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): October 25, 2016
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 October 25, 2016, the Company issued a press release setting forth its third quarter 2016 financial results along with its fiscal year 2016 financial outlook and its fourth quarter 2016 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 October 25, 2016, the Company will hold its previously announced conference call to discuss its third quarter 2016 results, its fiscal year 2016 financial outlook and its fourth quarter 2016 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 October 25, 2016 |
99.2 | Supplemental materials, dated October 25, 2016 |
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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: October 25, 2016
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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 October 25, 2016
99.2 Supplemental materials, dated October 25, 2016
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 | NEWS RELEASE | |
October 25, 2016
NCR Announces Third Quarter 2016 Results
• | Q3 revenue and earnings better than expected led by accelerating revenue growth and an improved operating margin; Revenue up 4% as reported and up 10% excluding FX and the IPS divestiture |
• | Software revenue up 8%, driven by software license growth of 25% and cloud growth of 7%; Net annual contract value for cloud of $15 million in Q3, a leading indicator of future cloud revenue, up from $5 million in the prior year |
• | GAAP diluted EPS of $0.69 in Q3 up from prior year Q3 of $0.59, an increase of 17%; Non-GAAP diluted EPS of $0.87 up from prior year Q3 of $0.78, an increase of 14% constant currency |
• | Cash flow from operations of $225 million, up 32%; Free cash flow of $153 million, up 44% |
• | 2016 full year revenue and non-GAAP earnings guidance raised and cash flow guidance reaffirmed |
DULUTH, Ga. - NCR Corporation (NYSE: NCR) reported financial results today for the three months ended September 30, 2016. Third quarter 2016 revenue of $1.68 billion was up 4% year-over-year. Excluding the impact of foreign currency and adjusted for the Interactive Printer Solutions (IPS) divestiture, third quarter 2016 revenue was up 10%. Third quarter 2016 GAAP diluted EPS of $0.69 was up from $0.59 in the third quarter in 2015. Third quarter 2016 diluted EPS (non-GAAP) of $0.87 was up from $0.78 in the third quarter in 2015. Third quarter 2016 diluted EPS included $0.02 of negative impact relating to unfavorable foreign currency.
“Today we are increasing our full year 2016 revenue and non-GAAP earnings guidance due to accelerating revenue trends, ongoing improvement in execution, and the benefits of our global Omni-Channel leadership position,” said Chairman and CEO Bill Nuti. “We delivered an impressive third quarter that included top line growth across all our business segments as well as strong cash flow generation. Software revenue growth accelerated due to solid growth in cloud and software license. In our Services business, revenues continue to grow and we are hard at work executing efficiency programs that will drive improved customer success and margin performance over the long-term. Hardware had a terrific quarter as we began delivering our new ATM and Branch products, while store transformation momentum continued to drive self-checkout volumes. Overall, we enter the fourth quarter with confidence in our business, strategy, and market position.”
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.
Third Quarter 2016 Operating Results
Revenue
Third quarter revenue of $1.68 billion was up 4% year-over-year. On an adjusted constant currency basis, third quarter revenue was up 10%. Foreign currency fluctuations and the IPS divestiture had an unfavorable impact on the revenue comparison of zero and 6%, respectively. The following table shows the revenue by segment for the third quarter:
Third Quarter | |||||||||||||
$ in millions | 2016 | 2015 | % Change | % Change Adjusted Constant Currency | |||||||||
Software License | $ | 90 | $ | 72 | 25 | % | 26 | % | |||||
Software Maintenance | 92 | 86 | 7 | % | 7 | % | |||||||
Cloud | 142 | 133 | 7 | % | 6 | % | |||||||
Professional Services | 144 | 143 | 1 | % | — | % | |||||||
Software Revenue | $ | 468 | $ | 434 | 8 | % | 7 | % | |||||
Services Revenue | $ | 591 | $ | 563 | 5 | % | 6 | % | |||||
ATM | $ | 324 | $ | 291 | 11 | % | 11 | % | |||||
SCO | 104 | 56 | 86 | % | 86 | % | |||||||
POS | 185 | 183 | 1 | % | 2 | % | |||||||
IPS | 5 | 86 | (94 | %) | (14 | %) | |||||||
Hardware Revenue | $ | 618 | $ | 616 | — | % | 16 | % | |||||
Total Revenue | $ | 1,677 | $ | 1,613 | 4 | % | 10 | % | |||||
Gross Margin
Third quarter gross margin of $477 million increased 4% from $457 million. Third quarter gross margin (non-GAAP) of $491 million increased 4% from $473 million. The improvements in gross margin were primarily driven by higher Software revenue and Services gross margin rate expansion.
