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): July 20, 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 July 20, 2017, the Company issued a press release setting forth its second quarter 2017 financial results along with its third quarter 2017 and updated fiscal year 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 July 20, 2017, the Company will hold its previously announced conference call to discuss its second quarter 2017 results, its third quarter 2017 financial outlook and updated fiscal year 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 July 20, 2017 |
99.2 | Supplemental materials, dated July 20, 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: July 20, 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 July 20, 2017
99.2 Supplemental materials, dated July 20, 2017
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 | NEWS RELEASE | |
July 20, 2017
NCR Announces Second Quarter 2017 Results
DULUTH, Ga. - NCR Corporation (NYSE: NCR) reported financial results today for the three months ended June 30, 2017. Second quarter highlights include:
• | GAAP diluted EPS of $0.64, up 31% from $0.49 in the prior year; Non-GAAP diluted EPS of $0.80, up 13% constant currency from $0.72 in the prior year |
• | Revenue of $1.59 billion, down 2% as reported and up 3% excluding FX and the IPS divestiture |
• | Software revenue up 3% driven by cloud growth of 9%; Net ACV of $18 million in the quarter, up 13% |
• | GAAP gross margin rate expanded 160 basis points to 29.1%; Non-GAAP gross margin rate expanded 150 basis points constant currency to 30.1% |
• | GAAP operating margin rate expanded 110 basis points to 11.2%; Non-GAAP operating margin rate expanded 90 basis points constant currency to 13.5% |
• | 2017 Revenue, diluted EPS, and cash flow guidance reaffirmed |
"The second quarter is a great example of the strength of NCR's transformed business model over the last decade. The diversity of our revenue streams and growing strength in software, particularly cloud, drove financial results that were in-line with our expectations and keep us on target to achieve our full year outlook," said Chairman and CEO Bill Nuti. "We are clearly benefiting from the breadth of our solution offers, and our customers' increasing investments in omni-channel software, channel transformation, and digital enablement solutions across all of our end-markets. It is also clear that we continue to gain market share in strategic areas that drive recurring revenue, such as cloud and Services, and in an expanding smart-edge of the enterprise, including self-checkout and new modalities of point-of-sale, such as mobile POS, and interactive POS devices in new markets. As we move into the second half of the year, our goal is to further expand our leadership position in the omni-channel market, while continuing to focus on disruptive innovation, solution development, and market-leading Services delivery."
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 (or Net ACV) and the non-GAAP measures include free cash flow and others with the words “non-GAAP," "adjusted," or "constant currency" 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.
Second Quarter 2017 Operating Results
Revenue
Second quarter revenue of $1.59 billion was down 2% year-over-year. On an adjusted constant currency basis, second quarter revenue was up 3%. Foreign currency fluctuations and the IPS divestiture had an unfavorable impact on the revenue comparison of 2% and 3%, respectively.
The following table shows the revenue by segment for the second quarter:
$ in millions | 2017 | 2016 | % Change | % Change Adjusted Constant Currency | |||||||||
Software License | $ | 77 | $ | 82 | (6 | %) | (6 | %) | |||||
Software Maintenance | 91 | 91 | — | % | 1 | % | |||||||
Cloud | 145 | 133 | 9 | % | 9 | % | |||||||
Professional Services | 151 | 146 | 3 | % | 5 | % | |||||||
Software Revenue | $ | 464 | $ | 452 | 3 | % | 3 | % | |||||
Services Revenue | $ | 588 | $ | 574 | 2 | % | 4 | % | |||||
ATM | $ | 227 | $ | 286 | (21 | %) | (20 | %) | |||||
SCO | 96 | 70 | 37 | % | 37 | % | |||||||
POS | 213 | 180 | 18 | % | 20 | % | |||||||
IPS | 5 | 58 | (91 | %) | (21 | %) | |||||||
Hardware Revenue | $ | 541 | $ | 594 | (9 | %) | 1 | % | |||||
Total Revenue | $ | 1,593 | $ | 1,620 | (2 | %) | 3 | % | |||||
Software revenue was up 3% on a constant currency basis primarily due to continued demand for NCR's channel transformation with increases in cloud revenues of 9% and professional services of 5%. Software license revenue was down 6% due to unattached software license revenue that is now expected in the back half of the year. Software maintenance revenues returned to growth.
Services revenue was up 4% on a constant currency basis driven by hardware maintenance growth as a result of improving channel transformation trends, combined with increased managed and implementation services.
Hardware revenue was up 1% on a constant currency basis due to continued growth in SCO of 37% and an increase in POS revenues of 20%, driven by ongoing momentum in channel transformation. ATM revenues declined 20%, as anticipated. ATM revenue is expected to improve in the fourth quarter as larger customer roll-outs are scheduled to take place.
Gross Margin
Second quarter gross margin of $463 million increased 4% from $446 million. Second quarter gross margin (non-GAAP) of $479 million increased 3% from $465 million. Gross margin rate was 29.1%, up from 27.5%. Gross margin rate (Non-GAAP) was 30.1%, up from 28.7%. The increase in gross margin was due to continued focus on productivity improvements, particularly in our Services segment.
Expenses
Second quarter operating expenses of $285 million increased from $283 million. Second quarter operating expenses (non-GAAP) of $264 million increased from $258 million. The increase in expenses was a result of increased investment in research and development.
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Operating Income
Second quarter operating income of $178 million increased 9% from $163 million. Second quarter operating income (non-GAAP) of $215 million increased 4% from $207 million. Operating margin rate was 11.2%, up from 10.1%. Operating margin rate (non-GAAP) was 13.5%, up from 12.8%. Operating income was up as a result of higher revenue and gross margin rate expansion, offset by higher operating expenses.
Other (Expense)
Second quarter other (expense) of $48 million decreased 17% from $58 million. Second quarter other (expense) (non-GAAP) of $48 million decreased 9% from $53 million. The decrease was primarily due to a more favorable foreign currency impact and lower interest expense compared to the prior year period.
Income Tax Expense
Second quarter income tax expense of $33 million increased from $31 million. Second quarter income tax expense (non-GAAP) of $45 million was flat.
Net Income from Continuing Operations Attributable to NCR
Second quarter net income from continuing operations attributable to NCR of $97 million increased from $76 million. Second quarter net income from continuing operations attributable to NCR (non-GAAP) of $122 million increased from $111 million.
Cash Flow
Second quarter cash provided by operating activities of $95 million decreased from $121 million. Free cash flow was $18 million in the second quarter of 2017 as compared to $55 million in the second quarter of 2016. The decreases were due to higher working capital needs as we plan for increased revenues later in the year. Year-to-date cash provided by operating activities was $138 million compared to $144 million in the prior year, and year-to-date free cash flow was $6 million compared to free cash flow of $26 million in the prior year.
2017 Outlook
We are reaffirming our full year 2017 revenue guidance. Revenue is expected to be $6.63 billion to $6.75 billion, which represents expected revenue growth of 1% to 3% as reported and 4% to 6% adjusted constant currency. The 2017 revenue guidance includes expected foreign currency headwinds of $25 million in revenue. The 2017 expected growth rates also exclude approximately $124 million of IPS revenue from 2016 due to the IPS divestiture in May 2016.
We are also reaffirming our GAAP diluted earnings per share guidance of $2.20 to $2.32, and our non-GAAP diluted earnings per share guidance of $3.32 to $3.42. We expect GAAP diluted earnings per share to be up 22% to 29% and non-GAAP diluted earnings per share to be up 10% to 13% constant currency. The 2017 non-GAAP diluted earnings per share guidance includes an expected favorable foreign currency impact of $0.01.
Additionally, we continue to expect net cash provided by operating activities to be $805 million to $830 million and free cash flow to be $500 million to $525 million, or approximately 95% to 100% of non-GAAP net income.
Q3 2017 Outlook
For the third quarter of 2017, revenue is expected to be $1.66 billion to $1.70 billion, GAAP diluted earnings per share is expected to be $0.65 to $0.72, and non-GAAP diluted earnings per share is expected to be $0.88 to $0.93. The third quarter 2017 guidance includes expected foreign currency headwinds of $10 million in revenue and $0.02 in diluted earnings per share.
