Ncr Voyix Corporation · NYSE:VYX
Ncr Voyix — NCR — Q3 2017 Earnings Presentation
44 slides from Ncr Voyix's earnings presentation, Oct 19, 2017
Slide 1: Q3 2017 Earnings Conference Call
1 October 19, 2017 BILL NUTI, CHAIRMAN & CEO MARK BENJAMIN, PRESIDENT & COO BOB FISHMAN, CFO Q3 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,
Slide 3: Overview
3 Q3 earnings at HIGHER END and revenue at LOWER END of guidance range Continued CLOUD growth of 5% with Net ACV up 37% Operating Margin RATE EXPANSION driven by strength in Services Guidance LOWERED for full year due to softness in ATM market OVERVIEW
Slide 4: Financial Results
4 Non-GAAP gross margin rate down 10 bps; Non- GAAP operating margin rate expanded 40 bps Non-GAAP Diluted EPS up 7% Decrease in FCF due to higher working capital; Improvements expected in Q4 2017 FX 0 bps FX $0.00 $1.68 billion 29.3% 29.2% Q3 2016 Q3 2016Q3 2017 $0.93 Q3 2016 Q3 2017 $153 million Q
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 2% CC Up 3% CC Down 7% CC Down 70 bps CC Up 460 bps CC Down 540 bps CC51.1% 50.4% 21.8% 26.3% Q3 2016 Q3 2017 Q3 2016 Q3 2017 Software Gross Margin Services Gross Margin 19.9% 14.9% Q3 2016 Q3 2017 Hardware Gross Margin $468 million $476 million Q3 2016 Q3 2017 $591 million $609 million Q3 2017
Slide 7: Software
7 Q3 2017 Q3 2016 % Change % Change Constant Currency Software License $79 $90 (12)% (11)% Attached License 32 41 (22)% (23)% Unattached License 47 49 (4)% (4)% Software Maintenance 95 92 3% 3% Cloud 149 142 5% 5% Professional Services 153 144 6% 6% Software Revenue $476 $468 2% 2% Software Gross Ma
Slide 8: Services
8 Q3 2017 Q3 2016 % Change % Change Constant Currency Services Revenue $609 $591 3% 3% Services Gross Margin $160 $129 24% 25% Services Gross Margin Rate 26.3% 21.8% +450 bps +460 bps Operating Income $89 $56 59% 64% Operating Income as a % of Revenue 14.6% 9.5% +510 bps +530 bps $ in millions SERVI
Slide 9: Hardware
9 Q3 2017 Q3 2016 % Change % Change Constant Currency ATMs $273 $324 (16)% (17)% Self-Checkout (SCO) 79 104 (24)% (24)% Point-of-Sale (POS) 221 185 19% 18% Interactive Printer Solutions (IPS) 5 5 —% —% Hardware Revenue $578 $618 (6)% (7)% Hardware Gross Margin $86 $123 (30)% (32)% Hardware Gross Mar
Slide 10: Free Cash Flow
10 QTD YTD Q3 2017 Q3 2016 Q3 2017 Q3 2016 FY 2017E FY 2016 Cash Provided by Operating Activities $133 $225 $271 $369 $745 - $775 $894 Total capital expenditures (1) (79) (62) (206) (160) (285) (227) Cash used in Discontinued Operations (9) (10) (14) (30) (20) (39) Free Cash Flow $45 $153 $51 $179 $
Slide 11: Net Debt and EBITDA Metrics
11 Q3 2017 Q2 2017 Q1 2017 Q4 2016 Q3 2016 Debt $3,253 $3,282 $3,328 $3,051 $3,289 Cash (405) (377) (401) (498) (318) Net Debt $2,848 $2,905 $2,927 $2,553 $2,971 Adjusted EBITDA (1) $1,129 $1,111 $1,091 $1,057 $1,047 Net Debt / Adjusted EBITDA 2.5x 2.6x 2.7x 2.4x 2.8x $ in millions, except metrics(1
Slide 12: 2017 Guidance
12 2017 Guidance 2017 CCGrowth Rates 2017 Prior Guidance 2017 Prior CC Growth Rates 2016 Revenue (1) $6,475 - $6,525 1% $6,630 - $6,750 4% - 6% $6,543 GAAP Diluted EPS (2) $1.97 - $2.09 9% - 16% $2.20 - $2.32 22% - 29% $1.80 Non-GAAP Diluted EPS (1)(3) $3.10 - $3.20 1% - 4% $3.32 - $3.42 10% - 13% $
