UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 9, 2017
NCR CORPORATION
(Exact name of registrant as specified in its charter)
Commission File Number 001-00395
Maryland | 31-0387920 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
3097 Satellite Boulevard
Duluth, Georgia 30096
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (937) 445-5000
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
On February 9, 2017, the Company issued a press release setting forth its fourth quarter 2016 financial results along with its fiscal year 2017 financial outlook and its first quarter 2017 financial outlook. A copy of the press release is attached hereto as Exhibit 99.1 and hereby incorporated by reference.
Item 7.01. Regulation FD Disclosure.
On February 9, 2017, the Company will hold its previously announced conference call to discuss its fourth quarter 2016 results, its fiscal year 2017 financial outlook and its first quarter 2017 financial outlook. A copy of supplementary materials that will be referred to in the conference call, and which were posted to the Company’s website, is attached hereto as Exhibit 99.2.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits:
The following exhibits are attached with this current report on Form 8-K:
Exhibit No. | Description |
99.1 | Press Release issued by the Company, dated February 9, 2017 |
99.2 | Supplemental materials, dated February 9, 2017 |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
NCR Corporation | ||
By: | /s/ Robert Fishman | |
Robert Fishman | ||
Executive Vice President and Chief Financial Officer | ||
Date: February 9, 2017
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Index to Exhibits
The following exhibits are attached with this current report on Form 8-K:
Exhibit No. Description
99.1 Press Release issued by the Company, dated February 9, 2017
99.2 Supplemental materials, dated February 9, 2017
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 | NEWS RELEASE | |
February 9, 2017
NCR Announces Fourth Quarter and Full Year 2016 Results
DULUTH, Ga. - NCR Corporation (NYSE: NCR) reported financial results today for the three months and twelve months ended December 31, 2016. Fourth quarter and full year highlights include:
• | Fourth quarter revenue of $1.80 billion, up 7% as reported and up 14% excluding FX and the IPS divestiture; Unfavorable FX impact was $25 million higher than expected |
• | Fourth quarter software revenue up 9%, software license growth of 21% and cloud growth of 10%; Full year net annual contract value for cloud, a leading indicator of future cloud revenue, of $70 million, up 79% from $39 million in the prior year |
• | Fourth quarter GAAP diluted EPS of $0.43, up from $0.27 in the prior year, an increase of 59%; Fourth quarter non-GAAP diluted EPS of $1.07, up from $0.89 in the prior year, an increase of 30% constant currency; Unfavorable FX impact was $0.07 higher than expected |
• | Full year cash flow from operations of $894 million, and free cash flow of $628 million versus free cash flow guidance of $425 to $475 million |
• | $300 million share repurchase planned for 2017; approximately $70 million completed year-to-date |
• | 2017 guidance announced; Revenue growth of 1% to 3% as reported and 5% to 7% excluding FX and the IPS divestiture; GAAP diluted EPS growth of 42% to 49%; Non-GAAP diluted EPS growth of 9% to 12% constant currency; free cash flow conversion rate of 95% to 100% |
“Continued fourth-quarter momentum led to a highly successful 2016 and ability to exceed revenue, earnings, and free cash flow expectations," said Chairman and CEO Bill Nuti. “We were pleased with our top-line growth in every business, but especially in Software, where revenues continue to expand, particularly for our cloud and software license offerings. Hardware experienced another very strong quarter from ongoing demand for our Self-Checkout and A/ITM edge platforms that deliver channel transformation solutions. Overall, our global omni-channel leadership resulted in strong financial results throughout 2016, and our consistent performance speaks to the value we provide customers as they transform their businesses to effectively compete in the rapidly developing digital economy. We enter 2017 with a focus on maintaining our high level of execution, continuing to enable customer success, and further expanding our omni-channel leadership via investment in innovation. Also, based on our confidence in free cash flow generation, we are pleased to announce our intention to repurchase $300 million of shares in 2017.”
In this release, we use certain performance metrics as well as certain non-GAAP measures, including presenting certain measures on a constant currency and adjusted constant currency basis. The performance metrics include net annual contract value, and the non-GAAP measures include free cash flow and others with the words “non-GAAP” or “adjusted” in their titles. The performance metrics are listed and described, and the non-GAAP measures are listed, described and reconciled to their most directly comparable GAAP measures, under the heading “Performance Metrics and Non-GAAP Financial Measures” later in this release. Additionally, effective January 1, 2016, NCR began management of its business on a solution basis, changing from the previous model of management on a line of business basis, which resulted in a corresponding change to our reportable segments. Prior results have been recast under the new segment model for comparison purposes.
Fourth Quarter 2016 Operating Results
Revenue
Fourth quarter revenue of $1.80 billion was up 7% year-over-year. On an adjusted constant currency basis, fourth quarter revenue was up 14%. Foreign currency fluctuations and the IPS divestiture had an unfavorable impact on the revenue comparison of 1% and 6%, respectively.
The following table shows the revenue by segment for the fourth quarter:
Fourth Quarter | |||||||||||||
$ in millions | 2016 | 2015 | % Change | % Change Adjusted Constant Currency | |||||||||
Software License | $ | 103 | $ | 85 | 21 | % | 22 | % | |||||
Software Maintenance | 96 | 91 | 5 | % | 6 | % | |||||||
Cloud | 147 | 134 | 10 | % | 9 | % | |||||||
Professional Services | 156 | 149 | 5 | % | 5 | % | |||||||
Software Revenue | $ | 502 | $ | 459 | 9 | % | 10 | % | |||||
Services Revenue | $ | 598 | $ | 590 | 1 | % | 3 | % | |||||
ATM | $ | 385 | $ | 307 | 25 | % | 29 | % | |||||
SCO | 132 | 55 | 140 | % | 140 | % | |||||||
POS | 177 | 179 | (1 | %) | (1 | %) | |||||||
IPS | 8 | 90 | (91 | %) | (5 | %) | |||||||
Hardware Revenue | $ | 702 | $ | 631 | 11 | % | 30 | % | |||||
Total Revenue | $ | 1,802 | $ | 1,680 | 7 | % | 14 | % | |||||
Gross Margin
Fourth quarter gross margin of $479 million increased 1% from $476 million. Fourth quarter gross margin (non-GAAP) of $530 million increased 4% from $512 million. The increases were primarily due to higher revenue.
Expenses
Fourth quarter operating expenses of $333 million decreased from $338 million. Fourth quarter operating expenses (non-GAAP) of $266 million increased from $252 million. Operating expenses decreased as a percentage of revenue.
Operating Income
Fourth quarter operating income of $146 million increased 6% from $138 million. Fourth quarter operating income (non-GAAP) of $264 million increased 2% from $260 million. During the fourth quarter of 2016, we recorded the annual pension mark-to-market adjustment which was $85 million compared to $29 million in the prior year.
Other (Expense)
Fourth quarter other (expense) of $57 million decreased (33)% from $85 million, primarily due to the $34 million loss on the sale of the IPS business recorded in the fourth quarter of 2015. Fourth quarter other (expense) (non-GAAP) of $56 million increased 10% from $51 million, primarily due to foreign currency losses from a devaluation of the Egyptian pound recorded in the fourth quarter of 2016.
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Income Tax Expense
Fourth quarter income tax expense of $17 million increased from $5 million due to a less favorable mix of earnings partially offset by an increase in discrete tax benefits. Fourth quarter income tax expense (non-GAAP) of $36 million decreased from $53 million due to an increase in discrete tax benefits.
Net Income from Continuing Operations Attributable to NCR
Fourth quarter net income from continuing operations attributable to NCR of $68 million increased from $48 million. Fourth quarter net income from continuing operations attributable to NCR (non-GAAP) of $168 million increased from $156 million.
Cash Flow
Fourth quarter cash provided by operating activities of $525 million increased from $265 million. Free cash flow was $449 million in the fourth quarter of 2016 as compared to $184 million in the fourth quarter of 2015. The increases were driven by higher operating income and working capital improvements.
Full Year 2016 Operating Results
Full year 2016 revenue of $6.54 billion was up 3% from 2015. On an adjusted constant currency basis, full year 2016 revenue was up 7%. Foreign currency fluctuations and the IPS divestiture had an unfavorable impact on the full year revenue comparison of 1% and 3%, respectively.
Full year 2016 GAAP diluted EPS of $1.80 was up from $(0.94) in 2015. Full year 2016 diluted EPS (non-GAAP) of $3.02 was up from $2.76, or an increase of 15%, on a constant currency basis. Foreign currency fluctuations had an unfavorable impact on the full year diluted EPS comparison of $0.14.
Full year 2016 cash provided by operating activities of $894 million increased from $681 million. Full year 2016 free cash flow was $628 million in 2016 up from $409 million. The increases were driven by higher operating income and working capital improvements.
Share Repurchase Programs
During 2017, NCR plans to repurchase approximately $300 million of its common stock under its previously authorized share repurchase programs. NCR has repurchased shares of its common stock for approximately $70 million through the date of this release. Any share repurchases will be made by NCR in compliance with, and at such times as permitted by, federal securities laws and may be suspended or discontinued at any time.
2017 Outlook
In 2017, our revenue is expected to be $6.60 billion to $6.72 billion, up 1% to 3% as reported and 5% to 7% adjusted constant currency. Our GAAP diluted earnings per share is expected to be $2.56 to $2.69, up 42% to 49%, and our non-GAAP diluted earnings per share is expected to be $3.25 to $3.35, up 9% to 12% constant currency. Net cash provided by operating activities is expected to be $805 million to $830 million and free cash flow is expected to be $500 million to $525 million, or approximately 95% to 100% of non-GAAP net income. The 2017 guidance includes expected foreign currency headwinds of $95 million in revenue and $0.03 in diluted earnings per share. The 2017 guidance also excludes approximately $143 million of IPS revenue from 2016.
For the first quarter of 2017, revenue is expected to be $1.45 billion to $1.47 billion, GAAP diluted earnings per share is expected to be $0.17 to $0.25, and non-GAAP diluted earnings per share is expected to be $0.43 to $0.48. The first quarter 2017 guidance includes expected foreign currency headwinds of $17 million in revenue and $0.03 in diluted earnings per share.
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NCR will provide additional information regarding its 2017 guidance during its fourth quarter earnings conference call and webcast.
2016 Fourth Quarter Earnings Conference Call
A conference call is scheduled for today at 4:30 p.m. (EDT) to discuss the fourth quarter 2016 results and guidance for first quarter and full-year 2017. Access to the conference call and accompanying slides, as well as a replay of the call, are available on NCR's web site at http://investor.ncr.com/. Additionally, the live call can be accessed by dialing 888-820-9413 and entering the participant passcode 5508697.