NCR will provide additional information regarding its third quarter and full year 2017 guidance during its second quarter earnings conference call and webcast.
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2017 Second Quarter Earnings Conference Call
A conference call is scheduled for today at 4:30 p.m. (EDT) to discuss the second quarter 2017 results and guidance for third 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 (United States/Canada Toll-free) or 786-460-7169 (International Toll) and entering the participant passcode 3741909.
More information on NCR’s Q2 2017 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 33,000 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: https://www.linkedin.com/company/ncr-corporation
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 growing strength in software; the expectation of continued gains in market share and the expansion of smart-edge devices; NCR’s goals for the second half of the year; the completion of scheduled large customer ATM roll-outs and expected improvement in ATM revenue in the back half of 2017; and NCR’s full-year and third quarter financial guidance and outlook (including the sections entitled “2017 Outlook” and “Q3 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: the strength of end-market demand for ATMs and other financial services hardware; domestic and global economic and credit conditions including, in particular, those resulting from uncertainty in the "BRIC" economies, economic sanctions against Russia, the determination by Britain to exit the European Union, 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.
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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), Gross Margin Rate (non-GAAP), Operating Expenses (non-GAAP), Operating Income (non-GAAP), Operating Margin Rate (non-GAAP), Other (Expense) (non-GAAP), Income Tax Expense (non-GAAP), and Net Income from Continuing Operations Attributable to NCR (non-GAAP). NCR’s diluted earnings per share (non-GAAP), gross margin (non-GAAP), gross margin rate (non-GAAP), operating expenses (non-GAAP), operating income (non-GAAP), operating margin rate (non-GAAP), other (expense) (non-GAAP), income tax expense (non-GAAP), and net income from continuing operations attributable to NCR (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, gross margin rate, expenses, income from operations, operating margin rate, other (expense), income tax expense and net income from continuing operations attributable to NCR, 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 as a Percentage of Non-GAAP Net Income (or 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. 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 free cash flow as a percentage of non-GAAP net income (or the cash flow conversion rate). 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.
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Reconciliation of Gross Margin (GAAP) to Gross Margin (non-GAAP)
$ in millions | Q2 2017 | Q2 2016 | |||||
Gross Margin (GAAP) | $ | 463 | $ | 446 | |||
Transformation/Restructuring Costs | 4 | 4 | |||||
Acquisition-related amortization of intangibles | 12 | 15 | |||||
Gross Margin (Non-GAAP) | $ | 479 | $ | 465 | |||
Reconciliation of Gross Margin Rate (GAAP) to Gross Margin Rate (non-GAAP)
$ in millions | Q2 2017 | Q2 2016 | |||
Gross Margin Rate (GAAP) | 29.1 | % | 27.5 | % | |
Transformation/Restructuring Costs | 0.3 | % | 0.2 | % | |
Acquisition-related amortization of intangibles | 0.7 | % | 1.0 | % | |
Gross Margin Rate (Non-GAAP) | 30.1 | % | 28.7 | % | |
Reconciliation of Operating Expenses (GAAP) to Operating Expenses (non-GAAP)
$ in millions | Q2 2017 | Q2 2016 | |||||
Operating Expenses (GAAP) | $ | 285 | $ | 283 | |||
Transformation/Restructuring Costs | (4 | ) | (7 | ) | |||
Acquisition-related amortization of intangibles | (16 | ) | (17 | ) | |||
Acquisition-related costs | (1 | ) | (1 | ) | |||
Operating Expenses (Non-GAAP) | $ | 264 | $ | 258 | |||
Reconciliation of Income from Operations (GAAP) to Operating Income (non-GAAP)
$ in millions | Q2 2017 | Q2 2016 | |||||
Income from Operations (GAAP) | $ | 178 | $ | 163 | |||
Transformation/Restructuring Costs | 8 | 11 | |||||
Acquisition-related amortization of intangibles | 28 | 32 | |||||
Acquisition-related costs | 1 | 1 | |||||
Operating Income (Non-GAAP) | $ | 215 | $ | 207 | |||
Reconciliation of Operating Margin rate (GAAP) to Operating Margin rate (non-GAAP)
$ in millions | Q2 2017 | Q2 2016 | |||
Operating Margin rate (GAAP) | 11.2 | % | 10.1 | % | |
Transformation/Restructuring Costs | 0.5 | % | 0.7 | % | |
Acquisition-related amortization of intangibles | 1.7 | % | 1.9 | % | |
Acquisition-related costs | 0.1 | % | 0.1 | % | |
Operating Margin rate (Non-GAAP) | 13.5 | % | 12.8 | % | |
Reconciliation of Other (Expense) (GAAP) to Other (Expense) (non-GAAP)
$ in millions | Q2 2017 | Q2 2016 | |||||
Other (Expense) (GAAP) | $ | (48 | ) | $ | (58 | ) | |
Divestiture and liquidation losses | — | 5 | |||||
Other (Expense) (Non-GAAP) | $ | (48 | ) | $ | (53 | ) | |
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Reconciliation of Income Tax Expense (GAAP) to Income Tax Expense (non-GAAP)
$ in millions | Q2 2017 | Q2 2016 | |||||
Income Tax Expense (GAAP) | $ | 33 | $ | 31 | |||
Transformation/Restructuring Costs | 2 | 3 | |||||
Acquisition-related amortization of intangibles | 9 | 11 | |||||
Acquisition-related costs | 1 | — | |||||
Income Tax Expense (Non-GAAP) | $ | 45 | $ | 45 | |||
Reconciliation of Net Income from Continuing Operations Attributable to NCR (GAAP) to
Net Income from Continuing Operations Attributable to NCR (non-GAAP)
$ in millions | Q2 2017 | Q2 2016 | |||||
Net Income from Continuing Operations Attributable to NCR (GAAP) | $ | 97 | $ | 76 | |||
Transformation/Restructuring Costs | 6 | 8 | |||||
Acquisition-related amortization of intangibles | 19 | 21 | |||||
Acquisition-related costs | — | 1 | |||||
Divestiture and liquidation losses | — | 5 | |||||
Net Income from Continuing Operations Attributable to NCR (Non-GAAP) | $ | 122 | $ | 111 | |||
Reconciliation of Diluted Earnings Per Share (GAAP) to Non-GAAP Diluted Earnings Per Share (non-GAAP)
Q2 2017 Actual | Q2 2016 Actual | FY 2017 Guidance (2) | Q3 2017 Guidance (2) | ||||||||||
Diluted Earnings Per Share (GAAP) (1) | $ | 0.64 | $ | 0.49 | $2.20 - $2.32 | $0.65 - $0.72 | |||||||
Transformation/Restructuring Costs | 0.04 | 0.05 | 0.14 - 0.17 | 0.02 - 0.05 | |||||||||
Acquisition-related amortization of intangibles | 0.12 | 0.14 | 0.49 | 0.13 | |||||||||
Acquisition-related costs | — | 0.01 | 0.03 | 0.01 | |||||||||
Deemed dividends related to Blackstone transaction | — | — | 0.39 | — | |||||||||
Divestiture and liquidation losses | — | 0.03 | — | — | |||||||||
Diluted Earnings Per Share (non-GAAP) (1) | $ | 0.80 | $ | 0.72 | $3.32 - $3.42 | $0.88 - $0.93 | |||||||
(1) | Non-GAAP diluted EPS is determined using the conversion of the Series A Convertible Preferred Stock into common stock in the calculation of weighted average diluted shares outstanding. GAAP EPS is determined using the most dilutive measure, either including the impact of dividends or deemed 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 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. |
Reconciliation of Net Cash Provided by Operating Activities (GAAP) to Free Cash Flow (non-GAAP)
$ in millions | Q2 2017 QTD | Q2 2016 QTD | Q2 2017 YTD | Q2 2016 YTD | 2017 Guidance | |||||||||||||
Net cash provided by operating activities | $ | 95 | $ | 121 | $ | 138 | $ | 144 | $805 - $830 | |||||||||
Total capital expenditures | (75 | ) | (58 | ) | (127 | ) | (98 | ) | (285 | )* | ||||||||
Net cash used in discontinued operations | (2 | ) | (8 | ) | (5 | ) | (20 | ) | (20 | ) | ||||||||
Free cash flow | $ | 18 | $ | 55 | $ | 6 | $ | 26 | $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.