Expenses
Third quarter operating expenses of $288 million decreased from $289 million. Third quarter operating expenses (non-GAAP) of $261 million increased from $259 million.
Operating Income
Third quarter operating income of $189 million increased 13% from $168 million. Third quarter operating income (non-GAAP) of $230 million increased 7% from $214 million.
Other (Expense)
Third quarter other (expense) and other (expense) (non-GAAP) were each $49 million, or flat year-over-year.
Income Tax Expense
Third quarter income tax expense of $31 million increased from $16 million. Third quarter income tax expense (non-GAAP) of $44 million increased from $30 million. In the third quarter of 2015, income tax expense benefited from audit settlements in foreign jurisdictions.
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Net Income from Continuing Operations Attributable to NCR
Third quarter net income from continuing operations attributable to NCR of $107 million increased from $102 million. Third quarter net income from continuing operations attributable to NCR (non-GAAP) of $135 million increased from $134 million.
Cash Flow
Third quarter cash provided by operating activities of $225 million increased from $170 million. Free cash flow was $153 million in the third quarter of 2016 as compared to $106 million in the third quarter of 2015. The increases were due to higher operating income and improved working capital.
2016 Outlook
We are increasing our 2016 revenue and non-GAAP earnings guidance. We now expect revenue to be $6.47 billion to $6.50 billion (previous guidance of $6.325 billion to $6.400 billion), due to higher expected revenue in all segments and a decrease in the expected negative impact of foreign currency on revenue from $70 million to $50 million.
We now expect GAAP diluted earnings per share to be $2.25 to $2.30 (previous guidance of $2.25 to $2.35) and non-GAAP diluted earnings per share to be $2.97 to $3.02 (previous guidance of $2.90 to $3.00). The expected negative impact of foreign currency on earnings per share remains unchanged at $0.08. The operating income flow through on the higher revenue is partially offset by higher expenses in the fourth quarter of 2016. The expense increase is primarily due to lower employee related expenses in the prior year fourth quarter. For 2015, the actuarial mark-to-market pension adjustment is included in GAAP diluted earnings per share; however, 2016 guidance does not include actuarial mark-to-market pension adjustments, which will be determined in the fourth quarter of 2016.
We are reaffirming our free cash flow guidance. We continue to expect net cash provided by operating activities to be $675 million to $725 million and free cash flow to be $425 million to $475 million.
Fourth Quarter 2016 Outlook
For the fourth quarter of 2016, revenue is expected to be $1.729 billion to $1.759 billion, GAAP diluted earnings per share is expected to be $0.87 to $0.92, and non-GAAP diluted earnings per share is expected to be $1.01 to $1.06. The fourth quarter 2016 guidance includes an expected foreign currency benefit of $5 million for revenue and no impact on earnings per share. For the fourth quarter of 2015, the actuarial mark-to-market pension adjustment is included in GAAP diluted earnings per share; however, the fourth quarter of 2016 guidance does not include actuarial mark-to-market pension adjustments, which will be determined in the fourth quarter of 2016.
NCR will provide additional information regarding its 2016 guidance during its third quarter earnings conference call and webcast.
2016 Third Quarter Earnings Conference Call
A conference call is scheduled for today at 4:30 p.m. (EDT) to discuss the third quarter 2016 results and guidance for fourth quarter and full-year 2016. 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 866-379-5914 and entering the participant passcode 95343549.
More information on NCR’s Q3 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
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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,” “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 the reasons for increasing NCR’s full year 2016 revenue and earnings guidance, including with respect to accelerating revenue trends, ongoing improvement in execution and NCR’s Omni-Channel Software, Channel Transformation and Digital Enablement leadership; cost and efficiency improvements in NCR’s Services business and their expected benefits, including with respect to margin performance; trends in store automation and the self-checkout market and their effects on NCR’s Hardware business; NCR’s business momentum in the fourth quarter of 2016; NCR’s omni-channel strategy and its expected benefits; market and economic conditions affecting NCR and its business and NCR's full-year and fourth quarter financial outlook (including the section entitled "2016 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, market conditions and spending trends in the financial services industry, fluctuations in oil and commodity prices and their effects on local, regional and global market conditions, economic and market conditions in Russia, China and emerging markets, and the determination by Britain to exit the European Union and further potential changes in Eurozone participation; 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; foreign currency fluctuations; our ability to successfully introduce new solutions and compete in the information technology industry; the transformation of our business model and our ability to sell higher-margin software and services; our ability to improve execution in our sales and services organizations; defects or errors in our products or problems with our hosting facilities; compliance with data privacy and protection requirements; 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 ongoing restructuring plan; 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. 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
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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. Free cash flow does not have a uniform definition under GAAP and, therefore, NCR's definition may differ from other companies' definitions of this measure.