More information on NCR’s Q4 2016 earnings, including additional financial information and analysis, is available on NCR’s Investor Relations website at http://investor.ncr.com/.
About NCR Corporation
NCR Corporation (NYSE: NCR) is the global leader in omni-channel solutions, turning everyday interactions with businesses into exceptional experiences. With its software, hardware, and portfolio of services, NCR enables nearly 550 million transactions daily across the financial, retail, hospitality, travel, telecom and technology industries. NCR solutions run the everyday transactions that make your life easier.
NCR is headquartered in Duluth, Georgia with over 32,000 employees and does business in 180 countries. NCR is a trademark of NCR Corporation in the United States and other countries. NCR encourages investors to visit its web site which is updated regularly with financial and other important information about NCR.
Web site: www.ncr.com
Twitter: @NCRCorporation
Facebook: www.facebook.com/ncrcorp
LinkedIn: http://linkd.in/ncrgroup
YouTube: www.youtube.com/user/ncrcorporation
News Media Contact
Scott Sykes
NCR Corporation
212.589.8428
scott.sykes@ncr.com
Investor Contact
Michael Nelson
NCR Corporation
678.808.6995
michael.nelson@ncr.com
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Note to Investors This release contains forward-looking statements. Forward-looking statements use words such as “expect,” “anticipate,” “outlook,” “intend,” "plan" “believe,” “will,” “should,” “would,” “could” and words of similar meaning. 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, are examples of forward-looking statements. The forward-looking statements in this release include statements about NCR's future cloud revenue and indicators of future cloud revenue; NCR's plans for additional share repurchases in 2017; continued expansion of Software revenue, including for cloud and software license offerings; NCR's momentum entering 2017 and NCR’s areas of strategic focus for 2017; and NCR's full-year and first quarter financial guidance and outlook (including the section entitled "2017 Outlook") and the expected type and magnitude of the non-operational adjustments included in any forward-looking non-GAAP measures. Forward-looking statements are based on our current beliefs, expectations and assumptions, which may not prove to be accurate, and involve a number of known and unknown risks and uncertainties, many of which are out of NCR's control. Forward-looking statements are not guarantees of future performance, and there are a number of important factors that could cause actual outcomes and results to differ materially from the results contemplated by such forward-looking statements, including those factors relating to: domestic and global economic and credit conditions including, in particular, those resulting from uncertainty in the Chinese economy, economic sanctions against Russia, the determination by Britain to exit the European Union and further potential changes in Eurozone participation, the potential for changes to global or regional trade agreements or the imposition of protectionist trade policies, and the imposition of import or export tariffs or border adjustments; the impact of our indebtedness and its terms on our financial and operating activities; the impact of the terms of our strategic relationship with Blackstone and our Series A Convertible Preferred Stock; the transformation of our business model and our ability to sell higher-margin software and services; the possibility of disruptions in or problems with our data center hosting facilities; cybersecurity risks and compliance with data privacy and protection requirements; foreign currency fluctuations; our ability to successfully introduce new solutions and compete in the information technology industry; our ability to improve execution in our sales and services organizations; defects or errors in our products; manufacturing disruptions; collectability difficulties in subcontracting relationships in Emerging Industries; the historical seasonality of our sales; the availability and success of acquisitions, divestitures and alliances, including the divestiture of our Interactive Printer Solutions business; our pension strategy and underfunded pension obligation; the success of our restructuring plans and cost reduction initiatives; tax rates; reliance on third party suppliers; development and protection of intellectual property; workforce turnover and the ability to attract and retain skilled employees; environmental exposures from our historical and ongoing manufacturing activities; and uncertainties with regard to regulations, lawsuits, claims and other matters across various jurisdictions. Additional information concerning these and other factors can be found in the Company's filings with the U.S. Securities and Exchange Commission, including the Company’s most recent annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Any forward-looking statement speaks only as of the date on which it is made. The Company does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Performance Metrics and Non-GAAP Financial Measures
Performance Metrics. The term “net annual contract value” or “net ACV” for any particular period means NCR’s net bookings for cloud revenue during the period, and is calculated as twelve months of expected subscription revenues under new cloud contracts during such period less twelve months of subscription revenues under cloud contracts that expired or were terminated during such period.
Non-GAAP Financial Measures. While NCR reports its results in accordance with Generally Accepted Accounting Principles in the United States, or GAAP, in this release NCR also uses the non-GAAP measures listed and described below.
Diluted EPS (non-GAAP), Gross Margin (non-GAAP), Operating Expenses (non-GAAP), Operating Income (non-GAAP), Other (Expense) (non-GAAP), Income Tax Expense (non-GAAP), and Net Income Attributable to Continuing Operations (non-GAAP). NCR’s diluted earnings per share (non-GAAP), gross margin (non-GAAP), operating expenses (non-GAAP), operating income (non-GAAP), other (expense) (non-GAAP), income tax expense (non-GAAP), and net income attributable to continuing operations (non-GAAP) are determined by excluding pension mark-to-market adjustments, pension settlements, pension curtailments and pension special termination benefits and other special items, including amortization of acquisition related intangibles, from NCR’s GAAP earnings per share, gross margin, expenses, income (loss) from operations, other (expense), income tax expense and net income attributable to continuing operations, respectively.
Due to the non-operational nature of these pension and other special items, NCR's management uses these non-GAAP measures to evaluate year-over-year operating performance. NCR also uses operating income (non-GAAP) and diluted EPS (non-GAAP), to manage and determine the effectiveness of its business managers and as a basis for incentive compensation. NCR believes these measures are useful for investors because they provide a more complete understanding of NCR's underlying operational performance, as well as consistency and comparability with NCR's past reports of financial results.
Free Cash Flow and Free Cash Flow Conversion Rate. NCR defines free cash flow as net cash provided by/used in operating activities and cash flow provided by/used in discontinued operations less capital expenditures for property, plant and equipment, additions to capitalized software, discretionary pension contributions and pension settlements. NCR's management uses free cash flow to assess the financial performance of the Company and believes it is useful for investors because it relates the operating cash flow of the
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Company to the capital that is spent to continue and improve business operations. In particular, free cash flow indicates the amount of cash generated after capital expenditures which can be used for, among other things, investment in the Company's existing businesses, strategic acquisitions, strengthening the Company's balance sheet, repurchase of Company stock and repayment of the Company's debt obligations. Free cash flow does not represent the residual cash flow available for discretionary expenditures since there may be other nondiscretionary expenditures that are not deducted from the measure. NCR also describes the measure free cash flow conversion rate, which is calculated as free cash flow divided by non-GAAP net income. NCR’s management targets an annual free cash flow conversion rate at or above the range described in this release because management believes that a conversion rate at or above that range represents the efficient conversion of non-GAAP net income to free cash flow for its business. Free cash flow and free cash flow conversion do not have uniform definitions under GAAP and, therefore, NCR's definitions may differ from other companies' definitions of these measures.
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 monthly average exchange rates. Due to the overall variability of foreign exchange rates from period to period, NCR’s management uses constant currency measures to evaluate period-over-period operating performance on a more consistent and comparable basis. NCR also presents certain financial measures on an adjusted constant currency basis, which excludes both the effects of foreign currency translation, as described above, and the results of NCR’s Interactive Printer Solutions (IPS) business for the comparable prior period after completion of the sale of the business (which results were previously included in NCR’s Hardware segment). NCR completed the sale of all but the Middle East and Africa assets of its Interactive Printer Solutions (IPS) division to Atlas Holdings LLC on May 27, 2016. NCR’s management believes that presentation of financial measures without these results is more representative of the company's period-over-period operating performance, and provides additional insight into historical and/or future performance, which may be helpful for investors.
NCR's definitions and calculations of these non-GAAP measures may differ from similarly-titled measures reported by other companies and cannot, therefore, be compared with similarly-titled measures of other companies. These non-GAAP measures should not be considered as substitutes for, or superior to, results determined in accordance with GAAP. These non-GAAP measures are reconciled to their most directly comparable GAAP measures in the tables below or, in the case of quarterly free cash flow, in the body of this release.