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Reconciliation of Revenue Growth % (GAAP) to
Revenue Growth Adjusted Constant Currency % (non-GAAP)
Three months ended June 30, 2017 | |||||||
Revenue Growth % (GAAP) | Favorable (unfavorable) FX impact | Divestiture impact | Revenue Growth Adjusted Constant Currency % (non-GAAP) | ||||
Software License | (6)% | —% | —% | (6)% | |||
Software Maintenance | —% | (1)% | —% | 1% | |||
Cloud | 9% | —% | —% | 9% | |||
Professional Services | 3% | (2)% | —% | 5% | |||
Software | 3% | —% | —% | 3% | |||
Services | 2% | (2)% | —% | 4% | |||
ATMs | (21)% | (1)% | —% | (20)% | |||
SCO | 37% | —% | —% | 37% | |||
POS | 18% | (2)% | —% | 20% | |||
IPS | (91)% | —% | (70)% | (21)% | |||
Hardware | (9)% | (1)% | (9)% | 1% | |||
Total Revenue | (2)% | (2)% | (3)% | 3% | |||
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 | NCR CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in millions, except per share amounts) | Schedule A |
For the Periods Ended June 30 | |||||||||||||||
Three Months | Six Months | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenue | |||||||||||||||
Products | $ | 618 | $ | 676 | $ | 1,172 | $ | 1,224 | |||||||
Services | 975 | 944 | 1,899 | 1,840 | |||||||||||
Total Revenue | 1,593 | 1,620 | 3,071 | 3,064 | |||||||||||
Cost of products | 478 | 517 | 902 | 959 | |||||||||||
Cost of services | 652 | 657 | 1,293 | 1,279 | |||||||||||
Total gross margin | 463 | 446 | 876 | 826 | |||||||||||
% of Revenue | 29.1 | % | 27.5 | % | 28.5 | % | 27.0 | % | |||||||
Selling, general and administrative expenses | 227 | 229 | 456 | 453 | |||||||||||
Research and development expenses | 58 | 50 | 125 | 103 | |||||||||||
Restructuring-related charges | — | 4 | — | 6 | |||||||||||
Income from operations | 178 | 163 | 295 | 264 | |||||||||||
% of Revenue | 11.2 | % | 10.1 | % | 9.6 | % | 8.6 | % | |||||||
Interest expense | (41 | ) | (43 | ) | (80 | ) | (89 | ) | |||||||
Other (expense), net | (7 | ) | (15 | ) | (14 | ) | (25 | ) | |||||||
Total other (expense), net | (48 | ) | (58 | ) | (94 | ) | (114 | ) | |||||||
Income before income taxes and discontinued operations | 130 | 105 | 201 | 150 | |||||||||||
% of Revenue | 8.2 | % | 6.5 | % | 6.5 | % | 4.9 | % | |||||||
Income tax expense | 33 | 31 | 47 | 44 | |||||||||||
Income from continuing operations | 97 | 74 | 154 | 106 | |||||||||||
Income from discontinued operations, net of tax | 5 | — | 5 | — | |||||||||||
Net income | 102 | 74 | 159 | 106 | |||||||||||
Net income attributable to noncontrolling interests | — | (2 | ) | — | (2 | ) | |||||||||
Net income attributable to NCR | $ | 102 | $ | 76 | $ | 159 | $ | 108 | |||||||
Amounts attributable to NCR common stockholders: | |||||||||||||||
Income from continuing operations | $ | 97 | $ | 76 | $ | 154 | $ | 108 | |||||||
Dividends on convertible preferred stock | (12 | ) | (13 | ) | (24 | ) | (24 | ) | |||||||
Deemed dividend on modification of convertible preferred stock | — | — | (4 | ) | — | ||||||||||
Deemed dividend on convertible preferred shares related to redemption | — | — | (58 | ) | — | ||||||||||
Net income from continuing operations attributable to NCR common stockholders | 85 | 63 | 68 | $ | 84 | ||||||||||
Income from discontinued operations, net of tax | 5 | — | 5 | — | |||||||||||
Net income attributable to NCR common stockholders | $ | 90 | $ | 63 | $ | 73 | $ | 84 | |||||||
Net income per share attributable to NCR common stockholders: | |||||||||||||||
Net income per common share from continuing operations | |||||||||||||||
Basic | $ | 0.70 | $ | 0.51 | $ | 0.56 | $ | 0.66 | |||||||
Diluted | $ | 0.64 | $ | 0.49 | $ | 0.53 | $ | 0.65 | |||||||
Net income per common share | |||||||||||||||
Basic | $ | 0.74 | $ | 0.51 | $ | 0.60 | $ | 0.66 | |||||||
Diluted | $ | 0.67 | $ | 0.49 | $ | 0.57 | $ | 0.65 | |||||||
Weighted average common shares outstanding | |||||||||||||||
Basic | 121.4 | 123.8 | 122.1 | 127.1 | |||||||||||
Diluted | 152.7 | 154.5 | 127.2 | 129.6 | |||||||||||
(1) Diluted EPS is determined using the most dilutive measure, either including the impact of the dividends and deemed 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.
10
| NCR CORPORATION REVENUE AND OPERATING INCOME SUMMARY (Unaudited) (in millions) | Schedule B |
For the Periods Ended June 30 | |||||||||||||||||||||||
Three Months | Six Months | ||||||||||||||||||||||
2017 | 2016 | % Change | % Change Adjusted Constant Currency | 2017 | 2016 | % Change | % Change Adjusted Constant Currency | ||||||||||||||||
Revenue by segment | |||||||||||||||||||||||
Software | $ | 464 | $ | 452 | 3% | 3% | $ | 916 | $ | 871 | 5% | 6% | |||||||||||
Software Gross Margin Rate | 49.1 | % | 51.5 | % | 50.2 | % | 51.0 | % | |||||||||||||||
Services | 588 | 574 | 2% | 4% | 1,145 | 1,117 | 3% | 4% | |||||||||||||||
Services Gross Margin Rate | 25.3 | % | 21.6 | % | 23.7 | % | 21.0 | % | |||||||||||||||
Hardware | 541 | 594 | (9)% | 1% | 1,010 | 1,076 | (6)% | 7% | |||||||||||||||
Hardware Gross Margin Rate | 18.9 | % | 18.2 | % | 17.8 | % | 16.9 | % | |||||||||||||||
Total Revenue | $ | 1,593 | $ | 1,620 | (2)% | 3% | $ | 3,071 | $ | 3,064 | —% | 6% | |||||||||||
Gross Margin Rate | 30.1 | % | 28.7 | % | 29.7 | % | 28.1 | % | |||||||||||||||
Operating income by segment | |||||||||||||||||||||||
Software | $ | 128 | $ | 144 | $ | 253 | $ | 259 | |||||||||||||||
% of Revenue | 27.6 | % | 31.9 | % | 27.6 | % | 29.7 | % | |||||||||||||||
Services | 75 | 49 | 120 | 83 | |||||||||||||||||||
% of Revenue | 12.8 | % | 8.5 | % | 10.5 | % | 7.4 | % | |||||||||||||||
Hardware | 12 | 14 | 2 | 4 | |||||||||||||||||||
% of Revenue | 2.2 | % | 2.4 | % | 0.2 | % | 0.4 | % | |||||||||||||||
Subtotal-segment operating income | $ | 215 | $ | 207 | $ | 375 | $ | 346 | |||||||||||||||
% of Revenue | 13.5 | % | 12.8 | % | 12.2 | % | 11.3 | % | |||||||||||||||
Other adjustments (1) | 37 | 44 | 80 | 82 | |||||||||||||||||||
Total income from operations | $ | 178 | $ | 163 | $ | 295 | $ | 264 | |||||||||||||||
(1) | The following table presents the other adjustments for NCR: |
For the Periods Ended June 30 | |||||||||||||||
Three Months | Six Months | ||||||||||||||
In millions | 2017 | 2016 | 2017 | 2016 | |||||||||||
Transformation/Restructuring costs | $ | 8 | $ | 11 | $ | 21 | $ | 15 | |||||||
Acquisition-related amortization of intangible assets | 28 | 32 | 57 | 64 | |||||||||||
Acquisition-related costs | 1 | 1 | 2 | 3 | |||||||||||
Total other adjustments | $ | 37 | $ | 44 | $ | 80 | $ | 82 | |||||||
11
| NCR CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) (in millions, except per share amounts) | Schedule C |
June 30, 2017 | March 31, 2017 | December 31, 2016 | |||||||||
Assets | |||||||||||
Current assets | |||||||||||
Cash and cash equivalents | $ | 377 | $ | 401 | $ | 498 | |||||
Accounts receivable, net | 1,321 | 1,298 | 1,282 | ||||||||
Inventories | 828 | 800 | 699 | ||||||||
