Ncr Voyix Corporation · NYSE:VYX
Ncr Voyix — NCR — Q2 2018 Earnings Presentation
40 slides from Ncr Voyix's earnings presentation, Jul 26, 2018
Slide 1: Q2 2018 Earnings Conference Call
Q2 2018 EARNINGS CONFERENCE CALL MICHAEL HAYFORD, PRESIDENT & CEO BOB FISHMAN, CFO July 26, 2018
Slide 2: Notes to Investors: Forward-Looking Statements
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: Early Observations
EARLY OBSERVATIONS VALUE of the NCR Brand Important CUSTOMER RELATIONSHIPS all over the world Well ESTABLISHED global sales distribution network Dedicated EMPLOYEES that enable NCR to succeed 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 shareholder value • Maintain focus on cost efficiencies • Reallocate cash investments to highest growth opportunities • Drive higher recurring
Slide 5: Q2 2018 Financial Results
Q2 2018 FINANCIAL RESULTS Non-GAAP Gross Revenue Margin Rate FX FX Benefit Benefit $17 million 30 bps $1.59 $1.54 29.9% 29.2% billion billion Q2 2017 Q2 2018 Q2 2017 Q2 2018 Revenue down 4% as reported and down 5% CC; Non-GAAP gross margin rate down 70 bps as Recurring revenue up 4%, 48% of total re
Slide 6: Q2 2018 Segment Results
Q2 2018 SEGMENT RESULTS Software Revenue Services Revenue Hardware Revenue Down Up 4% Up 1% $610 16% $588 million $541 $464 $470 million million $457 million million million Q2 2017 Q2 2018 Q2 2017 Q2 2018 Q2 2017 Q2 2018 Software Gross Margin Services Gross Margin Hardware Gross Margin Up 70 Down 4
Slide 7: Software Q2 2018 Update
SOFTWARE Q2 2018 Update % Change Q2 2018 Q2 2017 % Change Constant Currency Software License $68 $77 (12)% (13)% Attached License 23 27 (15)% (17)% Unattached License 45 50 (10)% (10)% Software Maintenance 93 91 2% 1% Cloud 155 145 7% 7% Professional Services 154 151 2% —% Software Revenue $470 $464
Slide 8: Services Q2 2018 Update
SERVICES Q2 2018 Update % Change Q2 2018 Q2 2017 % Change Constant Currency Services Revenue $610 $588 4% 3% Services Gross Margin $158 $148 7% 7% Services Gross Margin Rate 25.9% 25.2% +70 bps +100 bps Operating Income $77 $74 4% 7% Operating Income as a % of Revenue 12.6% 12.6% — bps +40 bps $ in
Slide 9: Hardware Q2 2018 Update
HARDWARE Q2 2018 Update % Change Q2 2018 Q2 2017 % Change Constant Currency ATMs $180 $227 (21)% (22)% Self-Checkout (SCO) 99 96 3% 3% Point-of-Sale (POS) 178 213 (16)% (18)% Interactive Printer Solutions (IPS) — 5 (100)% (100)% Hardware Revenue $457 $541 (16)% (17)% Hardware Gross Margin $68 $102 (
Slide 10: Free Cash Flow, Net Debt & EBITDA
FREE CASH FLOW, NET DEBT & EBITDA Free Cash Flow Q2 2018 Q2 2017 YTD 2018 YTD 2017 Cash Provided by Operating Activities $119 $95 $95 $134 Total capital expenditures (1) (85) (75) (156) (127) Cash used in Discontinued Operations (7) (2) (11) (5) Free Cash Flow $27 $18 ($72) $2 $ in millions (1) Capi
Slide 11: 2018 Guidance
2018 GUIDANCE Previous FY 2018 Guidance Current FY 2018 Guidance Revenue Growth 0% - 3% (1)% - (3)% GAAP Diluted EPS (1) $2.08 - $2.48 $0.07- $0.65 Non-GAAP Diluted EPS $3.30 - $3.45 $2.55- $2.75 $300 - $350 million Free Cash Flow ~90% Conversion Rate ~ 80 - 90% Conversion Rate (1) The current year
Slide 12: Looking Forward
LOOKING FORWARD Accelerate growth; Primarily recurring revenue Improve the quality and delivery of our products and services Focus on customer satisfaction Act with a sense of urgency Drive free cash flow and invest in projects that generate the highest long term return on capital 12