Reconciliation of Gross Margin (GAAP) to Gross Margin (non-GAAP)
$ in millions | Q4 2016 | Q4 2015 | |||||
Gross Margin (GAAP) | $ | 479 | $ | 476 | |||
Restructuring/Transformation Costs | — | 9 | |||||
Acquisition-related amortization of intangibles | 13 | 16 | |||||
Pension mark-to-market adjustments | 38 | 11 | |||||
Operating Gross Margin (Non-GAAP) | $ | 530 | $ | 512 | |||
Reconciliation of Operating Expenses (GAAP) to Operating Expenses (non-GAAP)
$ in millions | Q4 2016 | Q4 2015 | |||||
Operating Expenses (GAAP) | $ | 333 | $ | 338 | |||
Restructuring/Transformation Costs | (3 | ) | (29 | ) | |||
Acquisition-related amortization of intangibles | (15 | ) | (15 | ) | |||
Acquisition-related costs | (2 | ) | (4 | ) | |||
Loss on terminated contract receivable | — | (20 | ) | ||||
Pension mark-to-market adjustments | (47 | ) | (18 | ) | |||
Operating Expenses (Non-GAAP) | $ | 266 | $ | 252 | |||
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Reconciliation of Income from Operations (GAAP) to Operating Income (non-GAAP)
$ in millions | Q4 2016 | Q4 2015 | |||||
Income from Operations (GAAP) | $ | 146 | $ | 138 | |||
Restructuring/Transformation Costs | 3 | 38 | |||||
Acquisition-related costs | 2 | 4 | |||||
Acquisition-related amortization of intangibles | 28 | 31 | |||||
Loss on terminated contract receivable | — | 20 | |||||
Pension mark-to-market adjustments | 85 | 29 | |||||
Operating Income (Non-GAAP) | $ | 264 | $ | 260 | |||
Reconciliation of Other (Expense) (GAAP) to Other (Expense) (non-GAAP)
$ in millions | Q4 2016 | Q4 2015 | |||||
Other (Expense) (GAAP) | $ | (57 | ) | $ | (85 | ) | |
Divestiture and liquidation losses | 1 | 34 | |||||
Other (Expense) (Non-GAAP) | $ | (56 | ) | $ | (51 | ) | |
Reconciliation of Income Tax Expense (GAAP) to Income Tax Expense (non-GAAP)
$ in millions | Q4 2016 | Q4 2015 | |||||
Income Tax Expense (GAAP) | $ | 17 | $ | 5 | |||
Restructuring/Transformation Costs | 2 | 14 | |||||
Acquisition-related costs | — | 1 | |||||
Acquisition-related amortization of intangibles | 9 | 10 | |||||
Loss on terminated contract receivable | — | 7 | |||||
Divestiture and liquidation losses | 1 | 5 | |||||
Pension mark-to-market adjustments | 7 | 11 | |||||
Income Tax Expense (Non-GAAP) | $ | 36 | $ | 53 | |||
Reconciliation of Net Income from Continuing Operations Attributable to NCR (GAAP) to
Net Income from Continuing Operations Attributable to NCR (non-GAAP)
$ in millions | Q4 2016 | Q4 2015 | |||||
Net Income from Continuing Operations Attributable to NCR (GAAP) | $ | 68 | $ | 48 | |||
Restructuring/Transformation Costs | 1 | 24 | |||||
Acquisition-related costs | 2 | 3 | |||||
Acquisition-related amortization of intangibles | 19 | 21 | |||||
Divestiture and liquidation losses | — | 29 | |||||
Loss on terminated contract receivable | — | 13 | |||||
Pension mark-to-market adjustments | $ | 78 | $ | 18 | |||
Net Income from Continuing Operations Attributable to NCR (Non-GAAP) | $ | 168 | $ | 156 | |||
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Reconciliation of Diluted Earnings Per Share (GAAP) to Non-GAAP Diluted Earnings Per Share (non-GAAP)
Q4 2016 Actual | Q4 2015 Actual | 2016 Actual | 2015 Actual | Q1 2017 Guidance (2) | 2017 Guidance (2) | ||||||||||||||||
Diluted Earnings Per Share (GAAP) (1) | $ | 0.43 | $ | 0.27 | $ | 1.80 | $ | (0.94 | ) | $0.17 - $0.25 | $2.56 - $2.69 | ||||||||||
Restructuring/Transformation Costs | 0.01 | 0.14 | 0.13 | 0.29 | $0.10 - $0.13 | $0.15 - $0.18 | |||||||||||||||
Acquisition-related amortization of intangibles | 0.12 | 0.12 | 0.53 | 0.49 | 0.12 | 0.48 | |||||||||||||||
Acquisition-related costs | 0.01 | 0.02 | 0.03 | 0.05 | 0.01 | 0.03 | |||||||||||||||
Loss on terminated contract receivable | — | 0.07 | — | 0.08 | — | — | |||||||||||||||
Divestiture and liquidation losses | — | 0.17 | 0.03 | 0.17 | — | — | |||||||||||||||
Pension mark-to-market adjustments | 0.50 | 0.10 | 0.50 | 2.58 | — | — | |||||||||||||||
Diluted Earnings Per Share (non-GAAP) (1) | $ | 1.07 | $ | 0.89 | $ | 3.02 | $ | 2.76 | $0.43 - $0.48 | $3.25 - $3.35 | |||||||||||
(1) | GAAP and non-GAAP diluted EPS are determined using the most dilutive measure, either including the impact of dividends on the Company's Series A Convertible Preferred Stock in the calculation of net income or loss available to common stockholders or including the impact of the conversion of the Series A Convertible Preferred Stock into common stock in the calculation of the weighted average diluted shares outstanding. Therefore, GAAP diluted EPS and non-GAAP diluted EPS may be calculated using different methods, and may not mathematically reconcile. |
(2) | Except for the adjustments noted herein, this guidance does not include the effects of any future acquisitions/divestitures, restructuring activities, pension mark-to-market adjustments, taxes or other events, which are difficult to predict and which may or may not be significant. The diluted earnings per share (GAAP) guidance has been updated to include the expected impact of divestitures and liquidation losses. |
Reconciliation of Net Cash Provided by Operating Activities (GAAP) to Free Cash Flow (non-GAAP)
$ in millions | Q4 2016 Actual | Q4 2015 Actual | 2016 Actual | 2015 Actual | 2017 Guidance | ||||||||||||
Net cash provided by operating activities | $ | 525 | $ | 265 | $ | 894 | $ | 681 | $805 - $830 | ||||||||
Total capital expenditures | (67 | ) | (65 | ) | (227 | ) | (229 | ) | (285)* | ||||||||
Net cash used in discontinued operations | (9 | ) | (16 | ) | (39 | ) | (43 | ) | (20) | ||||||||
Free cash flow | $ | 449 | $ | 184 | $ | 628 | $ | 409 | $500 - $525 | ||||||||
* Note: The total capital expenditures of $285 million in 2017 includes $70 million related to the new world headquarters in Atlanta, Georgia. This $70 million is offset by $45 million of expected reimbursements by the lessor included in net cash provided by operating activities.
Reconciliation of Revenue Growth % (GAAP) to
Revenue Growth Adjusted Constant Currency % (non-GAAP)
Three months ended December 31, 2016 | |||||||
Revenue Growth % (GAAP) | Favorable (unfavorable) FX impact | Divestiture impact | Revenue Growth Adjusted Constant Currency % (non-GAAP) | ||||
Software License | 21% | (1)% | —% | 22% | |||
Software Maintenance | 5% | (1)% | —% | 6% | |||
Cloud | 10% | 1% | —% | 9% | |||
Professional Services | 5% | —% | —% | 5% | |||
Software | 9% | (1)% | —% | 10% | |||
Services | 1% | (2)% | —% | 3% | |||
ATMs | 25% | (4)% | —% | 29% | |||
SCO | 140% | —% | —% | 140% | |||
POS | (1)% | —% | —% | (1)% | |||
IPS | (91)% | —% | (86)% | (5)% | |||
Hardware | 11% | (2)% | (17)% | 30% | |||
Total Revenue | 7% | (1)% | (6)% | 14% | |||
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 | NCR CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in millions, except per share amounts) | Schedule A |
For the Periods Ended December 31 | |||||||||||||||
Three Months | Twelve Months | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenue | |||||||||||||||
Products | $ | 805 | $ | 716 | $ | 2,737 | $ | 2,711 | |||||||
Services | 997 | 964 | 3,806 | 3,662 | |||||||||||
Total Revenue | 1,802 | 1,680 | 6,543 | 6,373 | |||||||||||
Cost of products | 615 | 533 | 2,102 | 2,072 | |||||||||||
Cost of services | 708 | 671 | 2,659 | 2,832 | |||||||||||
Total gross margin | 479 | 476 | 1,782 | 1,469 | |||||||||||
% of Revenue | 26.6 | % | 28.3 | % | 27.2 | % | 23.1 | % | |||||||
Selling, general and administrative expenses | 248 | 254 | 926 | 1,042 | |||||||||||
Research and development expenses | 83 | 55 | 242 | 230 | |||||||||||
Restructuring-related charges | 2 | 29 | 15 | 62 | |||||||||||
Income (loss) from operations | 146 | 138 | 599 | 135 | |||||||||||
% of Revenue | 8.1 | % | 8.2 | % | 9.2 | % | 2.1 | % | |||||||
Interest expense | (40 | ) | (42 | ) | (170 | ) | (173 | ) | |||||||
Other (expense), net | (17 | ) | (43 | ) | (50 | ) | (57 | ) | |||||||
Total other (expense), net | (57 | ) | (85 | ) | (220 | ) | (230 | ) | |||||||
Income (loss) before income taxes and discontinued operations | 89 | 53 | 379 | (95 | ) | ||||||||||
% of Revenue | 4.9 | % | 3.2 | % | 5.8 | % | (1.5 | )% | |||||||
Income tax expense | 17 | 5 | 92 | 55 | |||||||||||
Income (loss) from continuing operations | 72 | 48 | 287 | (150 | ) | ||||||||||
Loss from discontinued operations, net of tax | (11 | ) | (20 | ) | (13 | ) | (24 | ) | |||||||
Net income (loss) | 61 | 28 | 274 | (174 | ) | ||||||||||
Net income attributable to noncontrolling interests | 4 | — | 4 | 4 | |||||||||||
Net income (loss) attributable to NCR | $ | 57 | $ | 28 | $ | 270 | $ | (178 | ) | ||||||
Amounts attributable to NCR common stockholders: | |||||||||||||||
Income (loss) from continuing operations | $ | 68 | $ | 48 | $ | 283 | $ | (154 | ) | ||||||
Dividends on convertible preferred stock | (12 | ) | (4 | ) | (49 | ) | (4 | ) | |||||||
Net income (loss) from continuing operations attributable to NCR common stockholders | 56 | 44 | 234 | $ | (158 | ) | |||||||||
Loss from discontinued operations, net of tax | (11 | ) | (20 | ) | (13 | ) | (24 | ) | |||||||
Net income (loss) attributable to NCR common stockholders | $ | 45 | $ | 24 | $ | 221 | $ | (182 | ) | ||||||
Net income (loss) per share attributable to NCR common stockholders: | |||||||||||||||
Net income (loss) per common share from continuing operations | |||||||||||||||
Basic | $ | 0.45 | $ | 0.27 | $ | 1.86 | $ | (0.94 | ) | ||||||
Diluted | $ | 0.43 | $ | 0.27 | $ | 1.80 | $ | (0.94 | ) | ||||||
Net income (loss) per common share | |||||||||||||||
Basic | $ | 0.36 | $ | 0.15 | $ | 1.76 | $ | (1.09 | ) | ||||||
Diluted | $ | 0.35 | $ | 0.15 | $ | 1.71 | $ | (1.09 | ) | ||||||
Weighted average common shares outstanding | |||||||||||||||
Basic | 124.5 | 162.1 | 125.6 | 167.6 | |||||||||||
Diluted (continuing operations) | 157.4 | 164.6 | 157.4 | 167.6 | |||||||||||
Diluted (net income) | 128.6 | 164.6 | 129.2 | 167.6 | |||||||||||
(1) Diluted EPS is determined using the most dilutive measure, either including the impact of the dividends on NCR's Series A Convertible Preferred Shares in the calculation of net income or loss per common share from continuing operations and net income or loss per common share or including the impact of the conversion of such preferred stock into common stock in the calculation of the weighted average diluted shares outstanding.
