Ncr Voyix Corporation · NYSE:VYX
Ncr Voyix — NCR — Q4 2018 Earnings Presentation
45 slides from Ncr Voyix's earnings presentation, Feb 7, 2019
Slide 1: Q4 2018 Earnings Conference Call
Q4 2018 EARNINGS CONFERENCE CALL MICHAEL HAYFORD, PRESIDENT & CEO OWEN SULLIVAN, COO ANDRE FERNANDEZ, CFO February 7, 2019
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: Overview
OVERVIEW RESULTS IN LINE with expectations Continued to IMPROVE EXECUTION and STABILIZE the business Services continued MARGIN EXPANSION Entered PAYMENTS through acquisition of JetPay 2019 GUIDANCE: Revenue growth 1-2%; Non- GAAP EPS $2.75-$2.85; FCF $300M- $350M 3
Slide 4: Strategic Thesis
STRATEGIC THESIS NCR Shareholder Value Creation will be driven by: Top-Line Mix shift Spend Revenue Growth to Software Optimization & Services 4
Slide 5: Strategic Growth Platforms
STRATEGIC GROWTH PLATFORMS Digital Digital Digital First First First Banking Restaurant Retail Digital Digital Connected Convenience Digital Services and Fuel Small Business Essentials 5
Slide 6: Productivity Focus Areas
PRODUCTIVITY FOCUS AREAS Services Hardware SG&A & Opex Transformation Network • Service • Executing • Reduce SG&A and performance and manufacturing discretionary spend productivity transformation with at least $100M initiatives initiatives of savings in 2019 • Driving revenue • Higher utilization an
Slide 7: Q4 2018 Financial Results
Q4 2018 FINANCIAL RESULTS Non-GAAP Gross Revenue Margin Rate FX FX ($39) million (20) bps $1.80 29.3% $1.78 billion 27.5% billion Q4 2017 Q4 2018 Q4 2017 Q4 2018 Revenue up 1% as reported and up 3% CC; Non-GAAP gross margin rate down 180 bps as Recurring revenue up 1%, 42% of total revenue reported
Slide 8: FY 2018 Financial Results
FY 2018 FINANCIAL RESULTS Non-GAAP Gross Revenue Margin Rate FX FX ($9) million (10 bps) $6.52 $6.41 29.4% 28.1% billion billion 2017 2018 2017 2018 Revenue down 2% as reported and CC; Non-GAAP gross margin rate down 130 bps as Recurring revenue up 3%, 46% of total revenue reported and down 140 bps
Slide 9: Software Q4 2018 Update
SOFTWARE Q4 2018 Update Q4 2018 Q4 2017 % Change % Change CC Software License $90 $95 (5)% (4)% Attached License 41 37 11% 16% Unattached License 49 58 (16)% (16)% Software Maintenance 90 96 (6)% (5)% Cloud 163 156 4% 5% Professional Services 159 161 (1)% 1% Software Revenue $502 $508 (1)% —% Softwa
Slide 10: Services Q4 2018 Update
SERVICES Q4 2018 Update Q4 2018 Q4 2017 % Change % Change CC Services Revenue $633 $619 2% 5% Services Gross Margin $172 $153 12% 16% Services Gross Margin Rate 27.2% 24.7% +250 bps +260 bps Operating Income $92 $76 21% 25% Operating Income as a % of Revenue 14.5% 12.3% +220 bps +230 bps $ in millio
Slide 11: Hardware Q4 2018 Update
HARDWARE Q4 2018 Update % Change Q4 2018 Q4 2017 % Change CC ATMs $367 $303 21% 26% Self-Checkout (SCO) 110 131 (16)% (16)% Point-of-Sale (POS) 189 218 (13)% (12)% Interactive Printer Solutions (IPS) — 3 (100)% (100)% Hardware Revenue $666 $655 2% 4% Hardware Gross Margin $78 $102 (24)% (23)% Hardwa
Slide 12: Free Cash Flow, Net Debt & EBITDA