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 | Q3 2016 Actual | Q3 2015 Actual | |||||
Gross Margin (GAAP) | $ | 477 | $ | 457 | |||
Acquisition-related amortization of intangibles | 14 | 15 | |||||
Pension mark-to-market adjustments | — | 1 | |||||
Operating Gross Margin (Non-GAAP) | $ | 491 | $ | 473 | |||
Reconciliation of Operating Expenses (GAAP) to Operating Expenses (non-GAAP)
$ in millions | Q3 2016 Actual | Q3 2015 Actual | |||||
Operating Expenses (GAAP) | $ | 288 | $ | 289 | |||
Restructuring/Transformation Costs | (8 | ) | (12 | ) | |||
Acquisition-related amortization of intangibles | (17 | ) | (16 | ) | |||
Acquisition-related costs | (2 | ) | (2 | ) | |||
Operating Expenses (Non-GAAP) | $ | 261 | $ | 259 | |||
Reconciliation of Income from Operations (GAAP) to Operating Income (non-GAAP)
$ in millions | Q3 2016 Actual | Q3 2015 Actual | |||||
Income from Operations (GAAP) | $ | 189 | $ | 168 | |||
Restructuring/Transformation Costs | 8 | 12 | |||||
Acquisition-related costs | 2 | 2 | |||||
Acquisition-related amortization of intangibles | 31 | 31 | |||||
Pension mark-to-market adjustments | — | 1 | |||||
Operating Income (Non-GAAP) | $ | 230 | $ | 214 | |||
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Reconciliation of Income Tax Expense (GAAP) to Income Tax Expense (non-GAAP)
$ in millions | Q3 2016 Actual | Q3 2015 Actual | |||||
Income Tax Expense (GAAP) | $ | 31 | $ | 16 | |||
Restructuring/Transformation Costs | 1 | 4 | |||||
Acquisition-related costs | 1 | — | |||||
Acquisition-related amortization of intangibles | 11 | 10 | |||||
Income Tax Expense (Non-GAAP) | $ | 44 | $ | 30 | |||
Reconciliation of Net Income from Continuing Operations Attributable to NCR (GAAP) to
Net Income from Continuing Operations Attributable to NCR (non-GAAP)
$ in millions | Q3 2016 Actual | Q3 2015 Actual | |||||
Net Income from Continuing Operations Attributable to NCR (GAAP) | $ | 107 | $ | 102 | |||
Restructuring/Transformation Costs | 7 | 8 | |||||
Acquisition-related costs | 1 | 2 | |||||
Acquisition-related amortization of intangibles | 20 | 21 | |||||
Pension mark-to-market adjustments | — | 1 | |||||
Net Income from Continuing Operations Attributable to NCR (Non-GAAP) | $ | 135 | $ | 134 | |||
Reconciliation of Diluted Earnings Per Share (GAAP) to Non-GAAP Diluted Earnings Per Share (non-GAAP)
Q3 2016 Actual | Q3 2015 Actual | 2016 Guidance (2) | Q4 2016 Guidance (2) | ||||||||||
Diluted Earnings Per Share (GAAP) (1) | $ | 0.69 | $ | 0.59 | $2.25 - $2.30 | $0.87 - $0.92 | |||||||
Restructuring/Transformation Costs | 0.05 | 0.05 | 0.14 | 0.01 | |||||||||
Acquisition-related amortization of intangibles | 0.12 | 0.12 | 0.53 | 0.13 | |||||||||
Acquisition-related costs | 0.01 | 0.01 | 0.02 | — | |||||||||
Divestiture and liquidation losses | — | — | 0.03 | — | |||||||||
Pension mark-to-market adjustments | — | 0.01 | — | — | |||||||||
Non-GAAP Diluted Earnings Per Share (non-GAAP) (1) | $ | 0.87 | $ | 0.78 | $2.97 - $3.02 | $1.01 - $1.06 | |||||||
(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 | Q3 2016 Actual | Q3 2015 Actual | 2016 Guidance | ||||||
Net cash provided by operating activities | $ | 225 | $ | 170 | $675 - $725 | ||||
Total capital expenditures | (62 | ) | (54 | ) | (220) | ||||
Net cash used in discontinued operations | (10 | ) | (10 | ) | (30) | ||||
Free cash flow | $ | 153 | $ | 106 | $425 - $475 | ||||
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Reconciliation of Revenue Growth % (GAAP) to
Revenue Growth Adjusted Constant Currency % (non-GAAP)
Three months ended September 30, 2016 | |||||||
Revenue Growth % (GAAP) | Favorable (unfavorable) FX impact | Divestiture impact | Revenue Growth Adjusted Constant Currency % (non-GAAP) | ||||
Software License | 25% | (1)% | —% | 26% | |||
Software Maintenance | 7% | —% | —% | 7% | |||
Cloud | 7% | 1% | —% | 6% | |||
Professional Services | 1% | 1% | —% | —% | |||
