Ncr Voyix Corporation · NYSE:VYX
Ncr Voyix — NCR — Q3 2018 Earnings Presentation
44 slides from Ncr Voyix's earnings presentation, Oct 30, 2018
Slide 1: Q3 2018 Earnings Conference Call
Q3 2018 EARNINGS CONFERENCE CALL MICHAEL HAYFORD, PRESIDENT & CEO OWEN SULLIVAN, COO ANDRE FERNANDEZ, EVP & CFO October 30, 2018
Slide 2: Notes to Investors
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 historical
Slide 3: Overview
OVERVIEW RECURRING REVENUE up 2% including Cloud revenue up 6% Services continued MARGIN EXPANSION Executing TARGETED M&A strategy ALLEVIATING supply chain constraints Addressing EXECUTION challenges Announcing program to drive $100m of SAVINGS 3
Slide 4: Top Priorities
TOP PRIORITIES Take CARE of our INNOVATE STREAMLINE Accelerate customers & bring high the GROWTH quality solutions business to market faster Create long-term stockholder value • Maintain focus on cost efficiencies • Reallocate capital to highest growth opportunities • Drive higher recurring revenue
Slide 5: Executing Targeted M&A Strategy
EXECUTING TARGETED M&A STRATEGY JETPAY ZIPSCENE Monetize Provides transactions behavioral via integrated analytics to POS and enable data payment monetization solution 5
Slide 6: Manufacturing Network Redesign Progress
MANUFACTURING NETWORK REDESIGN PROGRESS New centrally Contract Increasing Closed located manufacturing global manufacturing distribution production utilization plant in Beijing center to ramp rates and with two maximize optimizing additional supply chain supply chain facilities to logistics flow net
Slide 7: ATM Production Ramping
ATM PRODUCTION RAMPING Improving Strong Increased supply customer utilization demand chain constraints Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 E 7
Slide 8: Accelerated Customer Activation Teams
ACCELERATED CUSTOMER ACTIVATION TEAMS Coming together to take care of our customers INTERACTIVE TELLER CO-LOCATION CONSUMER SELF- ORDERING NCR OPTIC ACCOUNTABILITY NEXT-GENERATION RETAIL REFERENCABLE SELF-CHECKOUT CUSTOMERS RELEASE 6 8
Slide 9: Focus on Spend Optimization
FOCUS ON SPEND OPTIMIZATION Drive cost savings through operational efficiencies Drive Cost - Create efficiencies in corporate functions - Reduce spend in non-strategic areas Savings - Limit discretionary spend Generate at least $100 million in savings in 2019 Manufacturing Network Redesign Ongoing I
Slide 10: Q3 2018 Financial Results
Q3 2018 FINANCIAL RESULTS Non-GAAP Gross Revenue Margin Rate FX FX (10) ($32) million bps $1.66 $1.55 29.2% 27.4% billion billion Q3 2017 Q3 2018 Q3 2017 Q3 2018 Revenue down 7% as reported and down 5% CC; Non-GAAP gross margin rate down 180 bps as Recurring revenue up 2%, 48% of total revenue repor
Slide 11: Software
SOFTWARE Q3 2018 Update % Change Q3 2018 Q3 2017 % Change Constant Currency Software License $80 $79 1% 3% Attached License 26 32 (19)% (15)% Unattached License 54 47 15% 15% Software Maintenance 92 95 (3)% (2)% Cloud 158 149 6% 6% Professional Services 150 153 (2)% —% Software Revenue $480 $476 1%
Slide 12: Services
SERVICES Q3 2018 Update % Change Q3 2018 Q3 2017 % Change Constant Currency Services Revenue $616 $609 1% 4% Services Gross Margin $165 $159 4% 7% Services Gross Margin Rate 26.8% 26.1% +70 bps +90 bps Operating Income $90 $88 2% 6% Operating Income as a % of Revenue 14.6% 14.4% +20 bps +30 bps $ in
Slide 13: Hardware
HARDWARE Q3 2018 Update % Change Q3 2018 Q3 2017 % Change Constant Currency ATMs $237 $273 (13)% (10)% Self-Checkout (SCO) 60 79 (24)% (24)% Point-of-Sale (POS) 157 221 (29)% (28)% Interactive Printer Solutions (IPS) — 5 (100)% (100)% Hardware Revenue $454 $578 (21)% (20)% Hardware Gross Margin $32