FREE CASH FLOW, NET DEBT & EBITDA Free Cash Flow Q4 2018 Q4 2017 FY 2018 FY 2017 Cash Provided by Operating Activities $409 $482 $572 $752 Total capital expenditures (79) (88) (313) (294) Cash used in Discontinued Operations (13) 6 (36) (8) Free Cash Flow $317 $400 $223 $450 $ in millions Net Debt &
Slide 13: 2019 Guidance
2019 GUIDANCE FY 2019 Guidance Revenue Growth 1% - 2% Net Income Attributable to NCR $290 - $305 Adjusted EBITDA $1,040 - $1,080 GAAP Diluted EPS $1.91 - $2.01 Non-GAAP Diluted EPS $2.75 - $2.85 Cash Flow from Operations $705 - $730 Free Cash Flow $300 - $350 Capital Allocations 2018 2019 Stock repu
Slide 14: 2019 EBITDA Bridge
2019 EBITDA BRIDGE $1,040 - $1,080 $957 18 ix ost tate her th ion ion 19 20 ce/M le C Es Ot row ans mat nd 20 Pri eop eal ss G Exp sfor Spe on P R sine ces ran vity zati Bu rvi T ucti imi Se HW rod Opt & P $ in millions 14
Slide 15: Looking Forward
LOOKING FORWARD Allocate capital to highest growth and return on investment opportunities Return to growth Mix shift to software, services and recurring revenue Improve cost structure Drive cash flow generation 15
Slide 16: Supplementary Materials
SUPPLEMENTARY MATERIALS
Slide 17: Q4 2018 and FY 2018 GAAP Results
Q4 2018 and FY 2018 GAAP RESULTS % Change % Change As As Q4 2018 Q4 2017 Reported FY 2018 FY 2017 Reported Revenue $1,801 $1,782 1% $6,405 $6,516 (2)% Gross Margin 442 510 (13)% 1,675 1,855 (10)% Gross Margin Rate 24.5% 28.6% 26.2% 28.5% Operating Expenses 379 308 23% 1,484 1,164 27% % of Revenue 21
Slide 18: Q4 2018 and FY 2018 Operational Results
Q4 2018 and FY 2018 OPERATIONAL RESULTS % Change % Change % Change % Change Adjusted As Constant As Constant Q4 2018 Q4 2017 Reported Currency FY 2018 FY 2017 Reported Currency Revenue $1,801 $1,782 1% 3% $6,405 $6,516 (2)% (2)% Gross Margin (non-GAAP) 495 523 (5)% (4)% 1,800 1,916 (6)% (6)% Gross M
Slide 19: Software FY 2018
SOFTWARE FY 2018 FY 2017 % Change % Change CC Software License $308 $336 (8)% (8)% Attached License 111 121 (8)% (8)% Unattached License 197 215 (8)% (8)% Software Maintenance 366 374 (2)% (2)% Cloud 631 592 7% 7% Professional Services 607 598 2% 1% Software Revenue $1,912 $1,900 1% 1% Software Gros
Slide 20: Services FY 2018
SERVICES FY 2018 FY 2017 % Change % Change CC Services Revenue $2,460 $2,373 4% 4% Services Gross Margin $639 $581 10% 11% Services Gross Margin Rate 26.0% 24.5% +150 bps +170 bps Operating Income $321 $282 14% 17% Operating Income as a % of Revenue 13.0% 11.9% +110 bps +140 bps $ in millions 20
Slide 21: Hardware FY 2018
HARDWARE % Change FY 2018 FY 2017 % Change CC ATMs $979 $1,012 (3)% (3)% Self-Checkout (SCO) 346 407 (15)% (15)% Point-of-Sale (POS) 708 806 (12)% (12)% Interactive Printer Solutions (IPS) — 18 (100)% (100)% Hardware Revenue $2,033 $2,243 (9)% (9)% Hardware Gross Margin $245 $368 (33)% (36)% Hardwar
Slide 22: 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 23: 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 24: Net Income to Adjusted EBITDA