Other current assets | 290 | 281 | 278 | ||||||||
Total current assets | 2,816 | 2,780 | 2,757 | ||||||||
Property, plant and equipment, net | 304 | 288 | 287 | ||||||||
Goodwill | 2,736 | 2,732 | 2,727 | ||||||||
Intangibles, net | 618 | 645 | 672 | ||||||||
Prepaid pension cost | 107 | 100 | 94 | ||||||||
Deferred income taxes | 611 | 619 | 575 | ||||||||
Other assets | 575 | 561 | 561 | ||||||||
Total assets | $ | 7,767 | $ | 7,725 | $ | 7,673 | |||||
Liabilities and stockholders’ equity | |||||||||||
Current liabilities | |||||||||||
Short-term borrowings | $ | 267 | $ | 252 | $ | 50 | |||||
Accounts payable | 731 | 765 | 781 | ||||||||
Payroll and benefits liabilities | 205 | 181 | 234 | ||||||||
Deferred service revenue and customer deposits | 521 | 562 | 468 | ||||||||
Other current liabilities | 389 | 399 | 432 | ||||||||
Total current liabilities | 2,113 | 2,159 | 1,965 | ||||||||
Long-term debt | 3,015 | 3,076 | 3,001 | ||||||||
Pension and indemnity plan liabilities | 764 | 749 | 739 | ||||||||
Postretirement and postemployment benefits liabilities | 127 | 128 | 127 | ||||||||
Income tax accruals | 140 | 145 | 142 | ||||||||
Other liabilities | 161 | 143 | 138 | ||||||||
Total liabilities | 6,320 | 6,400 | 6,112 | ||||||||
Redeemable noncontrolling interests | 14 | 14 | 15 | ||||||||
Series A convertible preferred stock: par value $0.01 per share, 3.0 shares authorized, 0.8 shares issued and outstanding as of June 30, 2017 and 0.9 shares issued and outstanding as of December 31, 2016 | 786 | 776 | 847 | ||||||||
Stockholders' equity | |||||||||||
NCR stockholders' equity: | |||||||||||
Preferred stock: par value $0.01 per share, 100.0 shares authorized, no shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively | — | — | — | ||||||||
Common stock: par value $0.01 per share, 500.0 shares authorized, 121.4 and 124.6 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively | 1 | 1 | 1 | ||||||||
Paid-in capital | 25 | — | 32 | ||||||||
Retained earnings | 806 | 716 | 867 | ||||||||
Accumulated other comprehensive loss | (190 | ) | (187 | ) | (205 | ) | |||||
Total NCR stockholders' equity | 642 | 530 | 695 | ||||||||
Noncontrolling interests in subsidiaries | 5 | 5 | 4 | ||||||||
Total stockholders' equity | 647 | 535 | 699 | ||||||||
Total liabilities and stockholders' equity | $ | 7,767 | $ | 7,725 | $ | 7,673 | |||||
12
| NCR CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in millions) | Schedule D |
For the Periods Ended June 30 | |||||||||||||||
Three Months | Six Months | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Operating activities | |||||||||||||||
Net income | $ | 102 | $ | 74 | $ | 159 | $ | 106 | |||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||
Income from discontinued operations | (5 | ) | — | (5 | ) | — | |||||||||
Depreciation and amortization | 87 | 86 | 172 | 175 | |||||||||||
Stock-based compensation expense | 22 | 16 | 41 | 29 | |||||||||||
Deferred income taxes | 7 | 15 | 4 | 20 | |||||||||||
Gain on sale of property, plant and equipment and other assets | (1 | ) | — | (1 | ) | — | |||||||||
Loss on divestiture | — | 1 | — | 1 | |||||||||||
Impairment of long-lived and other assets | — | 1 | — | 2 | |||||||||||
Changes in assets and liabilities: | |||||||||||||||
Receivables | (11 | ) | (69 | ) | (28 | ) | (121 | ) | |||||||
Inventories | (25 | ) | (40 | ) | (126 | ) | (123 | ) | |||||||
Current payables and accrued expenses | (11 | ) | 35 | (93 | ) | 4 | |||||||||
Deferred service revenue and customer deposits | (46 | ) | 34 | 50 | 131 | ||||||||||
Employee benefit plans | (9 | ) | (12 | ) | (6 | ) | (26 | ) | |||||||
Other assets and liabilities | (15 | ) | (20 | ) | (29 | ) | (54 | ) | |||||||
Net cash provided by operating activities | 95 | 121 | 138 | 144 | |||||||||||
Investing activities | |||||||||||||||
Expenditures for property, plant and equipment | (32 | ) | (15 | ) | (43 | ) | (24 | ) | |||||||
Additions to capitalized software | (43 | ) | (43 | ) | (84 | ) | (74 | ) | |||||||
Proceeds from divestiture | — | 47 | — | 47 | |||||||||||
Other investing activities, net | 1 | — | — | (8 | ) | ||||||||||
Net cash used in investing activities | (74 | ) | (11 | ) | (127 | ) | (59 | ) | |||||||
Financing activities | |||||||||||||||
Short term borrowings, net | 10 | 10 | 13 | 1 | |||||||||||
Payments on term credit facilities | (14 | ) | (17 | ) | (25 | ) | (73 | ) | |||||||
Payments on revolving credit facilities | (420 | ) | (251 | ) | (615 | ) | (431 | ) | |||||||
Borrowings on revolving credit facilities | 375 | 195 | 855 | 706 | |||||||||||
Debt issuance costs | — | — | — | (8 | ) | ||||||||||
Repurchases of Company common stock | — | (37 | ) | (350 | ) | (250 | ) | ||||||||
Proceeds from employee stock plans | 5 | 3 | 8 | 6 | |||||||||||
Tax withholding payments on behalf of employees | (2 | ) | (1 | ) | (24 | ) | (7 | ) | |||||||
Other financing activities | (1 | ) | — | (1 | ) | — | |||||||||
Net cash used in financing activities | (47 | ) | (98 | ) | (139 | ) | (56 | ) | |||||||
Cash flows from discontinued operations | |||||||||||||||
Net cash used in discontinued operations | (2 | ) | (8 | ) | (5 | ) | (20 | ) | |||||||
Effect of exchange rate changes on cash and cash equivalents | 4 | (5 | ) | 12 | (5 | ) | |||||||||
(Decrease)/increase in cash and cash equivalents | (24 | ) | (1 | ) | (121 | ) | 4 | ||||||||
Cash and cash equivalents at beginning of period | 401 | 333 | 498 | 328 | |||||||||||
Cash and cash equivalents at end of period | $ | 377 | $ | 332 | $ | 377 | $ | 332 | |||||||
13
1
July 20, 2017
BILL NUTI, CHAIRMAN & CEO
MARK BENJAMIN, PRESIDENT & COO
BOB FISHMAN, CFO
Q2 2017 EARNINGS
CONFERENCE CALL
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 the expected results of hardware revenue on attached software and Services revenue and on recurring revenue; the
expected areas of focus for NCR’s Services segment in 2017; the completion of scheduled large customer ATM roll-outs and expected
improvement in ATM revenue in in the back half of 2017; expected capital expenditures for 2017, including with respect to NCR’s new world
headquarters; NCR’s full year 2017, 2017 segment and third quarter 2017 financial guidance, and the expected type and magnitude of the
non-operational adjustments included in any forward-looking non-GAAP measures; NCR’s expected revenue and earnings per share trending
for the third and fourth quarters of 2017; NCR’s confidence in its full year results; NCR’s solution offerings and their alignment with major
market trends and customer demands; NCR’s backlog and key metrics; expectations for margin expansion and the drivers of margin expansion;
the expected drivers of NCR’s growth; and the prioritization of free cash flow generation and a balanced capital allocation strategy. 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 24, 2017, and those