Software | 8% | 1% | —% | 7% | |||
Services | 5% | (1)% | —% | 6% | |||
ATMs | 11% | —% | —% | 11% | |||
SCO | 86% | —% | —% | 86% | |||
POS | 1% | (1)% | —% | 2% | |||
IPS | (94)% | —% | (80)% | (14)% | |||
Hardware | —% | (1)% | (15)% | 16% | |||
Total Revenue | 4% | —% | (6)% | 10% | |||
Nine months ended September 30, 2016 | |||||||
Revenue Growth % (GAAP) | Favorable (unfavorable) FX impact | Divestiture impact | Revenue Growth Adjusted Constant Currency % (non-GAAP) | ||||
Software | 4% | —% | —% | 4% | |||
Services | 5% | (2)% | —% | 7% | |||
Hardware | (5)% | (1)% | (7)% | 3% | |||
Total Revenue | 1% | (1)% | (3)% | 5% | |||
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 | NCR CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in millions, except per share amounts) | Schedule A |
For the Periods Ended September 30 | |||||||||||||||
Three Months | Nine Months | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenue | |||||||||||||||
Products | $ | 708 | $ | 688 | $ | 1,932 | $ | 1,995 | |||||||
Services | 969 | 925 | 2,809 | 2,698 | |||||||||||
Total Revenue | 1,677 | 1,613 | 4,741 | 4,693 | |||||||||||
Cost of products | 528 | 512 | 1,487 | 1,539 | |||||||||||
Cost of services | 672 | 644 | 1,951 | 2,161 | |||||||||||
Total gross margin | 477 | 457 | 1,303 | 993 | |||||||||||
% of Revenue | 28.4 | % | 28.3 | % | 27.5 | % | 21.2 | % | |||||||
Selling, general and administrative expenses | 225 | 224 | 678 | 788 | |||||||||||
Research and development expenses | 56 | 53 | 159 | 175 | |||||||||||
Restructuring-related charges | 7 | 12 | 13 | 33 | |||||||||||
Income (loss) from operations | 189 | 168 | 453 | (3 | ) | ||||||||||
% of Revenue | 11.3 | % | 10.4 | % | 9.6 | % | (0.1 | )% | |||||||
Interest expense | (41 | ) | (42 | ) | (130 | ) | (131 | ) | |||||||
Other (expense), net | (8 | ) | (7 | ) | (33 | ) | (14 | ) | |||||||
Total other (expense), net | (49 | ) | (49 | ) | (163 | ) | (145 | ) | |||||||
Income (loss) before income taxes and discontinued operations | 140 | 119 | 290 | (148 | ) | ||||||||||
% of Revenue | 8.3 | % | 7.4 | % | 6.1 | % | (3.2 | )% | |||||||
Income tax expense | 31 | 16 | 75 | 50 | |||||||||||
Income (loss) from continuing operations | 109 | 103 | 215 | (198 | ) | ||||||||||
Loss from discontinued operations, net of tax | (2 | ) | (4 | ) | (2 | ) | (4 | ) | |||||||
Net income (loss) | 107 | 99 | 213 | (202 | ) | ||||||||||
Net income attributable to noncontrolling interests | 2 | 1 | — | 4 | |||||||||||
Net income (loss) attributable to NCR | $ | 105 | $ | 98 | $ | 213 | $ | (206 | ) | ||||||
Amounts attributable to NCR common stockholders: | |||||||||||||||
Income (loss) from continuing operations | $ | 107 | $ | 102 | $ | 215 | $ | (202 | ) | ||||||
Dividends on convertible preferred stock | (13 | ) | — | (37 | ) | — | |||||||||
Income (loss) from continuing operations attributable to NCR common stockholders | 94 | 102 | 178 | (202 | ) | ||||||||||
Loss from discontinued operations, net of tax | (2 | ) | (4 | ) | (2 | ) | (4 | ) | |||||||
Net income (loss) attributable to NCR common stockholders | $ | 92 | $ | 98 | $ | 176 | $ | (206 | ) | ||||||
Net income (loss) per share attributable to NCR common stockholders: | |||||||||||||||
Net income (loss) per common share from continuing operations | |||||||||||||||
Basic | $ | 0.76 | $ | 0.60 | $ | 1.41 | $ | (1.19 | ) | ||||||
Diluted | $ | 0.69 | $ | 0.59 | $ | 1.37 | $ | (1.19 | ) | ||||||
Net income (loss) per common share | |||||||||||||||
Basic | $ | 0.74 | $ | 0.58 | $ | 1.40 | $ | (1.22 | ) | ||||||
Diluted | $ | 0.68 | $ | 0.57 | $ | 1.36 | $ | (1.22 | ) | ||||||
Weighted average common shares outstanding | |||||||||||||||
Basic | 123.9 | 169.8 | 126.0 | 169.5 | |||||||||||
Diluted | 155.4 | 172.3 | 156.8 | 169.5 | |||||||||||
(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 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.