9
| NCR CORPORATION REVENUE AND OPERATING INCOME SUMMARY (Unaudited) (in millions) | Schedule B |
For the Periods Ended December 31 | |||||||||||||||||||||||
Three Months | Twelve Months | ||||||||||||||||||||||
2016 | 2015 | % Change | % Change Adjusted Constant Currency | 2016 | 2015 | % Change | % Change Adjusted Constant Currency | ||||||||||||||||
Revenue by segment | |||||||||||||||||||||||
Software | $ | 502 | $ | 459 | 9% | 10% | $ | 1,841 | $ | 1,747 | 5% | 6% | |||||||||||
Software Gross Margin Rate | 53.8 | % | 53.2 | % | 51.8 | % | 51.9 | % | |||||||||||||||
Services | 598 | 590 | 1% | 3% | 2,306 | 2,218 | 4% | 6% | |||||||||||||||
Services Gross Margin Rate | 22.2 | % | 22.7 | % | 21.6 | % | 21.8 | % | |||||||||||||||
Hardware | 702 | 631 | 11% | 30% | 2,396 | 2,408 | —% | 9% | |||||||||||||||
Hardware Gross Margin Rate | 18.1 | % | 21.2 | % | 18.0 | % | 19.4 | % | |||||||||||||||
Total Revenue | $ | 1,802 | $ | 1,680 | 7% | 14% | $ | 6,543 | $ | 6,373 | 3% | 7% | |||||||||||
Gross Margin Rate | 29.4 | % | 30.5 | % | 28.8 | % | 29.1 | % | |||||||||||||||
Operating income by segment | |||||||||||||||||||||||
Software | $ | 172 | $ | 157 | $ | 577 | $ | 539 | |||||||||||||||
% of Revenue | 34.3 | % | 34.2 | % | 31.3 | % | 30.9 | % | |||||||||||||||
Services | 62 | 61 | 201 | 194 | |||||||||||||||||||
% of Revenue | 10.4 | % | 10.3 | % | 8.7 | % | 8.7 | % | |||||||||||||||
Hardware | 30 | 42 | 62 | 87 | |||||||||||||||||||
% of Revenue | 4.3 | % | 6.7 | % | 2.6 | % | 3.6 | % | |||||||||||||||
Subtotal-segment operating income | $ | 264 | $ | 260 | $ | 840 | $ | 820 | |||||||||||||||
% of Revenue | 14.7 | % | 15.5 | % | 12.8 | % | 12.9 | % | |||||||||||||||
Other adjustments (1) | 118 | 122 | 241 | 685 | |||||||||||||||||||
Total income (loss) from operations | $ | 146 | $ | 138 | $ | 599 | $ | 135 | |||||||||||||||
(1) | The following table presents the other adjustments for NCR: |
For the Periods Ended December 31 | |||||||||||||||
Three Months | Twelve Months | ||||||||||||||
In millions | 2016 | 2015 | 2016 | 2015 | |||||||||||
Restructuring / transformation costs | $ | 3 | $ | 38 | $ | 26 | $ | 74 | |||||||
Acquisition-related amortization of intangible assets | 28 | 31 | 123 | 125 | |||||||||||
Acquisition-related costs | 2 | 4 | 7 | 11 | |||||||||||
OFAC and FCPA investigations | — | — | — | 1 | |||||||||||
Loss on terminated contract receivable | — | 20 | — | 20 | |||||||||||
Pension mark-to-market adjustments | 85 | 29 | 85 | 454 | |||||||||||
Total other adjustments | $ | 118 | $ | 122 | $ | 241 | $ | 685 | |||||||
10
| NCR CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) (in millions, except per share amounts) | Schedule C |
December 31, 2016 | September 30, 2016 | December 31, 2015 | |||||||||
Assets | |||||||||||
Current assets | |||||||||||
Cash and cash equivalents | $ | 498 | $ | 318 | $ | 328 | |||||
Accounts receivable, net | 1,282 | 1,387 | 1,251 | ||||||||
Inventories | 699 | 776 | 643 | ||||||||
Other current assets | 278 | 270 | 327 | ||||||||
Total current assets | 2,757 | 2,751 | 2,549 | ||||||||
Property, plant and equipment, net | 287 | 289 | 322 | ||||||||
Goodwill | 2,727 | 2,737 | 2,733 | ||||||||
Intangibles, net | 672 | 704 | 798 | ||||||||
Prepaid pension cost | 94 | 132 | 130 | ||||||||
Deferred income taxes | 575 | 546 | 582 | ||||||||
Other assets | 561 | 552 | 521 | ||||||||
Total assets | $ | 7,673 | $ | 7,711 | $ | 7,635 | |||||
Liabilities and stockholders’ equity | |||||||||||
Current liabilities | |||||||||||
Short-term borrowings | $ | 50 | $ | 256 | $ | 13 | |||||
Accounts payable | 781 | 718 | 657 | ||||||||
Payroll and benefits liabilities | 234 | 212 | 189 | ||||||||
Deferred service revenue and customer deposits | 468 | 471 | 476 | ||||||||
Other current liabilities | 432 | 345 | 446 | ||||||||
Total current liabilities | 1,965 | 2,002 | 1,781 | ||||||||
Long-term debt | 3,001 | 3,033 | 3,239 | ||||||||
Pension and indemnity plan liabilities | 739 | 709 | 696 | ||||||||
Postretirement and postemployment benefits liabilities | 127 | 127 | 133 | ||||||||
Income tax accruals | 142 | 169 | 167 | ||||||||
Other liabilities | 138 | 151 | 79 | ||||||||
Total liabilities | 6,112 | 6,191 | 6,095 | ||||||||
Redeemable noncontrolling interests | 15 | 10 | 16 | ||||||||
Series A convertible preferred stock: par value $0.01 per share, 3.0 shares authorized, 0.9 shares issued and outstanding as of December 31, 2016 and September 30, 2016 and 0.8 shares issued and outstanding as of December 31, 2015 | 847 | 835 | 798 | ||||||||
Stockholders' equity | |||||||||||
NCR stockholders' equity: | |||||||||||
Preferred stock: par value $0.01 per share, 100.0 shares authorized, no shares issued and outstanding as of December 31, 2016, September 30, 2016 and December 31, 2015, respectively | — | — | — | ||||||||
Common stock: par value $0.01 per share, 500.0 shares authorized, 124.6, 124.0 and 133.0 shares issued and outstanding as of December 31, 2016, September 30, 2016, and December 31, 2015, respectively | 1 | 1 | 1 | ||||||||
Paid-in capital | 32 | 21 | — | ||||||||
Retained earnings | 867 | 822 | 869 | ||||||||
Accumulated other comprehensive loss | (205 | ) | (172 | ) | (150 | ) | |||||
Total NCR stockholders' equity | 695 | 672 | 720 | ||||||||
Noncontrolling interests in subsidiaries | 4 | 3 | 6 | ||||||||
Total stockholders' equity | 699 | 675 | 726 | ||||||||
Total liabilities and stockholders' equity | $ | 7,673 | $ | 7,711 | $ | 7,635 | |||||
11
| NCR CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in millions) | Schedule D |
For the Periods Ended December 31 | |||||||||||||||
Three Months | Twelve Months | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Operating activities | |||||||||||||||
Net income (loss) | 61 | $ | 28 | $ | 274 | $ | (174 | ) | |||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||||||
Loss from discontinued operations | 11 | 20 | 13 | 24 | |||||||||||
Depreciation and amortization | 85 | 79 | 344 | 308 | |||||||||||
Stock-based compensation expense | 16 | 10 | 61 | 42 | |||||||||||
Deferred income taxes | (29 | ) | (2 | ) | 10 | 24 | |||||||||
Gain on sale of property, plant and equipment and other assets | — | (1 | ) | — | (2 | ) | |||||||||
Loss on divestiture | 1 | — | 2 | — | |||||||||||
Impairment of long-lived and other assets | — | 47 | 2 | 63 | |||||||||||
Changes in assets and liabilities: | |||||||||||||||
Receivables | 49 | 108 | (89 | ) | 28 | ||||||||||
Inventories | 42 | 40 | (86 | ) | (46 | ) | |||||||||
Current payables and accrued expenses | 148 | (9 | ) | 216 | 8 | ||||||||||
Deferred service revenue and customer deposits | 10 | (53 | ) | 88 | 19 | ||||||||||
Employee benefit plans | 71 | 17 | 33 | 384 | |||||||||||
Other assets and liabilities | 60 | (19 | ) | 26 | 3 | ||||||||||
Net cash provided by operating activities | 525 | 265 | 894 | 681 | |||||||||||
Investing activities | |||||||||||||||
Expenditures for property, plant and equipment | (28 | ) | (32 | ) | (73 | ) | (79 | ) | |||||||
Proceeds from sales of property, plant and equipment | — | 19 | — | 19 | |||||||||||
Additions to capitalized software | (39 | ) | (33 | ) | (154 | ) | (150 | ) | |||||||
Proceeds from divestiture | — | — | 47 | — | |||||||||||
Other investing activities, net | (1 | ) | 1 | (9 | ) | 1 | |||||||||
Net cash used in investing activities | (68 | ) | (45 | ) | (189 | ) | (209 | ) | |||||||
Financing activities | |||||||||||||||
Short term borrowings, net | (6 | ) | 8 | (8 | ) | 8 | |||||||||
Payments on term credit facilities | (13 | ) | (71 | ) | (97 | ) | (383 | ) | |||||||
Payments on revolving credit facilities | (695 | ) | (717 | ) | (1,431 | ) | (1,694 | ) | |||||||
Borrowings on revolving credit facilities | 475 | 817 | 1,331 | 1,698 | |||||||||||
Debt issuance costs | (1 | ) | — | (9 | ) | — | |||||||||
Series A preferred stock issuance, net of issuance costs of $0 million, $26 million, $0 million, and $26 million, respectively | — | 794 | — | 794 | |||||||||||
Tender offer share repurchase, including repurchase costs of $0 million, $5 million, $0 million, and $5 million, respectively | — | (1,005 | ) | — | (1,005 | ) | |||||||||
Repurchases of Company common stock | — | — | (250 | ) | — | ||||||||||
Proceeds from employee stock plans | 5 | 3 | 15 | 15 | |||||||||||
Tax withholding payments on behalf of employees | (9 | ) | (6 | ) | (16 | ) | (16 | ) | |||||||
Other financing activities | — | — | (2 | ) | — | ||||||||||
Net cash used in financing activities | (244 | ) | (177 | ) | (467 | ) | (583 | ) | |||||||
Cash flows from discontinued operations | |||||||||||||||
Net cash used in discontinued operations | (9 | ) | (16 | ) | (39 | ) | (43 | ) | |||||||
Effect of exchange rate changes on cash and cash equivalents | (24 | ) | (2 | ) | (29 | ) | (29 | ) | |||||||
Decrease in cash and cash equivalents | 180 | 25 | 170 | (183 | ) | ||||||||||
Cash and cash equivalents at beginning of period | 318 | 303 | 328 | 511 | |||||||||||
Cash and cash equivalents at end of period | $ | 498 | $ | 328 | $ | 498 | $ | 328 | |||||||
12
1
Q4 2016 EARNINGS
CONFERENCE CALL
k
BILL NUTI, CHAIRMAN & CEO
MARK BENJAMIN, PRESIDENT & COO
BOB FISHMAN, CFO
February 9, 2017
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, are examples of forward-looking statements. The forward-looking statements in these materials include statements
about NCR’s omni-channel market momentum in orders and backlog at the start of 2017 and their effect on NCR’s future results; NCR’s plans for
additional share repurchases in 2017; expected areas of focus for NCR’s Services segment in 2017; hardware revenue growth and its effects on
attached and recurring revenue; NCR’s FY 2017, 2017 segment and Q1 2017 financial guidance and the expected type and magnitude of the
non-operational adjustments included in any forward-looking non-GAAP measures; NCR’s vision and strategy and its alignment with major trends
and customer activity; NCR’s backlog and key metrics and their expected impact on NCR’s 2017 financial success; NCR’s 2017 momentum and
the contribution of NCR’s sales funnel, orders and revenue growth to that momentum; expectations for margin expansion and the drivers of margin
expansion; and the expected drivers of NCR’s growth for the next decade. Forward-looking statements are not guarantees of future performance,
and there are a number of important factors that could cause actual outcomes and results to differ materially from the results contemplated by
such forward-looking statements, including those factors listed in Item 1a "Risk Factors" of NCR's Annual Report on Form 10-K filed with the
Securities and Exchange Commission (SEC) on February 26, 2016, and those factors detailed from time to time in NCR's other SEC reports.
