Slide 1: Q4 2015 Earnings Conference Call
1 Q4 2015 EARNINGS CONFERENCE CALL BILL NUTI, CHAIRMAN AND CEO BOB FISHMAN, CFO February 9, 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: A 2015 Retrospective
3 MORE DIFFICULT THAN EXPECTED … • China and Russia markets • Foreign Exchange environment ◦ Y/Y negative impact: Revenue - $415M; NPOI - $72M, non-GAAP EPS - $0.27 ◦ In key markets: Euro (10%); British Pound (5%); CAD (16%); AUD (10%); Brazilian Real (30%); and Russian Ruble and Turkish Lira over (
Slide 4: Q4 2015 Financial Results
4 Q4 2015 FINANCIAL RESULTS REVENUE Q4 2014 Q4 2015 $1.77 billion Revenue down 5% y/y, flat CC Recurring revenue up 1% y/y, up 6% CC, 41% of total revenue OPERATIONAL GROSS MARGIN Q4 2014 Q4 2015 30.2% 30.7% Up 50 bps y/y, up ~70 bps CC NPOI NPOI up 5% y/y, up 14% CC Non-GAAP EPS up 5% y/y, up 13% C
Slide 5: 2015 Financial Results
5 2015 FINANCIAL RESULTS REVENUE 2014 2015 $6.59 billion Revenue down 3% y/y, up 3% CC Recurring revenue down 1% y/y, up 5% CC, 43% of total revenue OPERATIONAL GROSS MARGIN 2014 2015 29.5% 29.3% Down 20 bps y/y NPOI NPOI up 1% y/y, up 10% CC Non-GAAP EPS up 1% y/y, up 11% CC FREE CASH FLOW FCF grow
Slide 6: Software-Related Revenue
6 SOFTWARE-RELATED REVENUE Q4 2015 Q4 2014 $129 QTD • QTD Software-related revenue down 4% y/y; down 1% CC • QTD Cloud revenue up 4% y/y; up 5% CC • QTD Professional Services revenue down 6% y/y; down 2% CC $459 Cloud Professional Services SW Licenses & SW Maintenance $189 FY 2015 $1,747 FY 2014 (#039;
Slide 7: Q4 & Full Year Operational Results
7 For the Periods Ended December 31 Three Months Twelve Months 2015 2014 As Reported Constant Currency 2015 2014 As Reported Constant Currency Revenue $1,680 $1,768 (5)% —% $6,373 $6,591 (3)% 3% Operational Gross Margin 516 534 (3)% 3% 1,865 1,942 (4)% 2% Operational Gross Margin Rate 30.7% 30.2% 29
Slide 8: Q4 & Full Year GAAP Results
8 For the Periods Ended December 31 Three Months Twelve Months 2015 2014 % Change 2015 2014 % Change Revenue $1,680 $1,768 (5)% $6,373 $6,591 (3%) Gross Margin (1) 476 432 10% 1,469 1,732 (15)% Gross Margin Rate 28.3% 24.4% 23.1% 26.3% Expenses (1) 338 397 (15)% 1,334 1,379 (3)% % of Revenue 20.1% 2
Slide 9: Q4 & Full-Year Revenue by Segment
9 Q4 & FULL-YEAR REVENUE BY SEGMENT Financial Services $861 $968 (11)% (5)% $3,319 $3,561 (7)% 1% Retail Solutions 528 526 — % 4 % 2,001 2,008 — % 5% Hospitality 189 172 10 % 12 % 686 659 4 % 7% Emerging Industries 102 102 — % 6 % 367 363 1 % 9% Total Revenue $1,680 $1,768 (5)% — % $6,373 $6,591 (3%
Slide 10: Q4 & Full-Year Operating Income by Segment
10 Q4 & FULL-YEAR OPERATING INCOME BY SEGMENT For the Periods Ended December 31 Three Months Twelve Months 2015 2014 %Change % Change Constant Currency 2015 2014 %Change % Change Constant Currency Financial Services $155 $159 (3%) 8% $518 $543 (5%) 5% % of Financial Services Revenue 18.0% 16.4% 15.6
Slide 11: Financial Services Q4 2015 Update
11 FINANCIAL SERVICES Q4 2015 Update • Revenue down 11% as reported and down 5% CC; and up 1% CC excluding BRIC countries • Operating income down 3% as reported and up 8% CC due to a favorable mix of revenue and expense management • Transformation initiatives, improved mix, and software growth drivi
Slide 12: Retail Solutions Q4 2015 Update
12 RETAIL SOLUTIONS Q4 2015 Update • Revenue flat as reported and up 4% CC; CC growth in the Americas and Europe • Operating income up 17% as reported and up 26% CC due to higher revenue and expense management • Retail ONE omni-commerce platform gaining traction and mindshare after successful Nation