9
| NCR CORPORATION REVENUE AND OPERATING INCOME SUMMARY (Unaudited) (in millions) | Schedule B |
For the Periods Ended September 30 | |||||||||||||||||||||||
Three Months | Nine Months | ||||||||||||||||||||||
2016 | 2015 | % Change | % Change Adjusted Constant Currency | 2016 | 2015 | % Change | % Change Adjusted Constant Currency | ||||||||||||||||
Revenue by segment | |||||||||||||||||||||||
Software | $ | 468 | $ | 434 | 8% | 7% | $ | 1,339 | $ | 1,288 | 4% | 4% | |||||||||||
Software Gross Margin Rate | 51.1 | % | 51.8 | % | 51.0 | % | 51.4 | % | |||||||||||||||
Services | 591 | 563 | 5% | 6% | 1,708 | 1,628 | 5% | 7% | |||||||||||||||
Services Gross Margin Rate | 21.8 | % | 21.7 | % | 21.3 | % | 21.4 | % | |||||||||||||||
Hardware | 618 | 616 | —% | 16% | 1,694 | 1,777 | (5)% | 3% | |||||||||||||||
Hardware Gross Margin Rate | 19.9 | % | 20.5 | % | 18.0 | % | 18.8 | % | |||||||||||||||
Total Revenue | $ | 1,677 | $ | 1,613 | 4% | 10% | $ | 4,741 | $ | 4,693 | 1% | 5% | |||||||||||
Gross Margin Rate | 29.3 | % | 29.3 | % | 28.5 | % | 28.7 | % | |||||||||||||||
Operating income by segment | |||||||||||||||||||||||
Software | $ | 146 | $ | 135 | $ | 405 | $ | 382 | |||||||||||||||
% of Revenue | 31.2 | % | 31.1 | % | 30.2 | % | 29.7 | % | |||||||||||||||
Services | 56 | 49 | 139 | 133 | |||||||||||||||||||
% of Revenue | 9.5 | % | 8.7 | % | 8.1 | % | 8.2 | % | |||||||||||||||
Hardware | 28 | 30 | 32 | 45 | |||||||||||||||||||
% of Revenue | 4.5 | % | 4.9 | % | 1.9 | % | 2.5 | % | |||||||||||||||
Subtotal-segment operating income | $ | 230 | $ | 214 | $ | 576 | $ | 560 | |||||||||||||||
% of Revenue | 13.7 | % | 13.3 | % | 12.1 | % | 11.9 | % | |||||||||||||||
Other adjustments (1) | 41 | 46 | 123 | 563 | |||||||||||||||||||
Total income (loss) from operations | $ | 189 | $ | 168 | $ | 453 | $ | (3 | ) | ||||||||||||||
(1) | The following table presents the other adjustments for NCR: |
For the Periods Ended September 30 | |||||||||||||||
Three Months | Nine Months | ||||||||||||||
In millions | 2016 | 2015 | 2016 | 2015 | |||||||||||
Restructuring / transformation costs | $ | 8 | $ | 12 | $ | 23 | $ | 36 | |||||||
Acquisition-related amortization of intangible assets | 31 | 31 | 95 | 94 | |||||||||||
Acquisition-related costs | 2 | 2 | 5 | 7 | |||||||||||
OFAC and FCPA investigations | — | — | — | 1 | |||||||||||
Pension mark-to-market adjustments | — | 1 | — | 425 | |||||||||||
Total other adjustments | $ | 41 | $ | 46 | $ | 123 | $ | 563 | |||||||
10
| NCR CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) (in millions, except per share amounts) | Schedule C |
September 30, 2016 | June 30, 2016 | December 31, 2015 | |||||||||
Assets | |||||||||||
Current assets | |||||||||||
Cash and cash equivalents | $ | 318 | $ | 332 | $ | 328 | |||||
Accounts receivable, net | 1,387 | 1,362 | 1,251 | ||||||||
Inventories | 776 | 765 | 643 | ||||||||
Other current assets | 270 | 294 | 327 | ||||||||
Total current assets | 2,751 | 2,753 | 2,549 | ||||||||
Property, plant and equipment, net | 289 | 290 | 322 | ||||||||
Goodwill | 2,737 | 2,736 | 2,733 | ||||||||
Intangibles, net | 704 | 734 | 798 | ||||||||
Prepaid pension cost | 132 | 130 | 130 | ||||||||
Deferred income taxes | 546 | 564 | 582 | ||||||||
Other assets | 552 | 544 | 521 | ||||||||
Total assets | $ | 7,711 | $ | 7,751 | $ | 7,635 | |||||
Liabilities and stockholders’ equity | |||||||||||
Current liabilities | |||||||||||
Short-term borrowings | $ | 256 | $ | 259 | $ | 13 | |||||