factors detailed from time to time in NCR's other SEC reports. These materials are dated July 20, 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 in these materials will include or make reference to certain "non-GAAP"
measures, including: selected measures, such as period-over-period revenue growth, expressed on a constant currency basis and adjusted
constant currency basis, gross margin rate (non-GAAP), operating margin rate (non-GAAP), diluted earnings per share (non-GAAP), free cash
flow (FCF), gross margin (non-GAAP), free cash flow as a percentage of non-GAAP net income (or free cash flow conversion rate), net debt,
adjusted EBITDA, the ratio of net debt to adjusted EBITDA, operating expenses (non-GAAP), operating income (non-GAAP), interest and other
expense (non-GAAP), income tax expense (non-GAAP), income tax rate (non-GAAP), and net income (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 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
OVERVIEW
Q2 Results IN LINE WITH EXPECTATIONS
Diversified REVENUE GROWTH
Continued CLOUD growth of 9% with Net
ACV up 13%
Margin RATE EXPANSION driven by strength
in Services
2017 Revenue, EPS, and Free Cash Flow
GUIDANCE REAFFIRMED
4
Non-GAAP gross margin rate up 150 bps CC
Non-GAAP Diluted EPS up 13% CC; Non-GAAP
operating margin rate expanded 90 bps CC to 13.5%
FCF as expected due to higher working capital to
support increased revenue in later quarters
FX
~(10) bps
FX
~($0.01)
$1.62
billion
28.7% 30.1%
Q2 2016 Q2 2016 Q2 2017
$0.80
Q2 2016 Q2 2017
$55
million
Q2 2016
$18
million
Q2 2017
Revenue Non-GAAP Gross Margin Rate
Non-GAAP Diluted EPS Free Cash Flow
Revenue up 3% adjusted CC
Recurring revenue up 4% CC, 45% of total revenue
$1.59
billion
Q2 2017
$0.72
IPS Sale and FX
FX ~($19) million
IPS ~($52 million)
Q2 2017 FINANCIAL RESULTS
5
OMNI-CHANNEL MARKET
Omni Channel
Software
• NCR's Omni-Channel
Platform Hub and
Applications
• Enables seamless consumer
experiences across physical
and digital channels
• Solutions Include: Retail
One, Customer Experience
Platform (CxP), Aloha
Enterprise, NCR Silver
Channel Transformation
• 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 smart-edge offerings: ATMs,
SCO, mPOS, ePOS, Peripherals
• Drives service offerings: Consulting
Services, Implementation Services,
Hardware Maintenance, Managed
Services, High Availability
Digital Enablement
• 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
Up 3%
CC
Up 4%
CC
Up 1%
adjusted
CC (1)
(1) Adjusted CC revenue growth excludes ~$52 million of IPS revenue from Q2 2016.
Down
220 bps
CC
Up 410
bps CC
Up 70
bps CC
(1)
Hardware revenue drives higher margin
attached Software and Services revenue
and future recurring revenue
51.5% 49.1%
21.6%
25.3%
Q2 2016 Q2 2017 Q2 2016 Q2 2017
Software Gross Margin Services Gross Margin
18.2%
18.9%
Q2 2016 Q2 2017
Hardware Gross Margin
$452
million
$464
million
Q2 2016 Q2 2017
$574
million
$588
million
Q2 2017Q2 2016
Software Revenue Services Revenue
$594
million
$541
million
Hardware Revenue
IPS Sale and FX
Q2 2017Q2 2016
Q2 2017 SEGMENT RESULTS
7
Q2 2017 Q2 2016 % Change % ChangeConstant Currency
Software License $77 $82 (6)% (6)%
Unattached License 50 50 —% —%
Software Maintenance 91 91 —% 1%
Cloud 145 133 9% 9%
Professional Services 151 146 3% 5%
Software Revenue $464 $452 3% 3%
Non-GAAP Gross Margin $228 $233 (2)% (1)%
Non-GAAP Gross Margin Rate 49.1% 51.5% (240) bps (220) bps
Operating Income $128 $144 (11)% (10)%
Operating Income as a % of Revenue 27.6% 31.9% (430) bps (400) bps
$ in millions
SOFTWARE
Q2 2017 Update
KEY HIGHLIGHTS
• Cloud revenue up 9% driven by prior period bookings; Net ACV of $18 million, up 13% from prior year
• Professional Services up 5% due to strength in channel transformation and digital enablement
• Software Maintenance up 1% due to Software License revenue growth in prior periods
• Software License down 6% due to lower unattached software that is now expected in the back half of the year
• Gross Margin rate down due to mix of software revenue partially offset by improved efficiency and scale in
Software Maintenance and Cloud; Expect margin rate expansion in the second half of the year
• Continued investment in R&D in support of software growth strategy
8
Q2 2017 Q2 2016 % Change
% Change
Constant
Currency
Services Revenue $588 $574 2% 4%
Non-GAAP Gross Margin $149 $124 20% 24%
Non-GAAP Gross Margin Rate 25.3% 21.6% +370 bps +410 bps
Operating Income $75 $49 53% 64%
Operating Income as a % of Revenue 12.8% 8.5% +430 bps +470 bps
$ in millions
SERVICES
Q2 2017 Update
KEY HIGHLIGHTS
• Hardware maintenance growth as a result of improving channel transformation trends, combined with increased
managed and implementation services, drove higher revenue in the quarter; Backlog improving in form of higher
file value
• Gross margin rate increased due to on-going business process improvement initiatives and mix of higher value
services
• Key areas of focus to drive future margin rate improvements: 1) Drive a higher mix of managed services; 2)
Productivity and efficiency improvements; 3) Remote diagnostics and repair; and 4) Product life-cycle
management
9
Q2 2017 Q2 2016 % Change
% Change
Constant
Currency
ATMs $227 $286 (21)% (20)%
Self-Checkout (SCO) 96 70 37% 37%
Point-of-Sale (POS) 213 180 18% 20%
Interactive Printer Solutions (IPS) 5 58 (91)% (21)% (1)
Hardware Revenue $541 $594 (9)% 1% (1)
Non-GAAP Gross Margin $102 $108 (6)% (6)%
Non-GAAP Gross Margin Rate 18.9% 18.2% +70 bps +70 bps
Operating Income $12 $14 (14)% (18)%
Operating Income as a % of Revenue 2.2% 2.4% (20) bps (30) bps
$ in millions(1) % change constant currency adjusted for FX and the divestiture of IPS.
HARDWARE
Q2 2017 Update
KEY HIGHLIGHTS
• SCO revenue up significantly due to store transformation traction globally
• Strong growth in POS revenues due to new product introductions and replacement cycle
• ATM revenue down as anticipated; ATM revenue expected to improve in Q4 as large customer roll-outs are
scheduled to take place
• Gross margin rate increase due to scale gains from new product introductions
• New product introductions expanding to global markets
• Hardware revenue drives higher margin attached revenue and future recurring revenue
10
QTD YTD
Q2 2017 Q2 2016 Q2 2017 Q2 2016 FY 2017E FY 2016
Cash Provided by Operating Activities $95 $121 $138 $144 $805 - $830 $894
Total capital expenditures (1) (75) (58) (127) (98) (285) (227)
Cash used in Discontinued Operations (2) (8) (5) (20) (20) (39)
Free Cash Flow $18 $55 $6 $26 $500 - $525 $628
Free Cash Flow as a % of non-GAAP net income(2) 95% - 100% 132%
$ in millions
(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.
(2) Also referred to as Free Cash Flow Conversion Rate.
FREE CASH FLOW
11
Q2 2017 Q1 2017 Q4 2016 Q2 2016
Debt $3,282 $3,328 $3,051 $3,457
Cash (377) (401) (498) (332)
Net Debt $2,905 $2,927 $2,553 $3,125
Adjusted EBITDA (1) $1,117 $1,095 $1,061 $1,020
Net Debt / Adjusted EBITDA 2.6x 2.7x 2.4x 3.1x
$ in millions, except metrics(1) Adjusted EBITDA for the trailing twelve-month period.
