Ncr Voyix Corporation · NYSE:VYX
Ncr Voyix — NCR — Q2 2017 Earnings Presentation
40 slides from Ncr Voyix's earnings presentation, Jul 20, 2017
Slide 1: Q2 2017 Earnings Conference Call
1 July 20, 2017 BILL NUTI, CHAIRMAN & CEO MARK BENJAMIN, PRESIDENT & COO BOB FISHMAN, CFO Q2 2017 EARNINGS CONFERENCE CALL
Slide 2: Forward-Looking Statements
2 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 or current fact, a
Slide 3: Overview
3 OVERVIEW Q2 Results IN LINE WITH EXPECTATIONS Diversified REVENUE GROWTH Continued CLOUD growth of 9% with Net ACV up 13% Margin RATE EXPANSION driven by strength in Services 2017 Revenue, EPS, and Free Cash Flow GUIDANCE REAFFIRMED
Slide 4: Financial Results
4 Non-GAAP gross margin rate up 150 bps CC Non-GAAP Diluted EPS up 13% CC; Non-GAAP operating margin rate expanded 90 bps CC to 13.5% FCF as expected due to higher working capital to support increased revenue in later quarters FX ~(10) bps FX ~($0.01) $1.62 billion 28.7% 30.1% Q2 2016 Q2 2016 Q2 201
Slide 5: Omni-Channel Market
5 OMNI-CHANNEL MARKET Omni Channel Software • NCR's Omni-Channel Platform Hub and Applications • Enables seamless consumer experiences across physical and digital channels • Solutions Include: Retail One, Customer Experience Platform (CxP), Aloha Enterprise, NCR Silver Channel Transformation • Enabl
Slide 6: Segment Results
6 Up 3% CC Up 4% CC Up 1% adjusted CC (1) (1) Adjusted CC revenue growth excludes ~$52 million of IPS revenue from Q2 2016. Down 220 bps CC Up 410 bps CC Up 70 bps CC (1) Hardware revenue drives higher margin attached Software and Services revenue and future recurring revenue 51.5% 49.1% 21.6% 25.3%
Slide 7: Software Q2 2017 Update
7 Q2 2017 Q2 2016 % Change % ChangeConstant Currency Software License $77 $82 (6)% (6)% Unattached License 50 50 —% —% Software Maintenance 91 91 —% 1% Cloud 145 133 9% 9% Professional Services 151 146 3% 5% Software Revenue $464 $452 3% 3% Non-GAAP Gross Margin $228 $233 (2)% (1)% Non-GAAP Gross Ma
Slide 8: Services Q2 2017 Update
8 Q2 2017 Q2 2016 % Change % Change Constant Currency Services Revenue $588 $574 2% 4% Non-GAAP Gross Margin $149 $124 20% 24% Non-GAAP Gross Margin Rate 25.3% 21.6% +370 bps +410 bps Operating Income $75 $49 53% 64% Operating Income as a % of Revenue 12.8% 8.5% +430 bps +470 bps $ in millions SERVI
Slide 9: Hardware Q2 2017 Update
9 Q2 2017 Q2 2016 % Change % Change Constant Currency ATMs $227 $286 (21)% (20)% Self-Checkout (SCO) 96 70 37% 37% Point-of-Sale (POS) 213 180 18% 20% Interactive Printer Solutions (IPS) 5 58 (91)% (21)% (1) Hardware Revenue $541 $594 (9)% 1% (1) Non-GAAP Gross Margin $102 $108 (6)% (6)% Non-GAAP Gr
Slide 10: Free Cash Flow
10 QTD YTD Q2 2017 Q2 2016 Q2 2017 Q2 2016 FY 2017E FY 2016 Cash Provided by Operating Activities $95 $121 $138 $144 $805 - $830 $894 Total capital expenditures (1) (75) (58) (127) (98) (285) (227) Cash used in Discontinued Operations (2) (8) (5) (20) (20) (39) Free Cash Flow $18 $55 $6 $26 $500 - $
Slide 11: Net Debt and EBITDA Metrics
