Slide 1: Q1 2014 Earnings Conference Call
Q1 2014 EARNINGS CONFERENCE CALL BILL NUTI, CHAIRMAN AND CEO JOHN BRUNO, EVP BOB FISHMAN, CFO April 29, 2014
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 within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that describe or relate to NCR’s future plans, goals, intentions,
Slide 3: Q1 2014 Financial Highlights
Q1 2014 FINANCIAL HIGHLIGHTS (1) Post AT&T Spin-off, excluding Teradata. (2) NPOI as a percentage of revenue. 3 REVENUE Q1 2013 Q1 2014 $1.41 billion $1.52 billion Up 8% y/y; up 10% on constant currency basis Recurring revenue up 22%; 44% of total revenue OPERATIONAL GROSS MARGIN Q1 2013 Q1 2014 27.
Slide 4: Investing in Our Reinvention
INVESTING IN OUR REINVENTION Investing to deliver differentiated value and sustainable long-term growth Commitment to disruptive innovation/R&D and delivering compelling value R&D as a % of revenue reaches an all-time high of 4.2%, up 15% y/y Strengthening Services Delivery and Sales organiz
Slide 5: Strong Software-Related Revenue Growth
STRONG SOFTWARE-RELATED REVENUE GROWTH Q1 2014 Q1 2013 $113 $33 Q1 • Q1 Software-related revenue up 45% • Q1 Professional Services revenue up 30% • Q1 SaaS revenue up 242% $135 $104 $273 $395 $136 $147 FY 2013 FY 2014e $1,775 – $1,825 FY 2012 $345 FY ($’s in Millions) ($’s in Millions) $466 $616 ~$7
Slide 6: Software-Related Revenue Positively Impacting Margins
43% 42% 41% 38% 36% 33% 45% 45% 45% 46% 43% 41% 12% 13% 14% 16% 21% 26% FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014e Software-Related Revenue Hardware Revenue Other Services Revenue (Hardware Maintenance, Transaction Services) ($ in Millions) $5,730 $6,750 – $6,850 SOFTWARE-RELATED REVENUE POSIT
Slide 7: Uniquely Positioned in Omni-Commerce Landscape
UNIQUELY POSITIONED IN OMNI-COMMERCE LANDSCAPE At the intersection of the world’s transactions We connect channel and payment options to provide convenience for consumers CREDIT/ DEBIT PROMOS CASH CHECK LOYALTY KIOSK MPOS TABLET MOBILE SOCIAL ONLINE INNOVATION: TECHNOLOGY CONSUMER BUSINESS MODEL 7
Slide 8: Transforming the Consumer Experience
TRANSFORMING THE CONSUMER EXPERIENCE 485 million transactions a day, around the world Transforming brick & mortar experiences Shaping digital experiences Travel Hospitality Stadium Sales Mobile Order & Pay Clientelling & Loyalty Digital Wallet at Pump Retail Interactive Teller Mobile Banking Financi
Slide 9: Mobile Boarding Passes Travel-in T&T Mobile Boarding Passes Bill Pay Security
Mobile Boarding Passes Travel-in T&T Mobile Boarding Passes Bill Pay Security Check-in Virtual Storefront Digital Signage Digital Signage Cash Management Loyalty Way Finding Queue Mgmt Digital Marketing Passenger Re-accommodation Merchandising & Retailing Global Leading Provider of
Slide 10: Financial Services Q1 2014 Update
Performance Highlights Financial Highlights Revenue $794M Operating Income $103M +11% y/y +81% y/y Strong orders driven by North America, small & mid-sized banks, Branch Transformation & SW Strong backlog, both in volume and mix Increased operating margin driven by favorable revenue mix & high
Slide 11: Update: Digital Insight Acquisition
UPDATE: DIGITAL INSIGHT ACQUISITION Creates one of the most powerful FinTech companies with the most comprehensive suite of retail banking solutions Uniquely positions NCR software within the FinTech industry with an end-to-end technology platform for seamless banking services across both physical
Slide 12: Retail Solutions Q1 2014 Update
Orders down mid-single digit y/y driven by North America; Strong orders in rest of world Backlog up significantly; Rollout of large orders pushing revenue to end of year & 2015 Q1 revenue growth as expected due to difficult comparison versus prior year Operating income decline due to unfavor