Accounts payable | 718 | 676 | 657 | ||||||||
Payroll and benefits liabilities | 212 | 191 | 189 | ||||||||
Deferred service revenue and customer deposits | 471 | 535 | 476 | ||||||||
Other current liabilities | 345 | 356 | 446 | ||||||||
Total current liabilities | 2,002 | 2,017 | 1,781 | ||||||||
Long-term debt | 3,033 | 3,198 | 3,239 | ||||||||
Pension and indemnity plan liabilities | 709 | 702 | 696 | ||||||||
Postretirement and postemployment benefits liabilities | 127 | 128 | 133 | ||||||||
Income tax accruals | 169 | 174 | 167 | ||||||||
Other liabilities | 151 | 141 | 79 | ||||||||
Total liabilities | 6,191 | 6,360 | 6,095 | ||||||||
Redeemable noncontrolling interests | 10 | 9 | 16 | ||||||||
Series A convertible preferred stock: par value $0.01 per share, 3.0 shares authorized, 0.9 shares issued and outstanding as of September 30, 2016 and 0.8 shares issued and outstanding as of June 30, 2016 and December 31, 2015, respectively | 835 | 822 | 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 September 30, 2016, June 30, 2016 and December 31, 2015, respectively | — | — | — | ||||||||
Common stock: par value $0.01 per share, 500.0 shares authorized, 124.0, 123.8 and 133.0 shares issued and outstanding as of September 30, 2016, June 30, 2016 and December 31, 2015, respectively | 1 | 1 | 1 | ||||||||
Paid-in capital | 21 | — | — | ||||||||
Retained earnings | 822 | 730 | 869 | ||||||||
Accumulated other comprehensive loss | (172 | ) | (176 | ) | (150 | ) | |||||
Total NCR stockholders' equity | 672 | 555 | 720 | ||||||||
Noncontrolling interests in subsidiaries | 3 | 5 | 6 | ||||||||
Total stockholders' equity | 675 | 560 | 726 | ||||||||
Total liabilities and stockholders' equity | $ | 7,711 | $ | 7,751 | $ | 7,635 | |||||
11
| NCR CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in millions) | Schedule D |
For the Periods Ended September 30 | |||||||||||||||
Three Months | Nine Months | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Operating activities | |||||||||||||||
Net income (loss) | 107 | $ | 99 | $ | 213 | $ | (202 | ) | |||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||||||
Loss from discontinued operations | 2 | 4 | 2 | 4 | |||||||||||
Depreciation and amortization | 84 | 77 | 259 | 229 | |||||||||||
Stock-based compensation expense | 16 | 12 | 45 | 32 | |||||||||||
Deferred income taxes | 19 | 11 | 39 | 26 | |||||||||||
Gain on sale of property, plant and equipment and other assets | — | — | — | (1 | ) | ||||||||||
Loss on divestiture | — | — | 1 | — | |||||||||||
Impairment of long-lived and other assets | — | — | 2 | 16 | |||||||||||
Changes in assets and liabilities: | |||||||||||||||
Receivables | (17 | ) | (29 | ) | (138 | ) | (80 | ) | |||||||
Inventories | (5 | ) | (32 | ) | (128 | ) | (86 | ) | |||||||
Current payables and accrued expenses | 64 | 42 | 68 | 17 | |||||||||||
Deferred service revenue and customer deposits | (53 | ) | (17 | ) | 78 | 72 | |||||||||
Employee benefit plans | (12 | ) | (19 | ) | (38 | ) | 367 | ||||||||
Other assets and liabilities | 20 | 22 | (34 | ) | 22 | ||||||||||
Net cash provided by operating activities | 225 | 170 | 369 | 416 | |||||||||||
Investing activities | |||||||||||||||
Expenditures for property, plant and equipment | (21 | ) | (16 | ) | (45 | ) | (47 | ) | |||||||
Additions to capitalized software | (41 | ) | (38 | ) | (115 | ) | (117 | ) | |||||||
Proceeds from divestiture | — | — | 47 | — | |||||||||||
Other investing activities, net | — | 3 | (8 | ) | — | ||||||||||