Slide 13: Supplementary Materials
SUPPLEMENTARY MATERIALS 13
Slide 14: Q2 2018 GAAP Results
Q2 2018 GAAP RESULTS % Change As Q2 2018 Q2 2017 Reported Revenue $1,537 $1,593 (4)% Gross Margin 403 461 (13)% Gross Margin Rate 26.2% 28.9% Operating Expenses 509 286 78% % of Revenue 33.1% 18.0% Operating (Loss) Income (1) (106) 175 (161)% % of Revenue (6.9)% 11.0% Interest and other expense (50)
Slide 15: Q2 2018 Operational Results
Q2 2018 OPERATIONAL RESULTS % Change % Change As Constant Q2 2018 Q2 2017 Reported Currency Revenue $1,537 $1,593 (4)% (5)% (1) Gross Margin (non-GAAP) 449 477 (6)% (8)% Gross Margin Rate (non-GAAP) 29.2% 29.9% (70) bps (100) bps Operating Expenses (non-GAAP) 284 265 7% 6% % of Revenue 18.5% 16.6% O
Slide 16: 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 17: Non-GAAP Measures: Constant Currency
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 18: Net Income to Adjusted EBITDA
GAAP TO NON-GAAP RECONCILIATION Net Income from Continuing Operations (GAAP) to Adjusted EBITDA (non-GAAP) Q2 2018 Q2 2017 in millions LTM LTM Net Income from Continuing Operations (GAAP) ($2) $335 Pension Mark-to-Market Adjustments 28 85 Transformation/Restructuring Costs 90 32 Acquisition-Related
Slide 19: Q2 2018 QTD GAAP to Non-GAAP
GAAP TO NON-GAAP RECONCILIATION Q2 2018 QTD Transformation Acquisition- Q2 QTD Asset Acquisition- Impact of and related Q2 QTD 2018 2018 Impairment related U.S. Tax Restructuring amortization of non-GAAP GAAP charges costs Reform in millions (except per share amounts) costs intangibles Product reven
Slide 20: Q2 2018 QTD EPS Reconciliation
GAAP TO NON-GAAP RECONCILIATION Q2 2018 QTD Q2 QTD 2018 Q2 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) $(143) $97 Dividends on convertible preferred sh
Slide 21: Q2 2017 QTD GAAP to Non-GAAP
GAAP TO NON-GAAP RECONCILIATION Q2 2017 QTD Acquisition- Acquisition- Q2 QTD 2017 Transformation related Q2 QTD 2017 related Costs amortization of GAAP costs non-GAAP intangibles in millions (except per share amounts) Product revenue $618 $— $— $— $618 Service revenue 975 — — — 975 Total revenue 1,5
Slide 22: Q2 2017 QTD EPS Reconciliation
GAAP TO NON-GAAP RECONCILIATION Q2 2017 QTD Q2 QTD 2017 Q2 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) $97 $122 (Loss) Income from continuing operation
Slide 23: Q2 2018 YTD GAAP to Non-GAAP
GAAP TO NON-GAAP RECONCILIATION Q2 2018 YTD Transformation Acquisition- Asset Acquisition- Impact of Q2 2018 YTD and related Q2 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 24: Q2 2018 YTD EPS Reconciliation
GAAP TO NON-GAAP RECONCILIATION Q2 2018 YTD Q2 2018 YTD Q2 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) $(88) $182 Dividends on convertible preferred sh
Slide 25: Q2 2017 YTD GAAP to Non-GAAP
GAAP TO NON-GAAP RECONCILIATION Q2 2017 YTD Acquisition- Acquisition- Q2 2017 YTD Transformation related Q2 2017 YTD related costs amortization GAAP costs non-GAAP in millions (except per share amounts) of intangibles Product revenue $1,172 $— $— $— $1,172 Service revenue 1,899 — — — 1,899 Total rev
Slide 26: Q2 2017 YTD EPS Reconciliation
GAAP TO NON-GAAP RECONCILIATION Q2 2017 YTD Q2 2017 YTD Q2 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) $154 $209 Dividends on convertible preferred sha