Slide 13: Hospitality Q4 2015 Update
13 HOSPITALITY Q4 2015 Update • Revenue up 10% as reported and up 12% CC growth due to higher software-related revenue • Operating income up 38% as reported and CC due to higher software-related revenue including cloud and professional services revenue • Driving improved results through sales transf
Slide 14: Emerging Industries Q4 2015 Update
14 EMERGING INDUSTRIES Q4 2015 Update • Revenue flat as reported and up 6% CC; CC growth driven by Telecom & Technology revenue Telecom & Technology ▪ Revenue growth due to improved Services performance Travel ▪ Redesigning check-in experiences around the world - 45 million mobile airline boarding p
Slide 15: Q4 Supplemental Revenue Information
15 Q4 SUPPLEMENTAL REVENUE INFORMATION For the Periods Ended December 31 Three Months Twelve Months 2015 2014 % Change % Change (Constant Currency) 2015 2014 % Change % Change (Constant Currency) Cloud $134 $129 4% 5% $536 $492 9% 10% Software License and Software Maintenance 176 189 (7%) (3%) 651 6
Slide 16: Free Cash Flow
16 FREE CASH FLOW Q4 2015 Q4 2014 FY 2015 FY 2014 Cash Provided by Operating Activities $265 $289 $681 $524 Net capital expenditures (65) (61) (229) (258) Cash used in Discontinued Operations (16) (29) (43) (1) Pension discretionary contributions and settlements — 30 — 48 Free Cash Flow $184 $229 $4
Slide 17: Net Debt & EBITDA Metrics
17 NET DEBT & EBITDA METRICS Q4 2014 Q3 2015 Q4 2015 Debt $3,618 $3,212 $3,252 Cash 511 303 328 Net Debt $3,107 $2,909 $2,924 Adjusted EBITDA $1,000 $1,013 (1) $1,033 Net Debt / Adjusted EBITDA 3.1x 2.9x 2.8x $ in millions, except metrics(1) Adjusted EBITDA for the trailing twelve-month period.
Slide 18: FY 2016 Guidance
18 2016 Guidance 2015 Revenue $6,100 - $6,200 $6,373 Diluted EPS (GAAP) $2.07 - $2.17 ($0.94) Non-GAAP Diluted EPS $2.72 - $2.82 $2.78 Free Cash Flow $425 - $475 $409 FY 2016 GUIDANCE $ in millions, except per share amounts Reconciliation of 2015 to 2016 Guidance Revenue Non-GAAPDiluted EPS 2015 $6,
Slide 19: Q1 2016 Guidance
19 Q1 2016 GUIDANCE Q1 2016e (1) Q1 2015 Revenue $1,440 - $1,450 $1,476 Diluted EPS (GAAP) $0.10 - $0.15 $0.23 Non-GAAP Diluted EPS (2) $0.30 - $0.35 $0.43 $ millions, except per share amounts (1) For Q1 2015, we expect unfavorable foreign currency impacts of approximately $45 million in revenue and
Slide 20: 2015 Year in Review
20 2015 YEAR IN REVIEW 2015 more challenging but achieved key metrics, including significantly higher free cash flow Leadership Position in Omni-Channel Solutions Services and Sales Transformation positively impacting Customer Satisfaction Market Consolidation creates Opportunity
Slide 21: Supplementary Non-GAAP Materials
SUPPLEMENTARY NON-GAAP MATERIALS
Slide 22: Non-GAAP Measures
22 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 23: Non-GAAP Measures: Adjusted EBITDA
23 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 24: GAAP to Non-GAAP Reconciliation: Operating Income and Adjusted EBITDA
24 Income from Operations (GAAP) to Non-Pension Operating Income (non-GAAP) and Adjusted EBITDA (non-GAAP) in millions FY 2014 Q3 2015 LTM FY 2015 Income (Loss) from Operations (GAAP) $353 $32 $135 Pension expense 152 581 464 Restructuring Plan 160 69 74 Acquisition-Related Amortization of Intangibl
Slide 25: GAAP to Non-GAAP Reconciliation Q4 2015