11 Q2 2017 Q1 2017 Q4 2016 Q2 2016 Debt $3,282 $3,328 $3,051 $3,457 Cash (377) (401) (498) (332) Net Debt $2,905 $2,927 $2,553 $3,125 Adjusted EBITDA (1) $1,117 $1,095 $1,061 $1,020 Net Debt / Adjusted EBITDA 2.6x 2.7x 2.4x 3.1x $ in millions, except metrics(1) Adjusted EBITDA for the trailing twelv
Slide 12: 2017 Guidance
12 2017 Guidance 2017 CC GrowthRates 2016 Revenue (1) $6,630 - $6,750 4% - 6% $6,543 GAAP Diluted EPS (2) $2.20 - $2.32 22% - 29% $1.80 Non-GAAP Diluted EPS (1)(3) $3.32 - $3.42 10% - 13% $3.02 2017 Guidance 2017 ConversionRate 2016 Free Cash Flow $500 - $525 95% - 100% $628 (1) The 2017 revenue gui
Slide 13: FY 2017 Segment Revenue Guidance
13 Segment 2017E CC Growth Rates(1) FY 2017 Guidance FY 2016 Software 6% - 7% $1,945 - $1,965 $1,841 Cloud Revenue 6% - 8% $590 - $600 $556 Services 2% - 4% $2,335 - $2,375 2,306 Hardware (2) 3% - 6% $2,350 - $2,410 2,396 Total (1) (2) 4% - 6% $6,630 - $6,750 $6,543 $ in millions (1) The 2017 revenu
Slide 14: Q3 2017 Guidance
14 Q3 2017E Q3 2016 CC GrowthRates Revenue (1) $1,660 - $1,700 $1,677 0% - 2% GAAP Diluted EPS $0.65 - $0.72 $0.69 (6)% - 4% Non-GAAP Diluted EPS (1) (2) $0.88 - $0.93 $0.87 4% - 9% $ millions, except per share amounts (1) The Q3 2017 revenue guidance and growth rates include an expected foreign cur
Slide 15: Revenue and EPS Trending
15 Q3 YTD Fourth Quarter $ % of Total $ % of Total Revenue (1) 2017 Guidance (mid-point) $4,756 71% $1,934 29% 2016 Results $4,599 72% $1,794 28% 3 year average $4,533 73% $1,684 27% Diluted EPS (non-GAAP) 2017 Guidance (mid-point) $2.27 67% $1.11 33% 2016 Results $1.97 65% $1.07 35% 3 year average
Slide 16: Looking Forward
16 LOOKING FORWARD Q2 results as expected and remain confident for full year NCR's solution offerings aligned with major market trends and customer demands Backlog and key metrics remain strong Software growth combined with our business transformation program is the key to margin expansion Omni-Chan
Slide 17: Supplementary Materials
17 SUPPLEMENTARY MATERIALS
Slide 18: Q2 2017 GAAP Results
18 Q2 2017 Q2 2016 As Reported Revenue $1,593 $1,620 (2)% Gross Margin 463 446 4% Gross Margin Rate 29.1% 27.5% Operating Expenses 285 283 1% % of Revenue 17.9% 17.5% Operating Income 178 163 9% % of Revenue 11.2% 10.1% Interest and other expense (48) (58) (17)% Income Tax Expense 33 31 6% Income Ta
Slide 19: Q2 2017 Operational Results
19 Q2 2017 Q2 2016 As Reported Constant Currency Revenue $1,593 $1,620 (2)% 3% (1) Gross Margin (non-GAAP) 479 465 3% 5% Gross Margin Rate (non-GAAP) 30.1% 28.7% +140 bps +150 bps Operating Expenses (non-GAAP) 264 258 2% 3% % of Revenue 16.6% 15.9% Operating Income (non-GAAP) 215 207 4% 6% % of Reve
Slide 20: Non-GAAP Measures
20 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 information regarding NC
Slide 21: Constant Currency, IPS Divestiture and Adjusted Constant Currency
21 Constant Currency, IPS Divestiture and Adjusted 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 mo
Slide 22: Net Income to Adjusted EBITDA Reconciliation
22 Net Income from Continuing Operations Attributable to NCR (GAAP) to Adjusted EBITDA (non-GAAP) in millions Q2 2017 LTM Q1 2017 LTM Q4 2016 LTM Q2 2016 LTM Net Income from Continuing Operations Attributable to NCR (GAAP) $329 $308 $283 $258 Pension Mark-to-Market Adjustments 85 85 85 30 Transforma