GAAP TO NON-GAAP RECONCILIATION Net Income from Continuing Operations (GAAP) to Adjusted EBITDA (non-GAAP) FY 2017 Q3 2018 LTM FY 2018 in millions Net (Loss) Income from Continuing Operations (GAAP) $240 ($34) ($34) Pension Mark-to-Market Adjustments 28 28 (45) Transformation/Restructuring Costs 29
Slide 25: Q4 2018 QTD GAAP to Non-GAAP
GAAP TO NON-GAAP RECONCILIATION Q4 2018 QTD Transformation Acquisition- Pension Q4 QTD Acquisition- Impact of Q4 QTD and related mark-to- 2018 related U.S. Tax 2018 Restructuring amortization of market GAAP costs Reform non-GAAP in millions (except per share amounts) costs intangibles adjustments Pr
Slide 26: Q4 2018 QTD Diluted EPS Reconciliation
GAAP TO NON-GAAP RECONCILIATION Q4 2018 QTD Q4 QTD 2018 Q4 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) $(33) $126 Dividends on convertible preferred sh
Slide 27: Q4 2017 QTD GAAP to Non-GAAP
GAAP TO NON-GAAP RECONCILIATION Q4 2017 QTD Acquisition- Pension Q4 QTD Acquisition- Impact of Q4 QTD Transformation related mark-to- 2017 related U.S. Tax 2017 non- Costs amortization market costs Reform GAAP of intangibles adjustments GAAP in millions (except per share amounts) Product revenue $75
Slide 28: Q4 2017 QTD Diluted EPS Reconciliation
GAAP TO NON-GAAP RECONCILIATION Q4 2017 QTD Q4 QTD 2017 Q4 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) ($35) $142 Dividends on convertible preferred sh
Slide 29: FY 2018 GAAP to Non-GAAP
GAAP TO NON-GAAP RECONCILIATION FY 2018 Transformation Goodwill & Acquisition- Pension Acquisition- Impact of FY 2018 and Long-lived related mark-to- FY 2018 related U.S. Tax Restructuring Asset amortization of market GAAP costs Reform non-GAAP in millions (except per share amounts) costs Impairment
Slide 30: FY 2018 Diluted EPS Reconciliation
GAAP TO NON-GAAP RECONCILIATION FY 2018 FY 2018 FY 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) $(36) $394 Dividends on convertible preferred shares (49) —
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 Diluted 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: Q4 2018 Gross Margin Reconciliation
GAAP TO NON-GAAP RECONCILIATION Q4 2018 QTD & YTD Gross Margin and Gross Margin Rate (non-GAAP) to Gross Margin and Gross Margin Rate (GAAP) Q4 2018 QTD Q4 2018 YTD Gross Margin Gross Margin Gross Margin Rate % Gross Margin Rate % Software 245 48.8% 916 47.9% Services 172 27.2% 639 26.0% Hardware 78
Slide 34: Q4 2017 Gross Margin Reconciliation
GAAP TO NON-GAAP RECONCILIATION Q4 2017 QTD & YTD Gross Margin and Gross Margin Rate (non-GAAP) to Gross Margin and Gross Margin Rate (GAAP) Q4 2017 QTD Q4 2017 YTD Gross Gross Gross Margin Rate Gross Margin Rate Margin % Margin % Software 268 52.8% 967 50.9% Services 153 24.7% 581 24.5% Hardware 10
Slide 35: Q4 2018 Operating Income Reconciliation
GAAP TO NON-GAAP RECONCILIATION Q4 2018 QTD & YTD Operating Income and Operating Income Rate (non-GAAP) to Operating Income and Operating Income Rate (GAAP) Q4 2018 QTD Q4 2018 YTD Operating Operating Operating Operating Income Income Income Income Rate Rate Software 141 28.1% 492 25.7% Services 92
Slide 36: Q4 2017 Operating Income Reconciliation