These materials are dated February 9, 2017, and NCR does not undertake any obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
NON-GAAP MEASURES. While NCR reports its results in accordance with generally accepted accounting principles in the United States
(GAAP), comments made during this conference call and these materials will include or make reference to the following "non-GAAP" measures:
selected measures, such as period-over-period revenue growth, expressed on a constant currency basis and adjusted constant currency basis,
diluted earnings per share (non-GAAP), free cash flow conversion rate, free cash flow (FCF), gross margin rate (non-GAAP), gross margin (non-
GAAP), operating income (non-GAAP), interest and other expense (non-GAAP), income tax rate (non-GAAP), net income (non-GAAP), adjusted
EBITDA, net debt, operating expenses (non-GAAP), and income tax expense (non-GAAP). These measures are included to provide additional
useful information regarding NCR's financial results, and are not a substitute for their comparable GAAP measures. Explanations of these non-
GAAP measures, and reconciliations of these non-GAAP measures to their directly comparable GAAP measures, are included in the accompanying
"Supplementary & Non-GAAP Materials" and are available on the Investor Relations page of NCR's website at www.ncr.com. Descriptions of many
of these non-GAAP measures are also included in NCR's SEC reports.
USE OF CERTAIN TERMS. As used in these materials, (i) the term "recurring revenue" means the sum of cloud, hardware maintenance
and software maintenance revenue, (ii) The term “net annual contract value” or “net ACV” for any particular period means NCR’s net bookings for
cloud revenue during the period, and is calculated as twelve months of expected subscription revenues under new cloud contracts during such
period less twelve months of subscription revenues under cloud contracts that expired or were terminated during such period, and (iii)the term
"CC" means constant currency.
These presentation materials and the associated remarks made during this conference call
are integrally related and are intended to be presented and understood together.
NOTES TO INVESTORS
3
4
STRATEGIC MIX SHIFT DRIVING GROWTH
• Software Operating Income represents 69%
of total Operating Income
• Software Operating Income Margin
expanded 140 bps over the past 2 years to
31.3%
• Software Operating Income increased 5%
2-year CAGR and 7% in 2016
Hardware Services Software
2014 2015 2016
$126
$87 $62
$165 $194
$201
$526 $539
$577
Free Cash Flow Conversion Rate
Free Cash Flow
2014 2015 2016
$313
$409
$628
67%
86%
132%
• 42% 2-year Free Cash Flow CAGR
• Significant improvement in conversion of
Non-GAAP Net Income to Free Cash Flow
aided by shift in Operating Income mix
Software Driving Profitable Growth
Strong FCF Growth & Conversion Rate
Favorable Operating Income Mix
Free Cash Flow Generation
$ in millions
$ in millions
5
OMNI-CHANNEL MARKET
NCR's strategic offers include:
• Enables revenue growth, productivity gains, and modernized consumer
experiences from the transformation of physical and digital channels
• Solutions include: Branch, Store, Restaurant, and Venue Transformation
• Drives edge offerings: ATMs, SCO, mPOS, ePOS, Peripherals
• Drives service offerings: Consulting Services, Implementation Services,
Hardware Maintenance, Managed Services, High Availability
• 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
• Enables new business models driven by the growing digitalization
movement
• Solutions include: Real-Time Actionable Insights, Loyalty, Cloud/ATM
Security, Loss & Fraud Prevention, Inventory and Labor Management,
Cash Management, Secure Payments, Transaction Processing, Remote
Deposit, Digital Check Processing
6
Q4 2016 FINANCIAL RESULTS
Non-GAAP gross margin rate down 80 bps CC
Non-GAAP Diluted EPS up 30% CC FCF up 144% due to higher operating income
and improvements in working capital
FX
~(30 bps)
FX
~($0.07)
30.5% 29.4%
Q4 2015 Q4 2015 Q4 2016
$0.89 $1.07
Q4 2015 Q4 2016
$184
million
Q4 2015
$449
million
Q4 2016
Revenue Non-GAAP Gross Margin Rate
Non-GAAP Diluted EPS Free Cash Flow
Revenue up 14% adjusted CC
Recurring revenue up 4% CC, 40% of total revenue
FX ~($20M)
IPS ~($80M)
Q4 2016
IPS Sale and FX
$1.80 billion $1.68 billion
7
FY 2016 FINANCIAL RESULTS
Non-GAAP gross margin rate down 30 bps CC
Non-GAAP Diluted EPS up 15% CC FCF up 54% due to higher operating income and
improvements in working capital
No FX
impact
FX
~($0.14)
29.1% 28.8%
2015 2015 2016
$2.76 $3.02
2015 2016
$409
million
2015
$628
million
2016
Revenue Non-GAAP Gross Margin Rate
Non-GAAP Diluted EPS Free Cash Flow
Revenue up 7% adjusted CC
Recurring revenue up 4% CC, 43% of total revenue
FX ~($75M)
IPS ~($188M)
2016
IPS Sale and FX
$6.54 billion $6.37 billion
8
n Software - 53.8% GM rate
n Services - 22.2% GM rate
n Hardware - 18.1% GM rate
Q4 2016 SEGMENT RESULTS
Q4 2016 Operating Income
$264M
Software Revenue
Q4 2015 Q4 2016
$459
$502
Services Revenue
Q4 2015 Q4 2016
$590 $598
million million
Hardware Revenue
Q4 2015 Q4 2016
million
million
Up 10%
CC
Up 3%
CC
Up 30%
adjusted
CC (1)
(1) Adjusted CC revenue growth excludes ~$80 million of IPS revenue from Q4 2015.
Software
65%
Services
24%
Hardware
11%
IPS Sale & FX
$631 million $702 million
9
SOFTWARE
Q4 2016 Update
Key Highlights
Q4 2016 Q4 2015 % Change
% Change
Constant
Currency
Software License $103 $85 21% 22%
Unattached License 58 55 5% 5%
Software Maintenance 96 91 5% 6%
Cloud 147 134 10% 9%
Professional Services 156 149 5% 5%
Software Revenue $502 $459 9% 10%
Non-GAAP Gross Margin $270 $244 11% 11%
Non-GAAP Gross Margin Rate 53.8% 53.2% +60 bps +70 bps
Operating Income $172 $157 10% 10%
Operating Income as a % of
Revenue 34.3% 34.2% +10 bps +10 bps
• Software License growth of 22% driven primarily by Channel Transformation solutions
• Cloud revenue up 9% CC driven by higher net ACV bookings
• Q4 net ACV of $16 million; FY 2016 net ACV of $70 million compared to FY 2015 of $39 million
• Non-GAAP gross margin rate expansion driven by strong top line growth
$ in millions
10
SERVICES
Q4 2016 Update
Q4 2016 Q4 2015 % Change
% Change
Constant
Currency
Services Revenue $598 $590 1% 3%
Non-GAAP Gross Margin $133 $134 (1)% —%
Non-GAAP Gross Margin Rate 22.2% 22.7% (50) bps (60) bps
Operating Income $62 $61 2% 3%
Operating Income as a % of
Revenue 10.4% 10.3% +10 bps — bps
$ in millions
• Channel Transformation drove hardware maintenance and implementation wins for large complex deals
• Non-GAAP gross margin rate down due to investments in business process improvement initiatives which
are expected to drive future margin rate improvements
• Key areas of focus: 1) Drive a higher mix of managed services; 2) Productivity and efficiency
improvements; 3) Remote diagnostics and repair; and 4) Product life-cycle management
Key Highlights
11
HARDWARE
Q4 2016 Update
• ATM revenue growth driven by new product sales and acceptance of omni-channel ready products
• SCO revenue up significantly due to Store Transformation traction globally
• Non-GAAP gross margin rate declined due to continued ramp up of new product launches
• Hardware revenue growth expected to drive high margin attached revenue and future recurring revenue
Key Highlights
Q4 2016 Q4 2015 % Change % Change ConstantCurrency
ATMs $385 $307 25% 29%
Self-Checkout (SCO) 132 55 140% 140%
Point-of-Sale (POS) 177 179 (1)% (1)%
Interactive Printer Solutions 8 90 (91)% (5)% (1)
Hardware Revenue $702 $631 11% 30% (1)
Non-GAAP Gross Margin $127 $134 (5)% 1%
Non-GAAP Gross Margin Rate 18.1% 21.2% (310) bps (210) bps
Operating Income $30 $42 (29)% (15)%
Operating Income as a % of Revenue 4.3% 6.7% (240) bps (130) bps
$ in millions(1) Revenue also adjusted for the divestiture of IPS.
12
Q4 & FY 2016 FREE CASH FLOW
Q4 2016 Q4 2015 FY 2016 FY 2015
Cash Provided by Operating
Activities $525 $265 $894 $681
Total capital expenditures (67) (65) (227) (229)
Cash used in Discontinued
Operations (9) (16) (39) (43)
Free Cash Flow $449 $184 $628 $409
Free Cash Flow as a % of non-GAAP net income 132% 86%
$ in millions
13
NET DEBT & EBITDA METRICS
FY 2015 Q3 2016 FY 2016
Debt $3,252 $3,289 $3,051
Cash (328) (318) (498)
Net Debt $2,924 $2,971 $2,553
Adjusted EBITDA $1,005 $1,047 (1) $1,061 (1)
Net Debt / Adjusted EBITDA 2.9x 2.8x 2.4x
$ in millions, except metrics
(1) Adjusted EBITDA for the trailing twelve-month period.