Slide 13: Hospitality Q1 2014 Update
Revenue growth across all theaters Operating income decline due to unfavorable revenue mix & investment in international expansion SW-related revenue up 2% SaaS revenue up 11% SaaS application sites up 20% y/y Financial Highlights Revenue $149M Operating Income $12M +14% y/y -43% y/y HOSPI
Slide 14: Emerging Industries Q1 2014 Update
Telecom & Technology Expanded service offerings by providing on-site maintenance and support for Unify customers Travel Continued focus on airport and airline innovation in emerging countries Shenzhen Baoan International Airport (China), Muscat International and Salalah airports (Oman), China
Slide 15: Q1 2014 Summary
Q1 2014 SUMMARY 8% revenue growth led by Financial Services, Hospitality and Emerging Industries; Retail Solutions’ revenue growth as expected due to difficult comparison versus prior year Branch transformation, mobile, SCO and omni-channel driving demand Recurring revenue growth % improved, i
Slide 16: Financial Performance & Guidance
FINANCIAL PERFORMANCE & GUIDANCE April 29, 2014
Slide 17: Q1 Operational Results
Revenue $1,518 $1,410 8%(1) / 10%(2) Operational Gross Margin 434 387 12% Operational Gross Margin Rate 28.6% 27.4% Expenses (non-GAAP) 279 258 8% % of Revenue 18.4% 18.3% NPOI 155 129(3) 20% % of Revenue 10.2% 9.1% Non-GAAP Diluted EPS(4) $0.50 $0.54 (7)% Q1 OPERATIONAL RESULTS 2014 2013 % Change (
Slide 18: Q1 GAAP Results
Revenue $1,518 $1,410 8% Gross Margin 416 369 13% Gross Margin Rate 27.4% 26.2% Expenses 308 284 8% % of Revenue 20.3% 20.1% Income from Operations 108 85(1) 27% % of Revenue 7.1% 6.0% GAAP Diluted EPS(2) $0.31 $0.37 (16%) Q1 GAAP RESULTS (1) Includes $13M curtailment benefit related to Q1 2013 amen
Slide 19: Q1 Revenue by Segment
Q1 REVENUE BY SEGMENT Financial Services Excluding Digital Insight* $ 794 718 $ 714 11% 1% 14% 4% Retail Solutions 490 489 - 1% Hospitality 149 131 14% 15% Emerging Industries 85 76 12% 12% Total Revenue Excluding Digital Insight* $ 1,518 1,442 $ 1,410 8% 2% 10% 4% 2014 2013 % Change % Change (Const
Slide 20: Q1 Operating Income by Segment
Q1 OPERATING INCOME BY SEGMENT Financial Services $ 103 $ 57 % of Financial Services Revenue 13.0% 8.0% Retail Solutions 36 41 % of Retail Solutions Revenue 7.3% 8.4% Hospitality 12 21 % of Hospitality Revenue 8.1% 16.0% Emerging Industries 4 10 % of Emerging Industries Revenue 4.7% 13.2% NPOI $ 155
Slide 21: Q1 Supplemental Revenue Information
Q1 SUPPLEMENTAL REVENUE INFORMATION SaaS $113 $33 242% Software License/Software Maintenance 147 136 8% Professional Services 135 104 30% Total Software-Related Revenue 395 273 45% Hardware 570 600 (5)% Other Services 553 537 3% Total Revenue $1,518 $1,410 8% 2014 2013 % Change $ millions For the Th
Slide 22: Free Cash Flow
FREE CASH FLOW Q1 2014 Q1 2013 FY 2014e FY 2013 Cash Provided by Operating Activities $31 $21 $595 - $625 $281 Net capital expenditures (66) (45) (250) – (260) (226) Cash Provided by (Used In) Discontinued Operations (16) 1 (45) – (55) (52) Pension discretionary contributions and settlements - - 20
Slide 23: Free Cash Flow Generation
FREE CASH FLOW GENERATION $ in 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 Adjusted FCF as a % of non-GAAP net income ~90% 80% $ millions, except metrics 23
Slide 24: Net Debt & EBITDA Metrics
NET DEBT & EBITDA METRICS $ in billions, except metrics 2013 Q1 2014 2014e Debt $3.4 $3.9 Cash 0.5 0.5 Net Debt $2.9 $3.4 $3.3 Adjusted EBITDA $0.9 $0.9 (1) $1.1 Net Debt / Adjusted EBITDA 3.2 3.7 ~3.0 (1) Adjusted EBITDA for the trailing twelve-month period. 24
Slide 25: 2014 Guidance
2014e 2013 Revenue $6,750 - $6,850(1) $6,123 Year-over-Year Revenue Growth 10% - 12% growth(1) 7% Income from Operations (GAAP)(2) $730 - $750 $666 Non-Pension Operating Income (NPOI) $900 - $920 $717 Adjusted EBITDA $1,085 – $1,105 $886 Diluted EPS (GAAP)(2) $2.36 - $2.46 $2.67 Non-GAAP Diluted EPS