Slide 13: FY 2017 Segment Revenue Guidance
13 Segment 2017E CC Growth Rates(1) FY 2017 Current Guidance FY 2017 Prior Guidance FY 2016 Software 2% - 3% $1,885 - $1,905 $1,945 - $1,965 $1,841 Cloud Revenue ~ 6% ~ $590 $590 - $600 $556 Services 3% $2,360 - $2,370 $2,335 - $2,375 2,306 Hardware (2) (2%) - (3%) $2,220 - $2,250 $2,350 - $2,410 2,
Slide 14: Q4 2017 Guidance
14 Q4 2017E Q4 2016 CC GrowthRates Revenue (1) $1,740 - $1,790 $1,802 (6%) - (3%) GAAP Diluted EPS (2) $0.64 - $0.76 $0.43 49% - 77% Non-GAAP Diluted EPS (1) (3) $0.83 - $0.93 $1.07 (28%) - (19%) $ in millions, except per share amounts (1) The Q4 2017 revenue guidance and growth rates are expected t
Slide 15: Q4 2017 Segment Revenue Guidance
15 Segment Q4 2017Guidance Q4 2017 CC Growth Rates Q4 2016 Q4 2016 CC Growth Rates Software $493 - $513 (4%) - 0% $502 10% Services $606 - $616 (1%) - 1% $598 3% Hardware $631 - $661 (13%) - (8%) $702 30% Total $1,740 - $1,790 (6%) - (3%) $1,802 14% $ in millions • Hardware decrease in Q4 2017 inclu
Slide 16: YTD 2017 Segment Results
16 n Software 50.3% GM rate n Services 24.6% GM rate n Hardware 16.8% GM rate YTD 2017 Operating Income Mix Software 65% Services 24% Up 4% CC Up 4% CC Up 1% Adj. CC $1.34 billion $1.39 bilion YTD 2016 YTD 2017 $1.71 billion $1.75 billion Software Revenue Services Revenue $1.69 billion $1.59 billion
Slide 17: Looking Forward
17 LOOKING FORWARD Improving execution and operational efficiencies NCR's solution offerings aligned with major market trends and customer demands Focused on sales funnel, orders and revenue growth to drive momentum going into 2018 Software growth combined with our business transformation program is
Slide 18: Supplementary Materials
18 SUPPLEMENTARY MATERIALS
Slide 19: Q3 2017 GAAP Results
19 Q3 2017 Q3 2016 As Reported Revenue $1,663 $1,677 (1)% Gross Margin 473 477 (1)% Gross Margin Rate 28.4% 28.4% Operating Expenses 273 288 (5)% % of Revenue 16.4% 17.2% Operating Income 200 189 6% % of Revenue 12.0% 11.3% Interest and other expense (50) (49) 2% Income Tax Expense 31 31 —% Income T
Slide 20: Q3 2017 Operational Results
20 Q3 2017 Q3 2016 As Reported Constant Currency Revenue $1,663 $1,677 (1)% (1)% (1) Gross Margin (non-GAAP) 486 491 (1)% (2)% Gross Margin Rate (non-GAAP) 29.2% 29.3% (10) bps (10) bps Operating Expenses (non-GAAP) 251 261 (4)% (4)% % of Revenue 15.1% 15.6% Operating Income (non-GAAP) 235 230 2% 1%
Slide 21: Non-GAAP Measures
21 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 22: Constant Currency, IPS Divestiture and Adjusted Constant Currency
22 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 23: Net Income to Adjusted EBITDA
23 Net Income from Continuing Operations (GAAP) to Adjusted EBITDA (non-GAAP) in millions Q3 2017 LTM Q2 2017 LTM Q1 2017 LTM Q4 2016 LTM Q3 2016 LTM Net Income from Continuing Operations (GAAP) $345 $335 $312 $287 $263 Pension Mark-to-Market Adjustments 85 85 85 85 29 Transformation/Restructuring C
Slide 24: Q3 QTD 2017 GAAP to Non-GAAP