Slide 23: Q2 QTD 2017 GAAP to Non-GAAP Reconciliation
23 in millions (except per share amounts) Q2 QTD 2017 GAAP Restructuring / Transformation Costs Acquisition- related amortization of intangibles Acquisition- related costs Q2 QTD 2017 non-GAAP Product revenue $618 $— $— $— $618 Service revenue 975 — — — 975 Total revenue 1,593 — — — 1,593 Cost of pr
Slide 24: Q2 QTD 2017 Diluted EPS Reconciliation
24 in millions (except per share amounts) Q2 QTD 2017 GAAP Q2 QTD 2017 non-GAAP Income (loss) from continuing operations attributable to NCR common stockholders: Income from continuing operations (attributable to NCR) $97 $122 (Loss) income from continuing operations attributable to NCR common stock
Slide 25: Q2 QTD 2016 GAAP to Non-GAAP Reconciliation
25 in millions (except per share amounts) Q2 QTD 2016 GAAP Restructuring / Transformation Costs Acquisition- related amortization of intangibles Acquisition- related costs Divestiture and Liquidation Losses Q2 QTD 2016 non-GAAP Product revenue $676 $— $— $— $— $676 Service revenue 944 — — — — 944 To
Slide 26: Q2 QTD 2016 Diluted EPS Reconciliation
26 in millions (except per share amounts) Q2 QTD 2016 GAAP Q2 QTD 2016 non-GAAP Income from continuing operations attributable to NCR common stockholders: Income from continuing operations (attributable to NCR) $76 $111 Income from continuing operations attributable to NCR common stockholders $76 $1
Slide 27: Q2 YTD 2017 GAAP to Non-GAAP Reconciliation
27 in millions (except per share amounts) Q2 YTD 2017 GAAP Restructuring / Transformation Costs Acquisition- related amortization of intangibles Acquisition- related costs Q2 YTD 2017 non-GAAP Product revenue $1,172 $— $— $— $1,172 Service revenue 1,899 — — — 1,899 Total revenue 3,071 — — — 3,071 Co
Slide 28: Q2 YTD 2017 Diluted EPS Reconciliation
28 in millions (except per share amounts) Q2 YTD 2017 GAAP Q2 YTD 2017 non-GAAP Income (loss) from continuing operations attributable to NCR common stockholders: Income from continuing operations (attributable to NCR) $154 $209 Dividends on convertible preferred shares (24) — Deemed dividend on modi
Slide 29: Q2 YTD 2016 GAAP to Non-GAAP Reconciliation
29 in millions (except per share amounts) Q2 YTD 2016 GAAP Restructuring / Transformation Costs Acquisition- related amortization of intangibles Acquisition- related costs Divestiture and Liquidation Losses Q2 YTD 2016 non-GAAP Product revenue $1,224 $— $— $— $— $1,224 Service revenue 1,840 — — — —
Slide 30: Q2 YTD 2016 Diluted EPS Reconciliation
30 in millions (except per share amounts) Q2 YTD 2016 GAAP Q2 YTD 2016 non-GAAP Income from continuing operations attributable to NCR common stockholders: Income from continuing operations (attributable to NCR) $108 $172 Dividends on convertible preferred shares (24) — Income from continuing operati
Slide 31: Q3 QTD 2016 GAAP to Non-GAAP Reconciliation