Slide 14: Free Cash Flow, Net Debt & EBITDA
FREE CASH FLOW, NET DEBT & EBITDA Free Cash Flow Q3 2018 Q3 2017 YTD 2018 YTD 2017 Cash Provided by Operating Activities $68 $136 $163 $270 Total capital expenditures (78) (79) (234) (206) Cash used in Discontinued Operations (12) (9) (23) (14) Free Cash Flow ($22) $48 ($94) $50 $ in millions Net De
Slide 15: 2018 Guidance
2018 GUIDANCE Current FY 2018 Guidance Previous FY 2018 Guidance Revenue Growth (1)% - (3)% (1)% - (3)% GAAP Diluted EPS (1) $0.10- $0.68 $0.07 - $0.65 Non-GAAP Diluted EPS $2.55- $2.75 $2.55 - $2.75 Free Cash Flow (2) $250 - $300 million $300 - $350 million (1) GAAP Diluted EPS FY 2018 guidance has
Slide 16: Looking Forward
LOOKING FORWARD Revenue growth; Focus on recurring revenue Deliver on outstanding demand Mix shift to software and services Improve cost structure Drive cash flow generation 16
Slide 17: Supplementary Materials
SUPPLEMENTARY MATERIALS 17
Slide 18: Q3 2018 GAAP Results
Q3 2018 GAAP RESULTS % Change As Q3 2018 Q3 2017 Reported Revenue $1,550 $1,663 (7)% Gross Margin 410 472 (13)% Gross Margin Rate 26.5% 28.4% Operating Expenses 285 273 4% % of Revenue 18.4% 16.4% Operating (Loss) Income 125 199 (37)% % of Revenue 8.1% 12.0% Interest and other expense (53) (49) 8% I
Slide 19: Q3 2018 Operational Results
Q3 2018 OPERATIONAL RESULTS % Change % Change As Constant Q3 2018 Q3 2017 Reported Currency Revenue $1,550 $1,663 (7)% (5)%(1) Gross Margin (non-GAAP) 425 485 (12)% (10)% Gross Margin Rate (non-GAAP) 27.4% 29.2% (180) bps (170) bps Operating Expenses (non-GAAP) 264 251 5% 7% % of Revenue 17.0% 15.1%
Slide 20: Non-GAAP Measures
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 informati
Slide 21: Non-GAAP Measures
NON-GAAP MEASURES Constant Currency. NCR presents certain financial measures, such as period-over-period revenue growth, on a constant currency basis, which excludes the effects of foreign currency translation by translating prior period results at current period monthly average exchange rates. Due
Slide 22: Net Income to Adjusted EBITDA
GAAP TO NON-GAAP RECONCILIATION Net Income from Continuing Operations (GAAP) to Adjusted EBITDA (non-GAAP) Q3 2018 Q3 2017 in millions LTM LTM Net (Loss) Income from Continuing Operations (GAAP) ($34) $345 Pension Mark-to-Market Adjustments 28 85 Transformation/Restructuring Costs 101 29 Acquisition
Slide 23: Q3 2018 QTD GAAP to Non-GAAP
GAAP TO NON-GAAP RECONCILIATION Q3 2018 QTD Transformation Acquisition- Q3 QTD Impact of and related Q3 QTD 2018 2018 U.S. Tax Restructuring amortization of non-GAAP GAAP Reform in millions (except per share amounts) costs intangibles Product revenue $534 $— $— $— $534 Service revenue 1,016 — — — 1,
Slide 24: Q3 2018 QTD EPS Reconciliation
GAAP TO NON-GAAP RECONCILIATION Q3 2018 QTD Q3 QTD 2018 Q3 QTD 2018 GAAP non-GAAP in millions (except per share amounts) Income from continuing operations attributable to NCR common stockholders: Income from continuing operations (attributable to NCR) $85 $86 Income from continuing operations attrib
Slide 25: Q3 2017 QTD GAAP to Non-GAAP
GAAP TO NON-GAAP RECONCILIATION Q3 2017 QTD Acquisition- Acquisition- Q3 QTD 2017 Transformation related Q3 QTD 2017 related Costs amortization of GAAP costs non-GAAP intangibles in millions (except per share amounts) Product revenue $657 $— $— $— $657 Service revenue 1,006 — — — 1,006 Total revenue
Slide 26: Q3 2017 QTD EPS Reconciliation