24 in millions (except per share amounts) Q3 QTD 2017 GAAP Transformation Costs Acquisition- related amortization of intangibles Acquisition- related costs Q3 QTD 2017 non-GAAP Product revenue $657 $— $— $— $657 Service revenue 1,006 — — — 1,006 Total revenue 1,663 — — — 1,663 Cost of products 528 —
Slide 25: Q3 QTD 2017 EPS Reconciliation
25 in millions (except per share amounts) Q3 QTD 2017 GAAP Q3 QTD 2017 non-GAAP Income from continuing operations attributable to NCR common stockholders $118 $143 Weighted average outstanding shares: Weighted average diluted shares outstanding 126.2 126.2 Weighted as-if converted preferred shares 2
Slide 26: Q3 QTD 2016 GAAP to Non-GAAP
26 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 27: Q3 QTD 2016 EPS Reconciliation
27 in millions (except per share amounts) Q3 QTD 2016 GAAP Q3 QTD 2016 non-GAAP Income from continuing operations attributable to NCR common stockholders $107 $135 Weighted average outstanding shares: Weighted average diluted shares outstanding 127.0 127.0 Weighted as-if converted preferred shares 2
Slide 28: Q3 YTD 2017 GAAP to Non-GAAP
28 in millions (except per share amounts) Q3 YTD 2017 GAAP Transformation Costs Acquisition- related amortization of intangibles Acquisition- related costs Q3 YTD 2017 non-GAAP Product revenue $1,829 $— $— $— $1,829 Service revenue 2,905 — — — 2,905 Total revenue 4,734 — — — 4,734 Cost of products 1
Slide 29: Q3 YTD 2017 EPS Reconciliation
29 in millions (except per share amounts) Q3 YTD 2017 GAAP Q3 YTD 2017 non-GAAP Income (loss) from continuing operations attributable to NCR common stockholders: Income from continuing operations (attributable to NCR) $272 $352 Dividends on convertible preferred shares (36) — Deemed dividend on modi
Slide 30: Q3 YTD 2016 GAAP to Non-GAAP
30 in millions (except per share amounts) Q3 YTD 2016 GAAP Restructuring / Transformation Costs Acquisition- related amortization of intangibles Acquisition- related costs Divestiture and Liquidation Losses Q3 YTD 2016 non-GAAP Product revenue $1,932 $— $— $— $— $1,932 Service revenue 2,809 — — — —
Slide 31: Q3 YTD 2016 EPS Reconciliation
31 in millions (except per share amounts) Q3 YTD 2016 GAAP Q3 YTD 2016 non-GAAP Income from continuing operations attributable to NCR common stockholders $215 $307 Weighted average outstanding shares: Weighted average diluted shares outstanding 128.8 128.8 Weighted as-if converted preferred shares 2
Slide 32: Q4 2016 GAAP to Non-GAAP
32 in millions (except per share amounts) Q4 YTD 2016 GAAP Restructuring / Transformation Costs Acquisition- related amortization of intangibles Acquisition - related costs Pension mark-to- market adjustments Divestiture and Liquidation Losses Q4 YTD 2016 non-GAAP Product revenue $805 $— $— $— $— $—
Slide 33: Q4 QTD 2016 EPS Reconciliation
33 in millions (except per share amounts) Q4 QTD 2016 GAAP Q4 QTD 2016 non-GAAP Income from continuing operations attributable to NCR common stockholders $68 $168 Weighted average outstanding shares: Weighted average diluted shares outstanding 128.6 128.6 Weighted as-if converted preferred shares 28
Slide 34: FY 2016 GAAP to Non-GAAP
34 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 35: FY 2016 EPS Reconciliation
