions (2) ~(70) (79) less: Working Capital (3) Change ~(65) (
Slide 17: Free Cash Flow Generation
NCR Confidential FREE CASH FLOW GENERATION 17 $ millions 2014e 2013 Free Cash Flow (FCF) ~$300 - $350 $207 plus: Pension 70 79 plus: Discontinued Ops 45-55 52 plus: Acquisition-related costs 25-35 43 Adjusted FCF ~$440-$510 $381
Slide 18: Debt and Liquidity
NCR Confidential Amount Outstanding Dec. 31, 2013 (1) Pro Forma Digital Insight Acquisition Maturity Interest Rate Term Loan A $1,115 $1,365 Jul-18 LIBOR + 2.25% Revolving Credit ($850M) - 300 Jul-18 LIBOR + 2.25% Total Senior Secured Debt $1,115 $1,665 4.625% Senior Notes Due 2021 500 500 Feb-21 4.
Slide 19: Pension Update
NCR Confidential 19 PENSION UPDATE 2011 2012 2013 Pension Assets $4.7B $5.2B $5.0B(1) Pension Liability $6.1B $5.7B $5.1B Pension Funded Status $(1.4B) $(0.5B) $(0.1B) Pension Contributions(2) $125M $152M $79M Expected to be $70M in 2014 and $50M in 2015 Pension Expense (Benefit)(3) $582M $(224M) $(
Slide 20: FY 2014 Guidance
NCR Confidential 20 2014e 2013 Revenue 12-14% growth $6,123 Income from Operations (GAAP)(1) $730 - $750 $666 Non-pension Operating Income (NPOI) $900 - $920 $717 Diluted EPS (GAAP)(1) $2.36 - $2.46 $2.67 Non-GAAP Diluted EPS(2) $3.00 - $3.10 $2.81 * 2014 guidance includes the impact of the acquisit
Slide 21: 2014 Segment Revenue Guidance
NCR Confidential 21 2014 SEGMENT REVENUE GUIDANCE Line of Business 2014e Revenue Growth Financial Services Financial Services excluding Digital Insight 15-17% 4-5% Retail 8-10% Hospitality 12-15% Emerging Industries 10-14% Total 12-14%
Slide 22: Q1 2014 Guidance
NCR Confidential Q1 2014 GUIDANCE Q1 2014e Q1 2013 Income from Operations (GAAP) $105 - $115 $85 Non Pension Operating Income (Non-GAAP) $155 – $165 $129(1) Tax rate 25% 16%(2) Other expense ~ $50 $19 $ millions 22 . (1) Includes $13M benefit related to change in the severance policy in the U.S. in
Slide 23: 2014 Goals
NCR Confidential Improve Free Cash Flow generation and working capital Further expand software/SaaS and services contribution and improve margin profile Use strong, growing NPOI to de-lever the balance sheet Implement next stage of cost reduction initiatives and complete final stages of pension stra
Slide 24: Supplementary Non-GAAP Materials
NCR Confidential SUPPLEMENTARY NON-GAAP MATERIALS
Slide 25: Non-GAAP Measures
NCR Confidential NON-GAAP MEASURES 25 While NCR reports its results in accordance with generally accepted accounting principles (GAAP) in the United States, comments made during this conference call and the related presentation materials will include non-GAAP measures in an effort to provide additio
Slide 26: Non-GAAP Measures: NPOI, EPS, Gross Margin, Expenses
NCR Confidential NON-GAAP MEASURES 26 NPOI, Non-GAAP EPS, Operational Gross Margin, Operational Gross Margin Rate, and Expenses (non-GAAP). The non- GAAP income from operations (i.e., non-pension operating income, or NPOI), non-GAAP earnings per share, operational gross margin, operational gross mar
Slide 27: Non-GAAP Reconciliations: Income from Operations to NPOI
NCR Confidential NON-GAAP RECONCILIATIONS 27 Q4 2013 Q4 2012 FY 2014 FY 2013 FY 2012 Q1 2014 Q1 2013 Income from Operations (GAAP) $297 $411 $730 - $750 $666 $748 $105 – 115 $85 Pension Expense (Benefit) (99) (254) 10 (78) (224) 1 7 Acquisition-Related Amortization of Intangibles 17 9 121 65 38 29 1
Slide 28: Non-GAAP Reconciliations: Diluted EPS
NCR Confidential NON-GAAP RECONCILIATIONS 28 Q4 2013 Q4 2012 FY 2014 FY 2013 FY 2012 Diluted EPS (GAAP) $1.21 $1.45 $2.36 - $2.46 $2.67 $2.90 Pension Expense (Benefit) (0.41) (0.82) 0.03 (0.34) (0.72) Acquisition-Related Amortization of Intangibles 0.07 0.04 0.47 0.29 0.15 Acquisition-Related Costs
Slide 29: Non-GAAP Reconciliations: Gross Margin
NCR Confidential NON-GAAP RECONCILIATIONS 29 Q4 2013 Q4 2012 FY 2013 FY 2012 Q4 2013 Q4 2012 FY 2013 FY 2012 Gross Margin (GAAP) $530 $574 $1,740 $1,645 Gross Margin as a % of Revenue (GAAP) 31.7% 35.0% 28.4% 28.7% Pension Expense (Benefit) (58) (146) (46) (128) Pension Expense (Benefit) (3.4)% (8.9
Slide 30: Non-GAAP Reconciliations: Operating Expenses
NCR Confidential NON-GAAP RECONCILIATIONS 30 Q4 2013 Q4 2012 FY 2013 FY 2012 Operating Expenses (GAAP) $233 $163 $1,074 $897 Pension (Expense) Benefit 41 108 32 96 Acquisition-Related Amortization of Intangibles (8) (4) (29) (19) Acquisition-Related Costs (2) (11) (46) (23) OFAC and FCPA Investigati
Slide 31: Non-GAAP Reconciliations: Free Cash Flow
NCR Confidential NON-GAAP RECONCILIATIONS 31 Q4 2013 Q4 2012 FY 2012 Cash Provided by Operating Activities (GAAP) $265 $100 $(180) Net capital expenditures (71) (49) (160) Cash Used In Discontinued Operations (1) (29) (114) Pension discretionary contributions and settlements 124 100 600 Free Cash Fl
Slide 32: Non-GAAP Reconciliations: FY 2013 and FY 2014 Free Cash Flow
NCR Confidential NON-GAAP RECONCILIATIONS 32 FY 2013 FY 2014 Cash Provided by Operating Activities (GAAP) $281 $595 - $625 Net capital expenditures (226) (250) -(260) Cash Used In Discontinued Operations (1) (52) (45) - (55) Pension discretionary contributions and settlements (2) 204 20 Free Cash Fl
Slide 33: Non-GAAP Reconciliations: Constant Currency Revenue Growth
NCR Confidential 33 NON-GAAP RECONCILIATIONS Revenue Growth % (GAAP) to Constant Currency Revenue Growth % (non-GAAP) Q4 2013 FY 2013 Revenue growth % (GAAP) 2% 7% Unfavorable foreign currency fluctuation impact 2% 2% Constant currency revenue growth % (non-GAAP) 4% 9%