14
2017 Guidance 2016 Growth Rates
Revenue (1) $6,600 - $6,720 $6,543 5% to 7%
GAAP Diluted EPS (2) $2.56 - $2.69 $1.80 42% to 49%
Non-GAAP Diluted EPS (1) (3) $3.25 - $3.35 $3.02 9% to 12%
Conversion rate
Free Cash Flow $500 - $525 $628 95% to 100%
FY 2017 GUIDANCE
(1) The 2017 revenue guidance and growth rate includes an expected unfavorable foreign currency impact of $95 million,
or ~2%. Revenue growth rates also exclude ~$143 million of IPS revenue, or ~2%, from 2016. The 2017 non-GAAP
diluted EPS guidance includes an expected foreign currency negative impact of $0.03.
(2) FY 2017 guidance does not include an estimate of the pension mark-to-market adjustments.
(3) For the 2017 guidance, we have assumed OIE of $210 million to $215 million, an effective tax rate of 25% and a share
count of 158 million compared to OIE of $214 million, an effective tax rate of 23% and a share count of 157 million in
2016.
$ millions, except per share amounts
15
2017 SEGMENT REVENUE GUIDANCE
Segment 2017e CC Growth Rates(1) FY 2017e FY 2016
Software 6% - 8% $1,940 - $1,960 $1,841
Cloud Revenue 6% - 8% $590 - $600 $556
Services 3% - 5% $2,320 - $2,360 2,306
Hardware (2) 5% - 8% $2,340 - $2,400 2,396
Total (1) (2) 5% - 7% $6,600 - $6,720 $6,543
$ in millions(1) The 2017 guidance includes an expected foreign currency negative impact of $95 million for revenue, or ~2%.
(2) The growth rates for Hardware revenue and total revenue are normalized for the sale of the IPS business, which was ~$143 million
of Hardware revenue in 2016.
16
Q1 2017 GUIDANCE
Q1 2017e Q1 2016 Growth Rates
Revenue (1) $1,450 - $1,470 $1,444 7% to 9%
GAAP Diluted EPS $0.17 - $0.25 $0.16 6% to 56%
Non-GAAP Diluted EPS (1) (2) $0.43 - $0.48 $0.38 23% to 37%
$ millions, except per share amounts
(1) The Q1 2017 revenue guidance and growth rate includes an expected foreign currency headwind of $17 million, or roughly
2%. The revenue growth also excludes ~$72 million of IPS revenue, or roughly 5%, from Q1 2016. The Q1 2017 non-GAAP
diluted EPS guidance includes an expected foreign currency negative impact of $0.03.
(2) For Q1 2017, we have assumed OIE of approximately $53 million, an effective tax rate of 28% and a share count of 158
million compared to OIE of $56 million, an effective tax rate of 27% and a share count of 160 million in Q1 2016.
17
▪ Continuing to improve execution
▪ NCR's vision and strategy aligned with major trends and customer
activity
▪ Strong backlog and key metrics point to a successful year to come
▪ Focused on sales funnel, orders, and revenue growth to maintain
momentum going into 2017
▪ Software growth combined with our business transformation
program is the key to margin expansion
▪ Omni-Channel, Channel Transformation, and Digital Enablement
are growth drivers for next decade
LOOKING FORWARD
SUPPLEMENTARY MATERIALS
19
Q4
2016
Q4
2015
As
Reported
Constant
Currency FY 2016 FY 2015
As
Reported
Constant
Currency
Revenue $1,802 $1,680 7% 14% (1) $6,543 $6,373 3% 7% (1)
Gross Margin (non-GAAP) 530 512 4% 6% $1,882 $1,857 1% 3%
Gross Margin Rate (non-GAAP) 29.4% 30.5% (110) bps (80) bps 28.8% 29.1% (30) bps (30) bps
Operating Expenses (non-GAAP) 266 252 6% 7% $1,042 $1,037 —% 2%
% of Revenue 14.8% 15.0% 15.9% 16.3%
Operating Income (non-GAAP) 264 260 2% 5% 840 820 2% 4%
% of Revenue 14.7% 15.5% (80) bps (50) bps 12.8% 12.9% (10) bps — bps
Interest and other expense (56) (51) 10% (4)% (214) (196) 9% —%
Income Tax Expense (non-GAAP) 36 53 (32)% 147 144 2%
Income Tax Rate (non-GAAP) 17% 25% 23% 23%
Net Income (non-GAAP) $168 $156 8% 17% $475 $476 —% 5%
Diluted EPS (non-GAAP) (2) $1.07 $0.89 20% 30% $3.02 $2.76 9% 15%
Q4 & FY 2016 OPERATIONAL RESULTS
(1) Adjusted CC revenue growth excludes $80 million of IPS revenue from Q4 2015 and $188 million from FY15.
(2) Q4 2016 includes $0.07 of unfavorable EPS impact, and FY2016 includes $0.14 of unfavorable EPS impact, related to foreign
currency headwinds. Diluted share count of 157 million in Q4 2016 and 175 million in Q4 2015.
$ millions, except per share amounts
20
Q4 2016 Q4 2015
As
Reported FY 2016 FY 2015
As
Reported
Revenue $1,802 $1,680 7% $6,543 $6,373 3%
Gross Margin 479 476 1% $1,782 $1,469 21%
Gross Margin Rate 26.6% 28.3% 27.2% 23.1%
Operating Expenses 333 338 (1)% $1,183 $1,334 (11)%
% of Revenue 18.5% 20.1% 18.1% 20.9%
Operating Income 146 138 6% 599 135 344%
% of Revenue 8.1% 8.2% 9.2% 2.1%
Interest and other expense (57) (85) (33)% (220) (230) (4)%
Income Tax Expense 17 5 240% 92 55 67%
Income Tax Rate 19% 9% 24% (58)%
Net Income $68 $48 42% $283 ($154) 284%
Diluted EPS $0.43 $0.27 59% $1.80 ($0.94) 291%
Q4 & FY 2016 GAAP RESULTS
$ millions, except per share amounts
21
Q4 & FY REVENUE BY SEGMENT
Q4 2016 Q4 2015 % Change
% Change
Adjusted
Constant
Currency
FY 2016 FY 2015 % Change
% Change
Adjusted
Constant
Currency
Software License $103 $85 21% 22% $341 $303 13% 13%
Software Maintenance 96 91 5% 6% 372 348 7% 8%
Cloud 147 134 10% 9% 556 536 4% 4%
Professional Services 156 149 5% 5% 572 560 2% 2%
Software $502 $459 9% 10% $1,841 $1,747 5% 6%
Services $598 $590 1% 3% $2,306 $2,218 4% 6%
ATMs $385 $307 25% 29% $1,221 $1,183 3% 5%
Self-Checkout (SCO) 132 55 140% 140% 351 187 88% 88%
Point-of-Sale (POS) 177 179 (1)% (1)% 674 692 (3)% (2)%
Interactive Printer
Solutions (IPS) 8 90 (91)% (5)% 150 346 (57)% (3)%
Hardware $702 $631 11% 30% $2,396 $2,408 —% 9%
Total Revenue $1,802 $1,680 7% 14% $6,543 $6,373 3% 7%
NON-GAAP MATERIALS
23
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 information
regarding NCR's financial results, and are not a substitute for their comparable GAAP measures.
Operating Income (non-GAAP), Diluted EPS (non-GAAP), Gross Margin (non-GAAP), Gross Margin Rate (non-GAAP), Interest and Other
expense (non-GAAP), Income Tax Rate (non-GAAP), Net Income (non-GAAP), Operating Expenses (non-GAAP) and Income Tax Expense
(non-GAAP). NCR’s operating income (non-GAAP), diluted earnings per share (non-GAAP), gross margin (non-GAAP), gross margin rate (non-
GAAP), interest and other expense (non-GAAP), income tax rate (non-GAAP), and net income (non-GAAP), operating expenses (non-GAAP) and
income tax expense (non-GAAP) are determined by excluding pension mark-to-market adjustments, pension settlements, pension curtailments
and pension special termination benefits and other special items, including amortization of acquisition related intangibles, from NCR's GAAP
income (loss) from operations, earnings per share, gross margin, gross margin rate, interest and other expense, effective tax rate net income,
operating expenses and income tax expense, respectively. Due to the non-operational nature of these pension and other special items, NCR's
management uses these non-GAAP measures to evaluate year-over-year operating performance. NCR also uses operating income (non-GAAP)
and non-GAAP diluted EPS, to manage and determine the effectiveness of its business managers and as a basis for incentive compensation.
NCR believes these measures are useful for investors because they provide a more complete understanding of NCR's underlying operational
performance, as well as consistency and comparability with NCR's past reports of financial results.
Free Cash Flow and Free Cash Flow Conversion Rate. NCR defines free cash flow as net cash provided by/used in operating activities and
cash flow provided by/used in discontinued operations less capital expenditures for property, plant and equipment, additions to capitalized software,
discretionary pension contributions and pension settlements. NCR's management uses free cash flow to assess the financial performance of the
Company and believes it is useful for investors because it relates the operating cash flow of the Company to the capital that is spent to continue
and improve business operations. In particular, free cash flow indicates the amount of cash generated after capital expenditures which can be
used for, among other things, investment in the Company's existing businesses, strategic acquisitions, strengthening the Company's balance
sheet, repurchase of Company stock and repayment of the Company's debt obligations. NCR also describes the measure free cash flow conversion
rate, which is calculated as free cash flow divided by non-GAAP net income. NCR’s management targets an annual free cash flow conversion rate
at or above the range described in these materials because management believes that a conversion rate at or above that range represents the
efficient conversion of non-GAAP net income to free cash flow for its business. Free cash flow and free cash flow conversion rate do not have
uniform definitions under GAAP and, therefore, NCR's definitions may differ from other companies' definition of these measures.
24
NON-GAAP MEASURES
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 monthly average exchange rates. Due to the overall variability of foreign exchange rates from period to period, NCR’s management uses
constant currency measures to evaluate period-over-period operating performance on a more consistent and comparable basis. NCR also presents
certain financial measures on an adjusted constant currency basis, which excludes both the effects of foreign currency translation, as described
above, and the results of NCR’s Interactive Printer Solutions (IPS) business for the comparable prior period after completion of the sale of the
business (which results were previously included in NCR’s Hardware segment). NCR completed the sale of all but the Middle East and Africa assets
of its Interactive Printer Solutions (IPS) division to Atlas Holdings LLC on May 27, 2016. NCR’s management believes that presentation of financial
measures without these results is more representative of the company's period-over-period operating performance, and provides additional insight
into historical and/or future performance, which may be helpful for investors.which the company is able to convert its non-GAAP net income to cash.
Net Debt and Adjusted EBITDA. NCR believes that Net Debt provides useful information to investors because NCR’s management reviews Net
Debt as part of its management of overall liquidity, financial flexibility, capital structure and leverage. In addition, certain debt rating agencies, creditors
and credit analysts monitor NCR’s Net Debt as part of their assessments of NCR’s business. NCR determines Net Debt based on its total debt less
cash and cash equivalents, with total debt being defined as total short-term borrowings plus total long-term debt.