25 in millions (except per share amounts) Q4 QTD 2015 GAAP Restructuring plan Acquisition- related amortization of intangibles Acquisition- related costs Reserve related to subcontract in MEA Loss on pending sale of IPS business Pension (expense) benefit Q4 QTD 2015 non-GAAP Product revenue $716 $—
Slide 26: GAAP to Non-GAAP Reconciliation Q4 2015 EPS
26 in millions (except per share amounts) Q4 QTD 2015 GAAP Q4 QTD 2015 non-GAAP Income (loss) from continuing operations attributable to NCR common stockholders: Income (loss) from continuing operations (attributable to NCR) $48 $157 Dividends on convertible preferred shares (4) — Income (loss) from
Slide 27: GAAP to Non-GAAP Reconciliation FY 2015
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 (expense) benefit FY 2015 non- GAAP
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) $479 Dividends on convertible preferred shares (4) — Income (loss) from cont
Slide 29: GAAP to Non-GAAP Reconciliation Q4 2014
29 in millions (except per share amounts) Q4 QTD 2014 GAAP Restructuring plan Acquisition- related amortization of intangibles Acquisition- related costs Acquisition- related purchase price adjustments OFAC and FCPA Investigations Pension (expense) benefit Q4 QTD 2014 non-GAAP Product revenue $815 —
Slide 30: GAAP to Non-GAAP Reconciliation FY 2014
30 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 31: Free Cash Flow Reconciliation
31 FREE CASH FLOW RECONCILIATION FY 2016e Cash Provided by Operating Activities $675 - $725 Net capital expenditures (220) Cash Used in Discontinued Operations (30) Pension discretionary contributions and settlements — Free Cash Flow $425 - $475 $ millions
Slide 32: GAAP to Non-GAAP Reconciliation: 2016 Guidance EPS
32 GAAP TO NON-GAAP RECONCILIATION FY 2016e Q1 2016e Diluted EPS (GAAP) (1) $2.07 - $2.17 $0.10 - $0.15 Restructuring Plan 0.10 0.03 Acquisition-Related Amortization of Intangibles 0.50 0.15 Acquisition-Related Costs 0.05 0.02 Non-GAAP Diluted EPS $2.72 - $2.82 $0.30 - $0.35 Diluted Earnings per Sha
Slide 33: Revenue Growth to Constant Currency by Segment
33 GAAP TO NON-GAAP RECONCILIATION Revenue Growth % (GAAP) to Revenue Growth % on a Constant Currency Basis (non-GAAP) Q4 2015 QTD Q4 2015 YTD Revenue Growth % (GAAP) Favorable (unfavorable) FX impact Constant Currency Revenue Growth % (non-GAAP) Revenue Growth % (GAAP) Favorable (unfavorable) FX im
Slide 34: Revenue Growth to Constant Currency by Revenue Type
34 GAAP TO NON-GAAP RECONCILIATION Revenue Growth % (GAAP) to Revenue Growth % on a Constant Currency Basis (non-GAAP) Q4 2015 QTD Q4 2015 YTD Revenue Growth % (GAAP) Favorable (unfavorable) FX impact Constant Currency Revenue Growth % (non-GAAP) Revenue Growth % (GAAP) Favorable (unfavorable) FX im
Slide 35: Operating Income Growth to Constant Currency
35 GAAP TO NON-GAAP RECONCILIATION Operating Income Growth % (GAAP) to Operating Income Growth % on a Constant Currency Basis (non-GAAP) Q4 2015 QTD Q4 2015 YTD Operating Income Growth % Reported Favorable (unfavorable) FX impact Constant Currency Operating Income Growth % (non-GAAP) Operating Incom
Slide 36: Operating Income Growth bps to Constant Currency
36 GAAP TO NON-GAAP RECONCILIATION Operating Income Growth bps (GAAP) to Operating Income Growth bps on a Constant Currency Basis (non-GAAP) Q4 2015 QTD Operating Income bps Growth Reported Favorable (unfavorable) FX impact Constant Currency Operating Income bps Growth (non- GAAP) Financial Services
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