GAAP TO NON-GAAP RECONCILIATION Q3 2017 QTD Q3 QTD 2017 Q3 QTD 2017 GAAP non-GAAP in millions (except per share amounts) Income from continuing operations attributable to NCR common stockholders: Income from continuing operations (attributable to NCR) $118 $143 Income from continuing operations attr
Slide 27: Q3 2018 YTD GAAP to Non-GAAP
GAAP TO NON-GAAP RECONCILIATION Q3 2018 YTD Transformation Acquisition- Asset Acquisition- Impact of Q3 2018 YTD and related Q3 2018 YTD Impairment related U.S. Tax Restructuring amortization of GAAP charges costs Reform non-GAAP in millions (except per share amounts) costs intangibles Product reven
Slide 28: Q3 2018 YTD EPS Reconciliation
GAAP TO NON-GAAP RECONCILIATION Q3 2018 YTD Q3 2018 YTD Q3 2018 YTD GAAP non-GAAP in millions (except per share amounts) Income from continuing operations attributable to NCR common stockholders: Income from continuing operations (attributable to NCR) $(3) $268 Dividends on convertible preferred sha
Slide 29: Q3 2017 YTD GAAP to Non-GAAP
GAAP TO NON-GAAP RECONCILIATION Q3 2017 YTD Acquisition- Acquisition- Q3 2017 YTD Transformation related Q3 2017 YTD related costs amortization GAAP costs non-GAAP in millions (except per share amounts) of intangibles Product revenue $1,829 $— $— $— $1,829 Service revenue 2,905 — — — 2,905 Total rev
Slide 30: Q3 2017 YTD EPS Reconciliation
GAAP TO NON-GAAP RECONCILIATION Q3 2017 YTD Q3 2017 YTD Q3 2017 YTD GAAP non-GAAP in millions (except per share amounts) Income from continuing operations attributable to NCR common stockholders: Income from continuing operations (attributable to NCR) $272 $352 Dividends on convertible preferred sha
Slide 31: FY 2017 GAAP to Non-GAAP
GAAP TO NON-GAAP RECONCILIATION FY 2017 Acquisition- Acquisition- Pension mark- FY 2017 Transformation related Impact of U.S. FY 2017 related to-market Costs amortization Tax Reform GAAP costs adjustments non-GAAP in millions (except per share amounts) of intangibles Product revenue $2,579 $— $— $—
Slide 32: FY 2017 EPS Reconciliation
GAAP TO NON-GAAP RECONCILIATION FY 2017 FY 2017 FY 2017 GAAP non-GAAP in millions (except per share amounts) Income from continuing operations attributable to NCR common stockholders: Income from continuing operations (attributable to NCR) $237 $494 Dividends on convertible preferred shares (47) — D
Slide 33: Q3 2018 QTD Gross Margin Reconciliation
GAAP TO NON-GAAP RECONCILIATION Q3 2018 QTD Gross Margin and Gross Margin Rate (non-GAAP) to Gross Margin and Gross Margin Rate (GAAP) Q3 2018 QTD Gross Margin Gross Margin Rate % Software 228 47.5% Services 165 26.8% Hardware 32 7.0% Total Gross Margin (non-GAAP) 425 27.4% Less: Transformation Cost
Slide 34: Q3 2017 QTD Gross Margin Reconciliation
GAAP TO NON-GAAP RECONCILIATION Q3 2017 QTD Gross Margin and Gross Margin Rate (non-GAAP) to Gross Margin and Gross Margin Rate (GAAP) Q3 2017 QTD Gross Margin Gross Margin Rate % Software 240 50.4% Services 159 26.1% Hardware 86 14.9% Total Gross Margin (non-GAAP) 485 29.2% Less: Transformation Cos
Slide 35: Q3 2018 QTD Operating Income Reconciliation
GAAP TO NON-GAAP RECONCILIATION Q3 2018 QTD Operating Income and Operating Income Rate (non-GAAP) to Operating Income and Operating Income Rate (GAAP) Q3 2018 QTD Operating Operating Income Income Rate Software 127 26.5% Services 90 14.6% Hardware (56) (12.3)% Total Operating Income (non-GAAP) 161 1
Slide 36: Q3 2017 QTD Operating Income Reconciliation
GAAP TO NON-GAAP RECONCILIATION Q3 2017 QTD Operating Income and Operating Income Rate (non-GAAP) to Operating Income and Operating Income Rate (GAAP) Q3 2017 QTD Operating Operating Income Income Rate Software 148 31.1% Services 88 14.4% Hardware (2) (0.3)% Total Operating Income (non-GAAP) 234 14.