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 its ability to fund discretionary
spending such as capital expenditures, strategic acquisitions and other investments. NCR determines Adjusted EBITDA for a given period based
on its GAAP income (loss) from continuing operations plus interest expense, net; plus income tax expense (benefit); plus depreciation and
amortization; plus other income (expense); plus pension expense (benefit); and plus special items. NCR believes that its ratio of net debt to Adjusted
EBITDA provides useful information to investors because it is an indicator of the company's ability to meet its future financial obligations.
NCR believes that its ratio of Net Debt to Adjusted EBITDA provides useful information to investors because it is an indicator of the company's ability
to meet its future financial obligations. In addition, the Net Debt to Adjusted EBITDA ratio is measures frequently used by investors and credit rating
agencies. The Net Debt to Adjusted EBITDA ratio is calculated by dividing Net Debt by trailing twelve-month Adjusted EBITDA.
NCR management's definitions and calculations of these non-GAAP measures may differ from similarly-titled measures reported by other companies
and cannot, therefore, be compared with similarly-titled measures of other companies. These non-GAAP measures should not be considered as
substitutes for, or superior to, results determined in accordance with GAAP. These non-GAAP measures are reconciled to their corresponding GAAP
measures in the following slides and elsewhere in these materials. These reconciliations and other information regarding these non-GAAP measures
are also available on the Investor Relations page of NCR's website at www.ncr.com.
25
Net Income from Continuing Operations Attributable to NCR (GAAP) to
Adjusted EBITDA (non-GAAP)
in millions FY 2015
Q3 2016
LTM FY 2016
Net Income from Continuing Operations Attributable to NCR (GAAP) ($154) $263 $283
Pension Mark-to-Market Adjustments 454 29 85
Restructuring/Transformation Costs 74 61 26
Acquisition-Related Amortization of Intangibles 125 126 123
Acquisition-Related Costs 11 9 7
Reserve related to a subcontract in MEA 20 20 —
Divestiture and Liquidation Losses 34 39 6
OFAC and FCPA Investigations 1 — —
Net Income from Continuing Operations Attributable to
Noncontrolling Interests 4 — 4
Interest Expense 173 172 170
Interest Income (5) (5) (4)
Depreciation and Amortization 171 198 208
Income Taxes 55 80 92
Stock Compensation Expense 42 55 61
Adjusted EBITDA (non-GAAP) $1,005 $1,047 $1,061
GAAP TO NON-GAAP RECONCILIATION
26
in millions (except per share amounts)
Q4 QTD
2016
GAAP
Restructuring /
Transformation
Costs
Acquisition-
related
amortization
of intangibles
Acquisition-
related
costs
Pension mark-to-
market
adjustments
Divestiture
and
Liquidation
Losses
Q4 QTD
2016
non-GAAP
Product revenue $805 $— $— $— $— $— $805
Service revenue 997 — — — — — 997
Total revenue 1,802 — — — — — 1,802
Cost of products 615 — (7) — (34) — 574
Cost of services 708 — (6) — (4) — 698
Gross margin 479 — 13 — 38 — 530
Gross margin rate 26.6% —% 0.7% —% 2.1% —% 29.4%
Selling, general and administrative expenses 248 (1) (15) (2) (24) — 206
Research and development expenses 83 — — — (23) — 60
Restructuring-related charges 2 (2) — — — — —
Total operating expenses 333 (3) (15) (2) (47) — 266
Total operating expense as a % of revenue 18.5% (0.2)% (0.8)% (0.1)% (2.6)% —% 14.8%
Income (loss) from operations 146 3 28 2 85 — 264
Income (loss) from operations as a % of revenue 8.1% 0.2% 1.6% 0.1% 4.7% —% 14.7%
Interest and Other (expense) income, net (57) — — — — 1 (56)
Income (loss) from continuing operations before income taxes 89 3 28 2 85 1 208
Income tax expense (benefit) 17 2 9 — 7 1 36
Effective tax rate 19% 17%
Income (loss) from continuing operations 72 1 19 2 78 — 172
Net income (loss) attributable to noncontrolling interests 4 — — — — — 4
Income (loss) from continuing operations (attributable to
NCR) $68 $1 $19 $2 $78 $— $168
Diluted earnings per share $0.43 $0.01 $0.12 $0.01 $0.50 $— $1.07
157.4 157.4
GAAP TO NON-GAAP RECONCILIATION
Q4 2016 QTD
27
in millions (except per share amounts)
Q4 QTD
2016
GAAP
Q4 QTD
2016
non-GAAP
Income (loss) from continuing operations attributable to NCR
common stockholders:
Income (loss) from continuing operations (attributable to NCR) $68 $168
Dividends on convertible preferred shares — —
Income (loss) 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 28.8 28.8
Total shares used in diluted earnings per share 157.4 157.4
Diluted earnings per share (1) $0.43 $1.07
GAAP TO NON-GAAP RECONCILIATION
Q4 2016 QTD
(1) GAAP and non-GAAP diluted EPS are determined using the most dilutive measure, either including
the impact of the dividends on NCR's Series A Convertible Preferred Shares in the calculation of net
income or loss available to common stockholders or including the impact of the conversion of such
preferred stock into common stock in the calculation of the weighted average diluted shares outstanding.
Therefore, GAAP diluted EPS and non-GAAP diluted EPS may be calculated using different methods,
and may not mathematically reconcile.
28
in millions (except per share amounts)
Q4 QTD
2015 GAAP
Restructuring
plan
Acquisition-
related
amortization
of intangibles
Acquisition-
related costs
Loss on
terminated
contract
receivable
Loss on
pending sale
of IPS
business
Pension mark-
to-market
adjustments
Q4 QTD 2015
non-GAAP
Product revenue $716 $— $— $— $— $— $— $716
Service revenue 964 — — — — — — 964
Total revenue 1,680 — — — — — — 1,680
Cost of products 533 (2) (10) — — — (3) 518
Cost of services 671 (7) (6) — — — (8) 650
Gross margin 476 9 16 — — — 11 512
Gross margin rate 28.3% 0.5% 1.0% —% —% —% 0.7% 30.5%
Selling, general and administrative expenses 254 — (15) (4) (20) — (10) 205
Research and development expenses 55 — — — — — (8) 47
Restructuring-related charges 29 (29) — — — — — —
Total operating expenses 338 (29) (15) (4) (20) — (18) 252
Total operating expense as a % of revenue 20.1% (1.7)% (1.0)% (0.2)% (1.2)% —% (1.0)% 15.0%
Income (loss) from operations 138 38 31 4 20 — 29 260
Income (loss) from operations as a % of revenue 8.2% 2.3% 1.9% 0.2% 1.2% —% 1.7% 15.5%
Interest and Other (expense) income, net (85) — — — — 34 — (51)
Income (loss) from continuing operations before
income taxes
53 38 31 4 20 34 29 209
Income tax expense (benefit) 5 14 10 1 7 5 11 53
Effective tax rate 9% 25%
Income (loss) from continuing operations 48 24 21 3 13 29 18 156
Net income (loss) attributable to noncontrolling
interests
— — — — — — — —
Income (loss) from continuing operations
(attributable to NCR)
$48 $24 $21 $3 $13 $29 $18 $156
Diluted earnings per share $0.27 $0.14 $0.12 $0.02 $0.07 $0.17 $0.10 $0.89
Diluted shares outstanding 164.6 174.7
GAAP TO NON-GAAP RECONCILIATION
Q4 2015 QTD
29
in millions (except per share amounts)
Q4 QTD
2015
GAAP
Q4 QTD 2015
non-GAAP
Income (loss) from continuing operations attributable to NCR
common stockholders:
Income (loss) from continuing operations (attributable to NCR) $48 $156
Dividends on convertible preferred shares (4) —
Income (loss) from continuing operations attributable to NCR common
stockholders
$44 $156
Weighted average outstanding shares:
Weighted average diluted shares outstanding 164.6 164.6
Weighted as-if converted preferred shares — 10.1
Total shares used in diluted earnings per share 164.6 174.7
Diluted earnings per share (1) $0.27 $0.89
GAAP TO NON-GAAP RECONCILIATION
Q4 2015 QTD
(1) GAAP and non-GAAP diluted EPS are determined using the most dilutive measure, either including
the impact of the dividends on NCR's Series A Convertible Preferred Stock in the calculation of net
income or loss available to common stockholders or including the impact of the conversion of such
preferred stock into common stock in the calculation of the weighted average diluted shares outstanding.
Therefore, GAAP diluted EPS and non-GAAP diluted EPS may be calculated using different methods,
and may not mathematically reconcile.
30
in millions (except per share amounts)
FY 2016
GAAP
Restructuring /
Transformation
Costs
Acquisition-
related
amortization
of intangibles
Acquisition-
related
costs
Pension
mark-to-
market
adjustments
Divestiture
and
Liquidation
Losses
FY 2016
non-GAAP
Product revenue $2,737 $— $— $— $— $— $2,737
Service revenue 3,806 — — — — — 3,806
Total revenue 6,543 — — — — — 6,543
Cost of products 2,102 — (34) — (34) — 2,034
Cost of services 2,659 (4) (24) — (4) — 2,627
Gross margin 1,782 4 58 — 38 — 1,882
Gross margin rate 27.2% 0.1% 0.8% —% 0.6% —% 28.8%
Selling, general and administrative expenses 926 (7) (65) (7) (24) — 823
Research and development expenses 242 — — — (23) — 219
Restructuring-related charges 15 (15) — — — — —
Total operating expenses 1,183 (22) (65) (7) (47) — 1,042
Total operating expense as a % of revenue 18.1% (0.3)% (1.0)% (0.1)% (0.7)% —% 15.9%
Income (loss) from operations 599 26 123 7 85 — 840
Income (loss) from operations as a % of revenue 9.2% 0.4% 1.9% 0.1% 1.3% —% 12.8%
Interest and Other (expense) income, net (220) — — — — 6 (214)
Income (loss) from continuing operations before income taxes 379 26 123 7 85 6 626
Income tax expense (benefit) 92 5 40 2 7 1 147
Effective tax rate 24% 23%
Income (loss) from continuing operations 287 21 83 5 78 5 479
Net income (loss) attributable to noncontrolling interests 4 — — — — — 4
Income (loss) from continuing operations (attributable to
NCR) $283 $21 $83 $5 $78 $5 $475
Diluted earnings per share $1.80 $0.13 $0.53 $0.03 $0.50 $0.03 $3.02
157.4 157.4
GAAP TO NON-GAAP RECONCILIATION
FY 2016
31
in millions (except per share amounts)
FY 2016
GAAP
FY 2016
non-GAAP
Income (loss) from continuing operations attributable to NCR
common stockholders:
Income (loss) from continuing operations (attributable to NCR) $283 $475
Dividends on convertible preferred shares — —
Income (loss) 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
Total shares used in diluted earnings per share 157.4 157.4
Diluted earnings per share (1) $1.80 $3.02
GAAP TO NON-GAAP RECONCILIATION
FY 2016
(1) GAAP and non-GAAP diluted EPS are determined using the most dilutive measure, either including
the impact of the dividends on NCR's Series A Convertible Preferred Shares in the calculation of net
income or loss available to common stockholders or including the impact of the conversion of such
preferred stock into common stock in the calculation of the weighted average diluted shares outstanding.