Slide 26: 2014 Segment Revenue Guidance
2014 SEGMENT REVENUE GUIDANCE Line of Business Current 2014 Guidance Previous 2014 Guidance FY 2013 Financial Services Financial Services excluding Digital Insight 15-17% 4-5% 15-17% 4-5% $3,115 Retail 3-5% 8-10% $2,034 Hospitality 8-10% 12-15% $626 Emerging Industries 10-14% 10-14% $348 Total 10-12
Slide 27: Q2 2014 Guidance
Q2 2014 GUIDANCE Q2 2014e Q2 2013 Income from Operations (GAAP) $163 - $173 $139 Non-Pension Operating Income (Non-GAAP) $205 – $215 $182 Tax rate 29% 25% Other expense ~ $50 $29 $ millions 27
Slide 28: 2014 Goals
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 strategy Continue ste
Slide 29: Supplementary Non-GAAP Materials
SUPPLEMENTARY NON-GAAP MATERIALS
Slide 30: 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 31: Non-GAAP Measures: Adjusted EBITDA
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, including i
Slide 32: GAAP to Non-GAAP Reconciliation
GAAP TO NON-GAAP RECONCILIATION Q1 2014 LTM FY 2013 FY 2014e Q2 2014e Income from Operations (GAAP) $689 $666 $730 - $750 $163 – $173 Pension Expense (Benefit) (86) (78) 8 3 Acquisition-Related Amortization of Intangibles 81 65 121 30 Acquisition-Related Costs 44 46 33 7 Acquisition-Related Purchase
Slide 33: Q1 2014 GAAP to Non-GAAP Reconciliation
in millions (except per share amounts) Q1 2014 GAAP Acquisition- related amortization of intangibles Acquisition- related costs Acquisition- related purchase price adjustments OFAC and FCPA Investigations Pension (expense) benefit Q1 2014 non-GAAP Product revenue $634 - - - - - $634 Service revenue
Slide 34: GAAP to Non-GAAP Reconciliation Q1 2013
GAAP TO NON-GAAP RECONCIALIATION Q1 2013 QTD in millions (except per share amounts) Q1 2013 GAAP Acquisition- related amortization of intangibles Acquisition- related costs Acquisition- related purchase price adjustments OFAC and FCPA Investigations Pension (expense) benefit Q1 2013 non-GAAP Product
Slide 35: GAAP to Non-GAAP Reconciliation Q2 2013
GAAP TO NON-GAAP RECONCILIATION Q2 2013 QTD in millions (except per share amounts) Q2 2013 GAAP Acquisition- related amortization of intangibles Acquisition- related costs Acquisition- related purchase price adjustments OFAC and FCPA Investigations Pension (expense) benefit Q2 2013 non-GAAP Product
Slide 36: GAAP to Non-GAAP Reconciliation Q4 2013 YTD
GAAP TO NON-GAAP RECONCILIATION Q4 2013 YTD in millions (except per share amounts) FY 2013 GAAP Acquisition- related amortization of intangibles Acquisition- related costs Acquisition- related purchase price adjustments OFAC and FCPA Investigations Japan valuation reserve release Pension (expense) b
Slide 37: GAAP to Non-GAAP Reconciliation FY 2014e
GAAP TO NON-GAAP RECONCILIATION FY 2014e Diluted EPS (GAAP) $2.36 - $2.46 Pension Expense (Benefit) 0.03 Acquisition-Related Amortization of Intangibles 0.47 Acquisition-Related Costs 0.11 Acquisition-Related Purchase Price Adjustment 0.02 OFAC and FCPA Investigations(1) 0.01 Non-GAAP Diluted EPS $3
Slide 38: GAAP to Non-GAAP Reconciliations: Gross Margin
GAAP TO NON-GAAP RECONCILIATIONS FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 Gross Margin as a % of Revenue (GAAP) 22.0% 22.9% 18.0% 28.7% 28.4% Pension expense (benefit) (0.5)% 0.6% 6.8% (2.2)% (0.7)% Impairment of assets related to an equity investment 0.5% - - - - Acquisition-related purchase price a
Slide 39: GAAP to Non-GAAP Reconciliations: Constant Currency
GAAP TO NON-GAAP RECONCILIATIONS Revenue Growth % (GAAP) to Revenue Growth % on a Constant Currency Basis (non-GAAP) Q1 2014 Revenue Growth % (GAAP) 8% Unfavorable foreign currency fluctuation impact 2% Revenue Growth % on a Constant Currency Basis (non-GAAP) 10% 39
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