NET DEBT AND EBITDA METRICS
12
2017 Guidance 2017 CC GrowthRates 2016
Revenue (1) $6,630 - $6,750 4% - 6% $6,543
GAAP Diluted EPS (2) $2.20 - $2.32 22% - 29% $1.80
Non-GAAP Diluted EPS (1)(3) $3.32 - $3.42 10% - 13% $3.02
2017 Guidance 2017 ConversionRate 2016
Free Cash Flow $500 - $525 95% - 100% $628
(1) The 2017 revenue guidance and growth rates include an expected unfavorable foreign currency impact of $25 million, or ~1%, compared to our
previous expectation of $65 million, or ~1%. Revenue growth rates also exclude ~$124 million million of IPS revenue, or ~2%, from 2016. The 2017
current non-GAAP diluted EPS guidance includes $0.01 favorable impact from expected foreign currency.
(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 approximately $205 million, an effective tax rate of 25% and a share count of 157 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
FY 2017 GUIDANCE
13
Segment 2017E CC Growth Rates(1)
FY 2017
Guidance FY 2016
Software 6% - 7% $1,945 - $1,965 $1,841
Cloud Revenue 6% - 8% $590 - $600 $556
Services 2% - 4% $2,335 - $2,375 2,306
Hardware (2) 3% - 6% $2,350 - $2,410 2,396
Total (1) (2) 4% - 6% $6,630 - $6,750 $6,543
$ in millions
(1) The 2017 revenue guidance and growth rates include an expected foreign currency negative impact of $25 million for revenue, or ~1%, compared to
prior guidance of $65 million, or 1%.
(2) The growth rates for Hardware revenue and total revenue are normalized for the sale of the IPS business, which was $124 million of Hardware
revenue in 2016.
FY 2017 SEGMENT REVENUE GUIDANCE
14
Q3 2017E Q3 2016 CC GrowthRates
Revenue (1) $1,660 - $1,700 $1,677 0% - 2%
GAAP Diluted EPS $0.65 - $0.72 $0.69 (6)% - 4%
Non-GAAP Diluted EPS (1) (2) $0.88 - $0.93 $0.87 4% - 9%
$ millions, except per share amounts
(1) The Q3 2017 revenue guidance and growth rates include an expected foreign currency headwind of $10 million, or roughly 1%. The Q3 2017 non-
GAAP diluted EPS guidance includes an expected foreign currency negative impact of $0.02.
(2) For Q3 2017, we have assumed OIE of approximately $50 million, an effective tax rate of 24% and a share count of 155 million compared to OIE of
$49 million, an effective tax rate of 24% and a share count of 155 million in Q3 2016.
Q3 2017 GUIDANCE
15
Q3 YTD Fourth Quarter
$ % of Total $ % of Total
Revenue (1)
2017 Guidance (mid-point) $4,756 71% $1,934 29%
2016 Results $4,599 72% $1,794 28%
3 year average $4,533 73% $1,684 27%
Diluted EPS (non-GAAP)
2017 Guidance (mid-point) $2.27 67% $1.11 33%
2016 Results $1.97 65% $1.07 35%
3 year average $1.90 67% $0.94 33%
$ in millions, except per share amounts(1) The 2016 and 3 year average revenues exclude IPS revenues
REVENUE AND EPS TRENDING
16
LOOKING FORWARD
Q2 results as expected and remain confident for full year
NCR's solution offerings aligned with major market
trends and customer demands
Backlog and key metrics remain strong
Software growth combined with our business
transformation program is the key to margin expansion
Omni-Channel, Channel Transformation, and Digital
Enablement continue to be strong growth drivers
Free cash flow generation and balanced capital allocation
strategy remains a top priority
17
SUPPLEMENTARY
MATERIALS
18
Q2 2017 Q2 2016 As Reported
Revenue $1,593 $1,620 (2)%
Gross Margin 463 446 4%
Gross Margin Rate 29.1% 27.5%
Operating Expenses 285 283 1%
% of Revenue 17.9% 17.5%
Operating Income 178 163 9%
% of Revenue 11.2% 10.1%
Interest and other expense (48) (58) (17)%
Income Tax Expense 33 31 6%
Income Tax Rate 25% 30%
Net Income $97 $76 28%
Diluted EPS $0.64 $0.49 31%
$ millions, except per share amounts
Q2 2017 GAAP RESULTS
19
Q2 2017 Q2 2016 As Reported
Constant
Currency
Revenue $1,593 $1,620 (2)% 3% (1)
Gross Margin (non-GAAP) 479 465 3% 5%
Gross Margin Rate (non-GAAP) 30.1% 28.7% +140 bps +150 bps
Operating Expenses (non-GAAP) 264 258 2% 3%
% of Revenue 16.6% 15.9%
Operating Income (non-GAAP) 215 207 4% 6%
% of Revenue 13.5% 12.8% +70 bps +90 bps
Interest and other expense (48) (53) (9)% (2)%
Income Tax Expense (non-GAAP) 45 45 —%
Income Tax Rate (non-GAAP) 27% 29%
Net Income (non-GAAP) $122 $111 10% 11%
Diluted EPS (non-GAAP) (2) $0.80 $0.72 11% 13%
(1) Adjusted CC revenue growth excludes $52 million of IPS revenue from Q2 2016. The negative impact of FX was $19 million.
(2) Q2 2017 includes $0.01 of unfavorable EPS impact related to foreign currency headwinds. Diluted share count of 152.7 million in Q2
2017 and 154.5 million in Q2 2016.
$ millions, except per share amounts
Q2 2017 OPERATIONAL RESULTS
20
While NCR reports its results in accordance with generally accepted accounting principles (GAAP) in the United States, comments
made during this conference call and in these materials will include non-GAAP measures. These measures are included to provide
additional useful information regarding 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), Operating 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), operating 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, operating 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 as a Percentage of Non-GAAP Net Income (or 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 free cash flow
as a percentage of non-GAAP net income (or 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.
NON-GAAP MEASURES
21
Constant Currency, IPS Divestiture and Adjusted Constant Currency. NCR presents certain financial measures, such as period-over-
period revenue growth, on a constant currency basis, which excludes the effects of foreign currency translation by translating prior
period results at current period 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.
NON-GAAP MEASURES
22
Net Income from Continuing Operations Attributable to NCR (GAAP) to
Adjusted EBITDA (non-GAAP)
in millions
Q2 2017
LTM
Q1 2017
LTM
Q4 2016
LTM
Q2 2016
LTM
Net Income from Continuing Operations Attributable to NCR (GAAP) $329 $308 $283 $258
Pension Mark-to-Market Adjustments 85 85 85 30
Transformation/Restructuring Costs 32 35 26 65
Acquisition-Related Amortization of Intangibles 116 120 123 126
Acquisition-Related Costs 6 6 7 9
Reserve related to a subcontract in MEA — — — 20
Divestiture and Liquidation Losses 1 6 6 39
Net Income (Loss) from Continuing Operations Attributable to
Noncontrolling Interests 6 4 4 (1)
Interest Expense 161 163 170 173
Interest Income (4) (4) (4) (5)
Depreciation and Amortization 217 212 208 190
Income Taxes 95 93 92 65
Stock Compensation Expense 73 67 61 51
Adjusted EBITDA (non-GAAP) $1,117 $1,095 $1,061 $1,020
GAAP TO NON-GAAP RECONCILIATION
23
in millions (except per share amounts)
Q2 QTD 2017
GAAP
Restructuring /
Transformation
Costs
Acquisition-
related
amortization of
intangibles
Acquisition-
related
costs
Q2 QTD 2017
non-GAAP
Product revenue $618 $— $— $— $618
Service revenue 975 — — — 975
Total revenue 1,593 — — — 1,593
Cost of products 478 — (6) — 472
Cost of services 652 (4) (6) — 642
Gross margin 463 4 12 — 479
Gross margin rate 29.1% 0.3% 0.7% —% 30.1%
Selling, general and administrative expenses 227 (3) (16) (1) 207
Research and development expenses 58 (1) — — 57
Total operating expenses 285 (4) (16) (1) 264
Total operating expense as a % of revenue 17.9% (0.3)% (1.0)% (0.1)% 16.6%
Income (loss) from operations 178 8 28 1 215
Income (loss) from operations as a % of revenue 11.2% 0.5% 1.7% 0.1% 13.5%
Interest and Other (expense) income, net (48) — — — (48)
Income (loss) from continuing operations before income taxes 130 8 28 1 167
Income tax expense (benefit) 33 2 9 1 45
Effective tax rate 25% 27%
Income (loss) from continuing operations 97 6 19 — 122
Net income (loss) attributable to noncontrolling interests — — — — —
Income (loss) from continuing operations (attributable to NCR) $97 $6 $19 $— $122
Diluted earnings per share $0.64 $0.04 $0.12 $— $0.80
Diluted shares outstanding 152.7 152.7
GAAP TO NON-GAAP RECONCILIATION
Q2 2017 QTD
24
in millions (except per share amounts)
Q2 QTD 2017
GAAP
Q2 QTD
2017
non-GAAP
Income (loss) from continuing operations attributable to NCR common
stockholders:
Income from continuing operations (attributable to NCR) $97 $122
(Loss) income from continuing operations attributable to NCR common
stockholders $97 $122
Weighted average outstanding shares:
Weighted average diluted shares outstanding 126.1 126.1
Weighted as-if converted preferred shares 26.6 26.6
Total shares used in diluted earnings per share 152.7 152.7
Diluted (loss) earnings per share (1) $0.64 $0.80
(1) GAAP 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 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.