GAAP TO NON-GAAP RECONCILIATION Q4 2017 QTD & YTD Operating Income and Operating Income Rate (non-GAAP) to Operating Income and Operating Income Rate (GAAP) Q4 2017 QTD Q4 2017 YTD Operating Operating Operating Operating Income Income Rate Income Income Rate Software 164 32.3% 563 29.6% Services 76
Slide 37: Revenue Growth to Constant Currency
GAAP TO NON-GAAP RECONCILIATION Revenue Growth % (GAAP) to Revenue Growth Constant Currency % (non-GAAP) Q4 2018 QTD Q4 2018 YTD Revenue Revenue Growth Revenue Favorable Growth Revenue Favorable Adjusted Growth % (unfavorable) Constant Growth % (unfavorable) Constant (GAAP) FX impact Currency % (GAA
Slide 38: Gross Margin Growth % to Constant Currency
GAAP TO NON-GAAP RECONCILIATION Gross Margin Growth % (GAAP) to Gross Margin Growth % on a Constant Currency Basis (non-GAAP) Q4 2018 QTD 2018 YTD Constant Constant Gross Margin Favorable Currency Gross Margin Favorable Currency Growth % (unfavorable) Gross Margin Growth % (unfavorable) Gross Margin
Slide 39: Operating Income Growth % to Constant Currency
GAAP TO NON-GAAP RECONCILIATION Operating Income Growth % (GAAP) to Operating Income Growth % on a Constant Currency Basis (non-GAAP) Q4 2018 QTD 2018 YTD Constant Constant Operating Currency Operating Currency Income Favorable Operating Income Favorable Operating Growth % (unfavorable) Income Growt
Slide 40: Gross Margin Growth bps to Constant Currency
GAAP TO NON-GAAP RECONCILIATION Gross Margin Growth bps (GAAP) to Gross Margin Growth bps on a Constant Currency Basis (non-GAAP) Q4 2018 QTD 2018 YTD Constant Constant Gross Margin Favorable Currency Gross Margin Favorable Currency bps Growth (unfavorable) Gross Margin bps Growth (unfavorable) Gros
Slide 41: Operating Income Growth bps to Constant Currency
GAAP TO NON-GAAP RECONCILIATION Operating Income Growth bps (GAAP) to Operating Income Growth bps on a Constant Currency Basis (non-GAAP) Q4 2018 QTD 2018 YTD Constant Constant Operating Favorable Currency Operating Favorable Currency Income bps (unfavorable) Operating Income bps (unfavorable) Opera
Slide 42: Diluted EPS 2019 Guidance
GAAP TO NON-GAAP RECONCILIATION Diluted Earnings Per Share 2019 Guidance Diluted EPS (GAAP) (1) (2) $1.91 - $2.01 Transformation & Restructuring costs 0.31 Acquisition-Related Amortization of Intangibles 0.48 Acquisition-Related Costs 0.05 Non-GAAP Diluted EPS (1) (3) $2.75 - $2.85 (1) Non-GAAP dilu
Slide 43: Adjusted EBITDA 2019 Guidance
GAAP TO NON-GAAP RECONCILIATION Earnings Before Interest, Taxes, Depreciation & Amortization (Adjusted EBITDA) 2019 Guidance Net Income Attributable to NCR (GAAP) $290 - $305 Transformation & Restructuring costs 60 Acquisition-Related Amortization of Intangibles 95 Acquisition-Related Costs 10 Inter
Slide 44: 2019 Free Cash Flow Guidance
GAAP TO NON-GAAP RECONCILIATION 2019 Guidance Cash Provided by Operating Activities $705 - $730 Less: Total capital expenditures (350) - (375) Less: Cash used in Discontinued Operations (30) Free Cash Flow $300 - $350 $ in millions 44
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