Therefore, GAAP diluted EPS and non-GAAP diluted EPS may be calculated using different methods,
and may not mathematically reconcile.
32
in millions (except per share amounts)
FY 2015
GAAP
Restructuring
plan
Acquisition-
related
amortization
of intangibles
Acquisition-
related
costs
Loss on
terminated
contract
receivable
Loss on
pending sale
of IPS
business
OFAC and
FCPA
Investigations
Pension
mark-to-
market
adjustments
FY 2015
non-GAAP
Product revenue $2,711 $— $— $— $— $— $— $— $2,711
Service revenue 3,662 — — — — — — — 3,662
Total revenue 6,373 — — — — — — — 6,373
Cost of products 2,072 (5) (38) — — — — (13) 2,016
Cost of services 2,832 (7) (25) — — — — (300) 2,500
Gross margin 1,469 12 63 — — — — 313 1,857
Gross margin rate 23.1% 0.2% 1.0% —% —% —% —% 4.8% 29.1%
Selling, general and administrative expenses 1,042 — (62) (11) (20) — (1) (123) 825
Research and development expenses 230 — — — — — — (18) 212
Restructuring-related charges 62 (62) — — — — — — —
Total expenses 1,334 (62) (62) (11) (20) — (1) (141) 1,037
Total expense as a % of revenue 20.9% (1.0)% (1.0)% (0.2)% (0.3)% —% —% (2.1)% 16.3%
Income (loss) from operations 135 74 125 11 20 — 1 454 820
Income (loss) from operations as a % of
revenue 2.1% 1.2% 2.0% 0.2% 0.3% —% —% 7.1% 12.9%
Interest and Other (expense) income, net (230) — — — — 34 — — (196)
Income (loss) from continuing operations before
income taxes (95) 74 125 11 20 34 1 454 624
Income tax expense (benefit) 55 24 40 3 7 5 1 9 144
Effective tax rate (58)% 23%
Income (loss) from continuing operations (150) 50 85 8 13 29 — 445 480
Net income (loss) attributable to noncontrolling
interests 4 — — — — — — — 4
Income (loss) from continuing operations
(attributable to NCR) ($154) $50 $85 $8 $13 $29 $— $445 $476
Diluted earnings per share ($0.94) $0.29 $0.49 $0.05 $0.08 $0.17 $— $2.58 $2.76
Diluted Shares outstanding 167.6 172.2
GAAP TO NON-GAAP RECONCILIATION
FY 2015
33
in millions (except per share amounts)
FY 2015
GAAP
FY 2015
non-GAAP
Income (loss) from continuing operations attributable to NCR
common stockholders:
Income (loss) from continuing operations (attributable to NCR) ($154) $476
Dividends on convertible preferred shares (4) —
Income (loss) from continuing operations attributable to NCR common
stockholders
($158) $476
Weighted average outstanding shares:
Weighted average basic shares outstanding 167.6 —
Weighted average diluted shares outstanding — 170.2
Weighted as-if converted preferred shares — 2.0
Total shares used in diluted earnings per share 167.6 172.2
Diluted earnings per share (1) ($0.94) $2.76
GAAP TO NON-GAAP RECONCILIATION
FY 2015
(1) GAAP and non-GAAP diluted EPS are determined using the most dilutive measure, either including
the impact of the dividends on NCR's Series A Convertible Preferred Stock in the calculation of net
income or loss available to common stockholders or including the impact of the conversion of such
preferred stock into common stock in the calculation of the weighted average diluted shares outstanding.
Therefore, GAAP diluted EPS and non-GAAP diluted EPS may be calculated using different methods,
and may not mathematically reconcile.
34
in millions (except per share amounts)
Q1 QTD
2016
GAAP
Restructuring /
Transformation Costs
Acquisition-
related
amortization
of intangibles
Acquisition- related
costs
Q1 QTD
2016
non-GAAP
Product revenue $548 $— $— $— $548
Service revenue 896 — — — 896
Total revenue 1,444 — — — 1,444
Cost of products 442 — (10) — 432
Cost of services 622 — (6) — 616
Gross margin 380 — 16 — 396
Gross margin rate 26.3% —% 1.1% —% 27.4%
Selling, general and administrative expenses 224 (2) (16) (2) 204
Research and development expenses 53 — — — 53
Restructuring-related charges 2 (2) — — —
Total expenses 279 (4) (16) (2) 257
Total expense as a % of revenue 19.3% (0.3)% (1.1)% (0.1)% 58.1%
Income (loss) from operations 101 4 32 2 139
Income (loss) from operations as a % of revenue 7.0% 0.3% 2.2% 0.1% 31.4%
Interest and Other (expense) income, net (56) — — — (56)
Income (loss) from continuing operations before income taxes 45 4 32 2 83
Income tax expense (benefit) 13 (1) 9 1 22
Effective tax rate 29% 27%
Income (loss) from continuing operations 32 5 23 1 61
Net income (loss) attributable to noncontrolling interests — — — — —
Income (loss) from continuing operations (attributable to NCR) $32 $5 $23 $1 $61
Diluted earnings per share $0.16 $0.03 $0.14 $0.01 $0.38
Diluted shares outstanding 160.4 160.4
GAAP TO NON-GAAP RECONCILIATION
Q1 2016 QTD
35
in millions (except per share amounts)
Q1 QTD
2016
GAAP
Q1 QTD
2016
non-GAAP
Income (loss) from continuing operations attributable to NCR
common stockholders:
Income (loss) from continuing operations (attributable to NCR) $32 $61
Dividends on convertible preferred shares (11) —
Income (loss) from continuing operations attributable to NCR common
stockholders
$21 $61
Weighted average outstanding shares:
Weighted average diluted shares outstanding 132.7 132.7
Weighted as-if converted preferred shares — 27.7
Total shares used in diluted earnings per share 132.7 160.4
Diluted earnings per share (1) $0.16 $0.38
(1) GAAP and non-GAAP diluted EPS are determined using the most dilutive measure, either including
the impact of the dividends on NCR's Series A Convertible Preferred Shares in the calculation of net
income or loss available to common stockholders or including the impact of the conversion of such
preferred stock into common stock in the calculation of the weighted average diluted shares outstanding.
Therefore, GAAP diluted EPS and non-GAAP diluted EPS may be calculated using different methods,
and may not mathematically reconcile.
GAAP TO NON-GAAP RECONCILIATION
Q1 2016 QTD
36
GAAP TO NON-GAAP RECONCILIATION
Revenue Growth % (GAAP) to
Revenue Growth Adjusted Constant Currency % (non-GAAP)
Q4 2016 QTD Q4 2016 YTD
Revenue
Growth %
(GAAP)
Favorable
(unfavorable
) FX impact
Divestiture
impact
Revenue
Growth
Adjusted
Constant
Currency %
(non-GAAP)
Revenue
Growth %
(GAAP)
Favorable
(unfavorable)
FX impact
Divestiture
impact
Revenue
Growth
Adjusted
Constant
Currency %
(non-GAAP)
Software License 21% (1)% —% 22% 13% —% —% 13%
Software Maintenance 5% (1)% —% 6% 7% (1)% —% 8%
Cloud 10% 1% —% 9% 4% —% —% 4%
Professional Services 5% —% —% 5% 2% —% —% 2%
Software 9% (1)% —% 10% 5% (1)% —% 6%
Services 1% (2)% —% 3% 4% (2)% —% 6%
ATMs 25% (4)% —% 29% 3% (2)% —% 5%
Self-Checkout (SCO) 140% —% —% 140% 88% —% —% 88%
Point-of-Sale (POS) (1)% —% —% (1)% (3)% (1)% —% (2)%
Interactive Printer
Solutions (IPS) (91)% —% (86)% (5)% (57)% (1)% (53)% (3)%
Hardware 11% (2)% (17)% 30% —% —% (9)% 9%
Total Revenue 7% (1)% (6)% 14% 3% (1)% (3)% 7%
37
GAAP TO NON-GAAP RECONCILIATION
Operating Income Growth % (GAAP) to
Operating Income Growth % on a Constant Currency Basis (non-GAAP)
Q4 2016 QTD
Operating Income
Growth % Reported
Favorable (unfavorable)
FX impact
Constant Currency
Operating Income
Growth % (non-GAAP)
Software 10% —% 10%
Services 2% (1)% 3%
Hardware (29)% (14)% (15)%
Total Operating
Income 2% (3)% 5%
38
GAAP TO NON-GAAP RECONCILIATION
Operating Income Growth bps (GAAP) to
Operating Income Growth bps on a Constant Currency Basis (non-GAAP)
Q4 2016 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 +10 bps +10 bps — bps
Hardware -240 bps -110 bps -130 bps
Total Operating Income -80 bps -30 bps -50 bps
39
GAAP TO NON-GAAP RECONCILIATION
Q1 2017e FY 2017e
Diluted EPS (GAAP) (1) $0.17 - $0.25 $2.56 - $2.69
Restructuring Plan $0.10 - $0.13 $0.15 - $0.18
Acquisition-Related Amortization of Intangibles 0.12 0.48
Acquisition-Related Costs 0.01 0.03
Divestiture and Liquidation Losses — —
Non-GAAP Diluted EPS $0.43 - $0.48 $3.25 - $3.35
Diluted Earnings per Share (GAAP) to
Diluted Earnings per Share (non-GAAP)
(1) Except for the adjustments noted herein as well as the pending divestiture of the Interactive Printer Solutions business, this guidance does not include the effects of
any future acquisitions/divestitures, restructuring activities, pension mark-to-market adjustments, taxes or other events, which are difficult to predict and which may
or may not be significant.
40
GAAP TO NON-GAAP RECONCILIATION
FY 2017e
Cash Provided by Operating Activities $805 - $830
Total capital expenditures (1) (285)
Cash used in Discontinued Operations (20)
Free Cash Flow $500 - $525
(1) The total capital expenditures of $285 million in 2017 includes $70 million related to the new world headquarters in Atlanta, Georgia. This $70 million is offset by $45
million of expected reimbursements by the lessor included in net cash provided by operating activities.
41