35 in millions (except per share amounts) FY 2016 GAAP FY 2016non-GAAP Income from continuing operations attributable to NCR common stockholders $283 $475 Weighted average outstanding shares: Weighted average diluted shares outstanding 129.2 129.2 Weighted as-if converted preferred shares 28.2 28.2
Slide 36: Revenue Growth to Adjusted Constant Currency, Q3 2017
36 Revenue Growth % (GAAP) to Revenue Growth Adjusted Constant Currency % (non-GAAP) Q3 2017 QTD Revenue Growth % (GAAP) Favorable (unfavorable) FX impact Revenue Growth Adjusted Constant Currency % (non-GAAP) Software License (12)% (1)% (11)% Attached License (22)% 1% (23)% Unattached License (4)%
Slide 37: Gross Margin Growth % Constant Currency
37 Gross Margin Growth % (GAAP) to Gross Margin Growth % on a Constant Currency Basis (non-GAAP) Q3 2017 QTD Gross Margin Growth % Reported Favorable (unfavorable) FX impact Constant Currency Gross Margin Growth % (non-GAAP) Software —% —% —% Services 24% (1)% 25% Hardware (30)% 2% (32)% Total Gross
Slide 38: Operating Income Growth % Constant Currency
38 Operating Income Growth % (GAAP) to Operating Income Growth % on a Constant Currency Basis (non-GAAP) Q3 2017 QTD Operating Income Growth % Reported Favorable (unfavorable) FX impact Constant Currency Operating Income Growth % (non-GAAP) Software 1% —% 1% Services 59% (5)% 64% Hardware (107)% (1)
Slide 39: Gross Margin Growth bps Constant Currency
39 GAAP TO NON-GAAP RECONCILIATION Gross Margin Growth bps (GAAP) to Gross Margin Growth bps on a Constant Currency Basis (non-GAAP) Q3 2017 QTD Gross Margin bps Growth Reported Favorable (unfavorable) FX impact Constant Currency Gross Margin bps Growth (non-GAAP) Software -70 bps — bps -70 bps Serv
Slide 40: Operating Income Growth bps Constant Currency
40 Operating Income Growth bps (GAAP) to Operating Income Growth bps on a Constant Currency Basis (non-GAAP) Q3 2017 QTD Operating Income bps Growth Reported Favorable (unfavorable) FX impact Constant Currency Operating Income bps Growth (non-GAAP) Software -10 bps — bps -10 bps Services +510 bps -2
Slide 41: Revenue Growth to Adjusted Constant Currency, Q3 2017 YTD
41 Revenue Growth % (GAAP) to Revenue Growth Adjusted Constant Currency % (non-GAAP) Q3 2017 YTD Revenue Growth % (GAAP) Favorable (unfavorable) FX impact Divestiture Impact Revenue Growth Adjusted Constant Currency % (non-GAAP) Software 4% —% —% 4% Services 3% (1)% —% 4% Hardware (6)% —% (7)% 1% To
Slide 42: Revenue Growth to Adjusted Constant Currency, Q4 2016
42 Revenue Growth % (GAAP) to Revenue Growth Adjusted Constant Currency % (non-GAAP) Q4 2016 QTD Revenue Growth % (GAAP) Favorable (unfavorable) FX impact Divestiture Impact Revenue Growth Adjusted Constant Currency % (non-GAAP) Software 9% (1)% —% 10% Services 1% (2)% —% 3% Hardware 11% (2)% (17)%
Slide 43: Diluted EPS GAAP to Non-GAAP Guidance
43 GAAP TO NON-GAAP RECONCILIATION Diluted Earnings per Share (GAAP) to Diluted Earnings per Share (non-GAAP) 2017 Guidance Prior 2017 Guidance Q4 2017 Guidance Diluted EPS (GAAP) (1) $1.97 - $2.09 $2.20 - $2.32 $0.64 - $0.76 Transformation costs 0.14 - 0.17 0.14 - 0.17 0.02 - 0.05 Acquisition-Relat
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