Net cash used in investing activities | (62 | ) | (51 | ) | (121 | ) | (164 | ) | |||||||
Financing activities | |||||||||||||||
Short term borrowings, net | (3 | ) | (28 | ) | (2 | ) | — | ||||||||
Payments on term credit facilities | (11 | ) | (196 | ) | (84 | ) | (312 | ) | |||||||
Payments on revolving credit facilities | (305 | ) | (369 | ) | (736 | ) | (977 | ) | |||||||
Borrowings on revolving credit facilities | 150 | 369 | 856 | 881 | |||||||||||
Debt issuance costs | — | — | (8 | ) | — | ||||||||||
Repurchases of Company common stock | — | — | (250 | ) | — | ||||||||||
Proceeds from employee stock plans | 4 | 1 | 10 | 12 | |||||||||||
Tax withholding payments on behalf of employees | — | — | (7 | ) | (10 | ) | |||||||||
Other financing activities | (2 | ) | — | (2 | ) | — | |||||||||
Net cash used in financing activities | (167 | ) | (223 | ) | (223 | ) | (406 | ) | |||||||
Cash flows from discontinued operations | |||||||||||||||
Net cash used in discontinued operations | (10 | ) | (10 | ) | (30 | ) | (27 | ) | |||||||
Effect of exchange rate changes on cash and cash equivalents | — | (8 | ) | (5 | ) | (27 | ) | ||||||||
Decrease in cash and cash equivalents | (14 | ) | (122 | ) | (10 | ) | (208 | ) | |||||||
Cash and cash equivalents at beginning of period | 332 | 425 | 328 | 511 | |||||||||||
Cash and cash equivalents at end of period | $ | 318 | $ | 303 | $ | 318 | $ | 303 | |||||||
12
1
Q3 2016 EARNINGS
CONFERENCE CALL
k
BILL NUTI, CHAIRMAN & CEO
MARK BENJAMIN, PRESIDENT & COO
BOB FISHMAN, CFO
PAUL LANGENBAHN, SVP & PRESIDENT, HOSPITALITY
October 25, 2016
2
NOTES TO INVESTORS
FORWARD-LOOKING STATEMENTS. Comments made during this conference call and in these materials contain forward-
looking statements. Statements that describe or relate to NCR's plans, goals, intentions, strategies or financial outlook, and statements
that do not relate to historical or current fact, are examples of forward-looking statements. The forward-looking statements in these materials
include statements about NCR’s accelerating revenue trends and the drivers of those trends; the momentum of, and demand for, NCR’s
Omni-Channel Software, Channel Transformation and Digital Enablement offerings and omni-channel solutions; NCR’s expected revenue,
non-GAAP operating income, non-GAAP earnings per share and free cash flow trending for 2016; improving execution; NCR’s vision and
strategy and its alignment with major trends and customer activity; the potential benefits of NCR’s backlog and key metrics on NCR’s 2016
financial performance; NCR’s areas of focus in the fourth quarter and their potential effects on 2017; expectations for margin expansion
and the drivers of margin expansion; and NCR’s Q4 2016, FY 2016 and 2016 segment revenue financial guidance and the expected type
and magnitude of the non-operational adjustments included in any forward-looking non-GAAP measures. 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 October 25, 2016, 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 the following "non-GAAP" measures: operating
income (non-GAAP), non-GAAP diluted earnings per share (non-GAAP diluted EPS), free cash flow (FCF), gross margin (non-GAAP),
gross margin rate (non-GAAP), operating expenses (non-GAAP), interest and other expense, net (non-GAAP), net debt, adjusted EBITDA,
income tax expense (non-GAAP), net income (non-GAAP) and selected measures expressed on a constant currency basis and adjusted
constant currency basis. 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.