Slide 37: Revenue Growth to Constant Currency
GAAP TO NON-GAAP RECONCILIATION Revenue Growth % (GAAP) to Revenue Growth Constant Currency % (non-GAAP) Q3 2018 QTD Revenue Growth Revenue Growth Favorable Constant % (GAAP) (unfavorable) FX Currency % impact (non-GAAP) Software License 1% (2)% 3% Attached License (19)% (4)% (15)% Unattached Licens
Slide 38: Gross Margin Growth % Constant Currency
GAAP TO NON-GAAP RECONCILIATION Gross Margin Growth % (GAAP) to Gross Margin Growth % on a Constant Currency Basis (non-GAAP) Q3 2018 QTD Constant Gross Margin Favorable Currency Gross Growth % (unfavorable) FX Margin Growth % Reported impact (non-GAAP) Software (5)% (1)% (4)% Services 4% (3)% 7% Ha
Slide 39: Operating Income Growth % Constant Currency
GAAP TO NON-GAAP RECONCILIATION Operating Income Growth % (GAAP) to Operating Income Growth % on a Constant Currency Basis (non-GAAP) Q3 2018 QTD Constant Operating Income Favorable Currency Growth % (unfavorable) FX Operating Income Reported impact Growth % (non- GAAP) Software (14)% (1)% (13)% Ser
Slide 40: Gross Margin Growth bps Constant Currency
GAAP TO NON-GAAP RECONCILIATION Gross Margin Growth bps (GAAP) to Gross Margin Growth bps on a Constant Currency Basis (non-GAAP) Q3 2018 QTD Constant Favorable Currency Gross Gross Margin bps (unfavorable) FX Margin bps Growth Reported impact Growth (non- GAAP) Software (290) bps (10) bps (280) bps
Slide 41: Operating Income Growth bps Constant Currency
GAAP TO NON-GAAP RECONCILIATION Operating Income Growth bps (GAAP) to Operating Income Growth bps on a Constant Currency Basis (non-GAAP) Q3 2018 QTD Constant Operating Income Favorable Currency bps Growth (unfavorable) FX Operating Income Reported impact bps Growth (non- GAAP) Software (460) bps 0
Slide 42: Diluted Earnings per Share Guidance
GAAP TO NON-GAAP RECONCILIATION Diluted Earnings per Share Current 2018 Prior 2018 Guidance Guidance Diluted EPS (GAAP) (1) (2) $0.10- $0.68 $0.07 - $0.65 Transformation & Restructuring costs 0.75 - 1.00 0.50 - 0.75 Asset impairment charges 1.16 1.16 Impact of U.S. Tax Reform (0.27) — Acquisition-Re
Slide 43: Free Cash Flow Guidance
GAAP TO NON-GAAP RECONCILIATION Free Cash Flow Current 2018 Guidance Prior 2018 Guidance Cash Provided by Operating Activities (1) $640 - $670 $690 - $720 Total capital expenditures (330) - (350) (330) - (350) Cash used in Discontinued Operations (40) (40) Free Cash Flow (1) $250 - $300 $300 - $350
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