31 in millions (except per share amounts) Q3 QTD 2016 GAAP Restructuring / Transformation Costs Acquisition- related amortization of intangibles Acquisition- related costs Q3 QTD 2016 non-GAAP Product revenue $708 $— $— $— $708 Service revenue 969 — — — 969 Total revenue 1,677 — — — 1,677 Cost of pr
Slide 32: FY 2016 GAAP to Non-GAAP Reconciliation
32 in millions (except per share amounts) FY 2016 GAAP Restructuring / Transformation Costs Acquisition- related amortization of intangibles Acquisition- related costs Divestiture and Liquidations Losses Pension mark- to-market adjustments FY 2016 non-GAAP Product revenue $2,737 $— $— $— $— $— $2,73
Slide 33: FY 2016 Diluted EPS Reconciliation
33 in millions (except per share amounts) FY 2016 GAAP FY 2016non-GAAP Income from continuing operations attributable to NCR common stockholders: Income from continuing operations (attributable to NCR) $283 $475 Income from continuing operations attributable to NCR common stockholders $283 $475 Weig
Slide 34: Revenue Growth to Adjusted Constant Currency Growth
34 Revenue Growth % (GAAP) to Revenue Growth Adjusted Constant Currency % (non-GAAP) Q2 2017 QTD Revenue Growth % (GAAP) Favorable (unfavorable) FX impact Divestiture impact Revenue Growth Adjusted Constant Currency % (non- GAAP) Software License (6)% —% —% (6)% Software Maintenance —% (1)% —% 1% Cl
Slide 35: Gross Margin Growth to Constant Currency Basis
35 Gross Margin Growth % (GAAP) to Gross Margin Growth % on a Constant Currency Basis (non-GAAP) Q2 2017 QTD Gross Margin Growth % Reported Favorable (unfavorable) FX impact Constant Currency Gross Margin Growth % (non-GAAP) Software (2)% (1)% (1)% Services 20% (4)% 24% Hardware (6)% —% (6)% Total G
Slide 36: Operating Income Growth to Constant Currency Basis
36 Operating Income Growth % (GAAP) to Operating Income Growth % on a Constant Currency Basis (non-GAAP) Q2 2017 QTD Operating Income Growth % Reported Favorable (unfavorable) FX impact Constant Currency Operating Income Growth % (non-GAAP) Software (11)% (1)% (10)% Services 53% (11)% 64% Hardware (
Slide 37: Gross Margin bps Growth to Constant Currency
37 GAAP TO NON-GAAP RECONCILIATION Gross Margin Growth bps (GAAP) to Gross Margin Growth bps on a Constant Currency Basis (non-GAAP) Q2 2017 QTD Gross Margin bps Growth Reported Favorable (unfavorable) FX impact Constant Currency Gross Margin bps Growth (non-GAAP) Software -240 bps -20 bps -220 bps
Slide 38: Operating Income bps Growth to Constant Currency
38 Operating Income Growth bps (GAAP) to Operating Income Growth bps on a Constant Currency Basis (non-GAAP) Q2 2017 QTD Operating Income bps Growth Reported Favorable (unfavorable) FX impact Constant Currency Operating Income bps Growth (non-GAAP) Software -430 bps -30 bps -400 bps Services +430 bp
Slide 39: Diluted EPS GAAP to Non-GAAP: 2017 Guidance
39 GAAP TO NON-GAAP RECONCILIATION Diluted Earnings per Share (GAAP) to Diluted Earnings per Share (non-GAAP) 2017 Guidance Q3 2017E Diluted EPS (GAAP) (1) $2.20 - $2.32 $0.65 - $0.72 Transformation costs 0.14 - 0.17 0.02 - 0.05 Acquisition-Related Amortization of Intangibles 0.49 0.13 Acquisition-R
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