Slide 27: 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 28: 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 29: Q2 2018 Gross Margin Reconciliation
GAAP TO NON-GAAP RECONCILIATION Q2 2018 QTD Gross Margin and Gross Margin Rate (non-GAAP) to Gross Margin and Gross Margin Rate (GAAP) Q2 2018 QTD Gross Margin Gross Margin Rate % Software 223 47.4% Services 158 25.9% Hardware 68 14.9% Total Gross Margin (non-GAAP) 449 29.2% Less: Transformation Cos
Slide 30: Q2 2017 Gross Margin Reconciliation
GAAP TO NON-GAAP RECONCILIATION Q2 2017 QTD Gross Margin and Gross Margin Rate (non-GAAP) to Gross Margin and Gross Margin Rate (GAAP) Q2 2017 QTD Gross Margin Gross Margin Rate % Software 227 48.9% Services 148 25.2% Hardware 102 18.9% Total Gross Margin (non-GAAP) 477 29.9% Less: Transformation Co
Slide 31: Q2 2018 Operating Income Reconciliation
GAAP TO NON-GAAP RECONCILIATION Q2 2018 QTD Operating Income and Operating Income Rate (non-GAAP) to Operating Income and Operating Income Rate (GAAP) Q2 2018 QTD Operating Operating Income Income Rate Software 115 24.5% Services 77 12.6% Hardware (27) (5.9)% Total Operating Income (non-GAAP) 165 10
Slide 32: Q2 2017 Operating Income Reconciliation
GAAP TO NON-GAAP RECONCILIATION Q2 2017 QTD Operating Income and Operating Income Rate (non-GAAP) to Operating Income and Operating Income Rate (GAAP) Q2 2017 QTD Operating Operating Income Income Rate Software 127 27.4% Services 74 12.6% Hardware 11 2.0% Total Operating Income (non-GAAP) 212 13.3%
Slide 33: Revenue Growth to Constant Currency
GAAP TO NON-GAAP RECONCILIATION Revenue Growth % (GAAP) to Revenue Growth Constant Currency % (non-GAAP) Q2 2018 QTD Revenue Growth Revenue Growth Favorable Constant % (GAAP) (unfavorable) FX Currency % impact (non-GAAP) Software License (12)% 1% (13)% Attached License (15)% 2% (17)% Unattached Lice
Slide 34: 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) Q2 2018 QTD Constant Gross Margin Favorable Currency Gross Growth % (unfavorable) FX Margin Growth % Reported impact (non-GAAP) Software (2)% 1% (3)% Services 7% —% 7% Hardwa
Slide 35: 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) Q2 2018 QTD Constant Operating Income Favorable Currency Growth % (unfavorable) FX Operating Income Reported impact Growth % (non- GAAP) Software (9)% 1% (10)% Servic
Slide 36: 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) Q2 2018 QTD Constant Favorable Currency Gross Gross Margin bps (unfavorable) FX Margin bps Growth Reported impact Growth (non- GAAP) Software (150) bps — bps (150) bps Se
Slide 37: 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) Q2 2018 QTD Constant Operating Income Favorable Currency bps Growth (unfavorable) FX Operating Income Reported impact bps Growth (non- GAAP) Software (290) bps (1
Slide 38: 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) $0.07- $0.65 $2.08 - $2.48 Transformation & Restructuring costs 0.50 - 0.75 0.50 - 0.75 Asset impairment charges 1.16 — Acquisition-Related Amortization of Intangibles 0.42
Slide 39: Free Cash Flow 2018 Guidance
GAAP TO NON-GAAP RECONCILIATION Free Cash Flow 2018 Guidance Cash Provided by Operating Activities $690 - $720 Total capital expenditures (1) (330) - (350) Cash used in Discontinued Operations (40) Free Cash Flow $300 - $350 $ in millions (1) Total capital expenditures includes approximately $75 mil
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