Non-GAAP EPS is always determined using the as-if converted preferred shares and shares that would be issued for stock
compensation awards. 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
Q2 2017 QTD
25
in millions (except per share amounts)
Q2 QTD 2016
GAAP
Restructuring /
Transformation
Costs
Acquisition-
related
amortization
of intangibles
Acquisition-
related
costs
Divestiture and
Liquidation
Losses
Q2 QTD 2016
non-GAAP
Product revenue $676 $— $— $— $— $676
Service revenue 944 — — — — 944
Total revenue 1,620 — — — — 1,620
Cost of products 517 — (9) — — 508
Cost of services 657 (4) (6) — — 647
Gross margin 446 4 15 — — 465
Gross margin rate 27.5% 0.2% 1.0% —% —% 28.7%
Selling, general and administrative expenses 229 (3) (17) (1) — 208
Research and development expenses 50 — — — — 50
Restructuring-related charges 4 (4) — — — —
Total expenses 283 (7) (17) (1) — 258
Total expense as a % of revenue 17.5% (0.4)% (1.1)% (0.1)% —% 15.9%
Income (loss) from operations 163 11 32 1 — 207
Income (loss) from operations as a % of revenue 10.1% 0.7% 1.9% 0.1% —% 12.8%
Interest and Other (expense) income, net (58) — — — 5 (53)
Income (loss) from continuing operations before
income taxes 105 11 32 1 5 154
Income tax expense (benefit) 31 3 11 — — 45
Effective tax rate 30% 29%
Income (loss) from continuing operations 74 8 21 1 5 109
Net income (loss) attributable to noncontrolling
interests (2) — — — — (2)
Income (loss) from continuing operations
(attributable to NCR) $76 $8 $21 $1 $5 $111
Diluted earnings per share $0.49 $0.05 $0.14 $0.01 $0.03 $0.72
Diluted shares outstanding 154.5 154.5
GAAP TO NON-GAAP RECONCILIATION
Q2 2016 QTD
26
in millions (except per share amounts)
Q2 QTD 2016
GAAP
Q2 QTD 2016
non-GAAP
Income from continuing operations attributable to NCR common
stockholders:
Income from continuing operations (attributable to NCR) $76 $111
Income from continuing operations attributable to NCR common
stockholders $76 $111
Weighted average outstanding shares:
Weighted average diluted shares outstanding 126.5 126.5
Weighted as-if converted preferred shares 28.0 28.0
Total shares used in diluted earnings per share 154.5 154.5
Diluted earnings per share (1) $0.49 $0.72
(1) GAAP 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 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.
Non-GAAP EPS is always determined using the as-if converted preferred shares and shares that would be issued for stock
compensation awards. 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
Q2 2016 QTD
27
in millions (except per share amounts)
Q2 YTD 2017
GAAP
Restructuring /
Transformation
Costs
Acquisition-
related
amortization of
intangibles
Acquisition-
related
costs
Q2 YTD 2017
non-GAAP
Product revenue $1,172 $— $— $— $1,172
Service revenue 1,899 — — — 1,899
Total revenue 3,071 — — — 3,071
Cost of products 902 (2) (13) — 887
Cost of services 1,293 (8) (12) — 1,273
Gross margin 876 10 25 — 911
Gross margin rate 28.5% 0.4% 0.8% —% 29.7%
Selling, general and administrative expenses 456 (7) (32) (2) 415
Research and development expenses 125 (4) — — 121
Total operating expenses 581 (11) (32) (2) 536
Total operating expense as a % of revenue 18.9% (0.4)% (1.0)% (0.1)% 17.5%
Income (loss) from operations 295 21 57 2 375
Income (loss) from operations as a % of revenue 9.6% 0.6% 1.9% 0.1% 12.2%
Interest and Other (expense) income, net (94) — — — (94)
Income (loss) from continuing operations before income taxes 201 21 57 2 281
Income tax expense (benefit) 47 6 18 1 72
Effective tax rate 23% 26%
Income (loss) from continuing operations 154 15 39 1 209
Net income (loss) attributable to noncontrolling interests — — — — —
Income (loss) from continuing operations (attributable to NCR) $154 $15 $39 $1 $209
Diluted earnings per share $0.53 $0.10 $0.25 $0.01 $1.35
Diluted shares outstanding 127.2 154.7
GAAP TO NON-GAAP RECONCILIATION
Q2 2017 YTD
28
in millions (except per share amounts)
Q2 YTD 2017
GAAP
Q2 YTD
2017
non-GAAP
Income (loss) from continuing operations attributable to NCR common
stockholders:
Income from continuing operations (attributable to NCR) $154 $209
Dividends on convertible preferred shares (24) —
Deemed dividend on modification of convertible preferred shares (4) —
Deemed dividend on convertible preferred shares related to redemption value
accretion (58) —
(Loss) income from continuing operations attributable to NCR common
stockholders $68 $209
Weighted average outstanding shares:
Weighted average diluted shares outstanding 127.2 127.2
Weighted as-if converted preferred shares — 27.5
Total shares used in diluted earnings per share 127.2 154.7
Diluted (loss) earnings per share (1) $0.53 $1.35
(1) GAAP 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 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.
Non-GAAP EPS is always determined using the as-if converted preferred shares and shares that would be issued for stock
compensation awards. 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
Q2 2017 YTD
29
in millions (except per share amounts)
Q2 YTD 2016
GAAP
Restructuring /
Transformation
Costs
Acquisition-
related
amortization of
intangibles
Acquisition-
related
costs
Divestiture and
Liquidation
Losses
Q2 YTD 2016
non-GAAP
Product revenue $1,224 $— $— $— $— $1,224
Service revenue 1,840 — — — — 1,840
Total revenue 3,064 — — — — 3,064
Cost of products 959 — (19) — — 940
Cost of services 1,279 (4) (12) — — 1,263
Gross margin 826 4 31 — — 861
Gross margin rate 27.0% 0.1% 1.0% —% —% 28.1%
Selling, general and administrative expenses 453 (5) (33) (3) — 412
Research and development expenses 103 — — — — 103
Restructuring-related charges 6 (6) — — — —
Total expenses 562 (11) (33) (3) — 515
Total expense as a % of revenue 18.3% (0.4)% (1.0)% (0.1)% —% 16.8%
Income (loss) from operations 264 15 64 3 — 346
Income (loss) from operations as a % of revenue 8.6% 0.5% 2.1% 0.1% —% 11.3%
Interest and Other (expense) income, net (114) — — — 5 (109)
Income (loss) from continuing operations before
income taxes 150 15 64 3 5 237
Income tax expense (benefit) 44 2 20 1 — 67
Effective tax rate 29% 28%
Income (loss) from continuing operations 106 13 44 2 5 170
Net income (loss) attributable to noncontrolling
interests (2) — — — — (2)
Income (loss) from continuing operations
(attributable to NCR) $108 $13 $44 $2 $5 $172
Diluted earnings per share $0.65 $0.08 $0.28 $0.01 $0.03 $1.09
Diluted shares outstanding 129.6 157.4
GAAP TO NON-GAAP RECONCILIATION
Q2 2016 YTD
30
in millions (except per share amounts)
Q2 YTD 2016
GAAP
Q2 YTD 2016
non-GAAP
Income from continuing operations attributable to NCR common
stockholders:
Income from continuing operations (attributable to NCR) $108 $172
Dividends on convertible preferred shares (24) —
Income from continuing operations attributable to NCR common
stockholders $84 $172
Weighted average outstanding shares:
Weighted average diluted shares outstanding 129.6 129.6
Weighted as-if converted preferred shares — 27.8
Total shares used in diluted earnings per share 129.6 157.4
Diluted earnings per share (1) $0.65 $1.09
(1) GAAP 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 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.
Non-GAAP EPS is always determined using the as-if converted preferred shares and shares that would be issued for stock
compensation awards. 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
Q2 2016 YTD
31
in millions (except per share amounts)
Q3 QTD 2016
GAAP
Restructuring /
Transformation
Costs
Acquisition-
related
amortization of
intangibles
Acquisition-
related costs
Q3 QTD
2016
non-GAAP
Product revenue $708 $— $— $— $708
Service revenue 969 — — — 969
Total revenue 1,677 — — — 1,677
Cost of products 528 — (8) — 520
Cost of services 672 — (6) — 666
Gross margin 477 — 14 — 491
Gross margin rate 28.4% —% 0.9% —% 29.3%
Selling, general and administrative expenses 225 (1) (17) (2) 205
Research and development expenses 56 — — — 56
Restructuring-related charges 7 (7) — — —
Total operating expenses 288 (8) (17) (2) 261
Total operating expense as a % of revenue 17.2% (0.5)% (1.0)% (0.1)% 15.6%
Income (loss) from operations 189 8 31 2 230
Income (loss) from operations as a % of revenue 11.3% 0.5% 1.8% 0.1% 13.7%
Interest and Other (expense) income, net (49) — — — (49)
Income (loss) from continuing operations before income taxes 140 8 31 2 181
Income tax expense (benefit) 31 1 11 1 44
Effective tax rate 22% 24%
Income (loss) from continuing operations 109 7 20 1 137
Net income (loss) attributable to noncontrolling interests 2 — — — 2
Income (loss) from continuing operations (attributable to
NCR) $107 $7 $20 $1 $135
Diluted earnings per share $0.69 $0.05 $0.12 $0.01 $0.87
Diluted shares outstanding 155.4 155.4
GAAP TO NON-GAAP RECONCILIATION
Q3 2016 QTD
32
in millions (except per share amounts)
FY 2016
GAAP
Restructuring /
Transformation
Costs
Acquisition-
related
amortization
of intangibles
Acquisition-
related
costs
Divestiture and
Liquidations
Losses
Pension mark-
to-market
adjustments
FY 2016
non-GAAP
Product revenue $2,737 $— $— $— $— $— $2,737
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 expenses 1,183 (22) (65) (7) — (47) 1,042
Total 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 6 85 626
Income tax expense (benefit) 92 5 40 2 1 7 147
Effective tax rate 24% 23%
Income (loss) from continuing operations 287 21 83 5 5 78 479
Net income (loss) attributable to noncontrolling
interests 4 — — — — — 4
Income (loss) from continuing operations
(attributable to NCR) $283 $21 $83 $5 $5 $78 $475
Diluted earnings per share $1.80 $0.13 $0.53 $0.03 $0.03 $0.50 $3.02
Diluted Shares outstanding 157.4 157.4
GAAP TO NON-GAAP RECONCILIATION
FY 2016
33
in millions (except per share amounts)
FY 2016 GAAP FY 2016non-GAAP
Income from continuing operations attributable to NCR common
stockholders:
Income from continuing operations (attributable to NCR) $283 $475
Income from continuing operations attributable to NCR common
stockholders $283 $475
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
(1) GAAP 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 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.
Non-GAAP EPS is always determined using the as-if converted preferred shares and shares that would be issued for stock
compensation awards. 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
FY 2016
34
Revenue Growth % (GAAP) to
Revenue Growth Adjusted Constant Currency % (non-GAAP)
Q2 2017 QTD
Revenue Growth %
(GAAP)
Favorable
(unfavorable) FX
impact
Divestiture impact
Revenue Growth
Adjusted Constant
Currency % (non-
GAAP)
Software License (6)% —% —% (6)%
Software Maintenance —% (1)% —% 1%
Cloud 9% —% —% 9%
Professional Services 3% (2)% —% 5%
Software 3% —% —% 3%
Services 2% (2)% —% 4%
ATMs (21)% (1)% —% (20)%
Self-Checkout (SCO) 37% —% —% 37%
Point-of-Sale (POS) 18% (2)% —% 20%
Interactive Printer Solutions (IPS) (91)% —% (70)% (21)%
Hardware (9)% (1)% (9)% 1%
Total Revenue (2)% (2)% (3)% 3%
GAAP TO NON-GAAP RECONCILIATION
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Gross Margin Growth % (GAAP) to
Gross Margin Growth % on a Constant Currency Basis (non-GAAP)
Q2 2017 QTD
Gross Margin Growth %
Reported
Favorable (unfavorable)
FX impact
Constant Currency
Gross Margin Growth %
(non-GAAP)
Software (2)% (1)% (1)%
Services 20% (4)% 24%
Hardware (6)% —% (6)%
Total Gross Margin 3% (2)% 5%
GAAP TO NON-GAAP RECONCILIATION
36
Operating Income Growth % (GAAP) to
Operating Income Growth % on a Constant Currency Basis (non-GAAP)
Q2 2017 QTD
Operating Income
Growth % Reported
Favorable (unfavorable)
FX impact
Constant Currency
Operating Income
Growth % (non-GAAP)
Software (11)% (1)% (10)%
Services 53% (11)% 64%
Hardware (14)% 4% (18)%
Total Operating
Income 4% (2)% 6%
GAAP TO NON-GAAP RECONCILIATION
37
GAAP TO NON-GAAP RECONCILIATION
Gross Margin Growth bps (GAAP) to
Gross Margin Growth bps on a Constant Currency Basis (non-GAAP)
Q2 2017 QTD
Gross Margin bps
Growth Reported
Favorable (unfavorable)
FX impact
Constant Currency
Gross Margin bps
Growth (non-GAAP)
Software -240 bps -20 bps -220 bps
Services +370 bps -40 bps +410 bps
Hardware +70 bps — bps +70 bps
Total Gross Margin
bps +140 bps -10 bps +150 bps
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Operating Income Growth bps (GAAP) to
Operating Income Growth bps on a Constant Currency Basis (non-GAAP)
Q2 2017 QTD
Operating Income bps
Growth Reported
Favorable (unfavorable)
FX impact
Constant Currency
Operating Income bps
Growth (non-GAAP)
Software -430 bps -30 bps -400 bps
Services +430 bps -40 bps +470 bps
Hardware -20 bps +10 bps -30 bps
Total Operating
Income +70 bps -20 bps +90 bps
GAAP TO NON-GAAP RECONCILIATION
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GAAP TO NON-GAAP RECONCILIATION
Diluted Earnings per Share (GAAP) to
Diluted Earnings per Share (non-GAAP)
2017
Guidance Q3 2017E
Diluted EPS (GAAP) (1) $2.20 - $2.32 $0.65 - $0.72
Transformation costs 0.14 - 0.17 0.02 - 0.05
Acquisition-Related Amortization of Intangibles 0.49 0.13
Acquisition-Related Costs 0.03 0.01
Deemed dividends related to Blackstone Transaction 0.39 —
Non-GAAP Diluted EPS $3.32 - $3.42 $0.88 - $0.93
(1) 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.
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