3
Q3 UPDATE
4
Q3 2016 FINANCIAL RESULTS
Non-GAAP gross margin rate up 20 bps CC
Non-GAAP EPS up 14% CC FCF up 44% due to improved cash from
operations
FX
~(20 bps)
FX
~($0.02)
29.3% 29.3%
Q3 2015 Q3 2015 Q3 2016
$0.78 $0.87
Q3 2015 Q3 2016
$106
million
Q3 2015
$153
million
Q3 2016
Revenue Non-GAAP Gross Margin Rate
Non-GAAP EPS Free Cash Flow
Revenue up 10% adjusted CC
Recurring revenue up 4% CC, 42% of total revenue
FX ~($5M)
IPS Sale
($79M)
Q3 2016
IPS Sale and FX
$1.68 billion $1.61 billion
5
Q3 2016 Q3 2015 As Reported
Constant
Currency
Revenue $1,677 $1,613 4% 10%(1)
Gross Margin (non-GAAP) 491 473 4% 5%
Gross Margin Rate (non-GAAP) 29.3% 29.3% — bps +20 bps
Operating Expenses (non-GAAP) 261 259 1% 2%
% of Revenue 15.6% 16.1%
Operating Income (non-GAAP) 230 214 7% 10%
% of Revenue 13.7% 13.3% +40 bps +60 bps
Interest and other expense (49) (49) —% (2)%
Income Tax Expense (non-GAAP) 44 30 47%
Income Tax Rate 24% 18%
Net Income (non-GAAP) $135 $134 1% 4%
Diluted EPS (non-GAAP) (2) $0.87 $0.78 12% 14%
Q3 OPERATIONAL RESULTS
(1) Adjusted CC revenue growth excludes $79 million of IPS revenue, or roughly 6%, from Q3 2015.
(2) Q3 2016 includes $0.02 of unfavorable EPS impact related to unfavorable foreign currency headwinds. Diluted share count of 155 million in Q3
2016 and 172 million in Q3 2015.
$ millions, except per share amounts
6
Q3 2016 Q3 2015 % Change
Revenue $1,677 $1,613 4%
Gross Margin 477 457 4%
Gross Margin Rate 28.4% 28.3%
Operating Expenses 288 289 —%
% of Revenue 17.2% 17.9%
Income from Operations 189 168 13%
% of Revenue 11.3% 10.4%
Interest and other expense (49) (49) —%
Income Tax Expense 31 16 94%
Income Tax Rate 22% 13%
GAAP Net Income $107 $102 5%
GAAP Diluted EPS (1) $0.69 $0.59 17%
Q3 GAAP RESULTS
$ millions, except per share amounts(1) Q3 2016 includes $0.02 of unfavorable EPS impact related to unfavorable foreign currency headwinds.
7
n Software - 51.1% GM rate
n Services - 21.8% GM rate
n Hardware - 19.9% GM rate
Q3 SEGMENT RESULTS
Q3 2016 Operating Income
$230M
Software Revenue
Q3 2015 Q3 2016
$434
$468
Services Revenue
Q3 2015 Q3 2016
$563
$591
million million
Hardware Revenue
Q3 2015 Q3 2016
millionmillion
Up 7%
CC
Up 6%
CC
Up 16%
adjusted
CC (1)
(1) Adjusted CC revenue growth excludes $79 million of IPS revenue from Q3 2015.
Software
64%
Services
24%
Hardware
12%
IPS Sale & FX
$616 million $618 million
8
Q3 REVENUE BY REGION
Q3 2016 Q3 2015 % Change % ChangeAdjusted CC
Americas $986 $899 10% 15%
Europe, Middle East Africa 464 489 (5)% 6%
Asia Pacific 227 225 1% (2)%
Total Revenue $1,677 $1,613 4% 10%
$ in millions
9
FREE CASH FLOW
QTD YTD
FY 2016e FY 2015
Q3 2016 Q3 2015 Q3 2016 Q3 2015
Cash Provided by
Operating Activities $225 $170 $369 $416 $675 - $725 $681
Net capital expenditures (62) (54) (160) (164) (220) (229)
Cash used in
Discontinued Operations (10) (10) (30) (27) (30) (43)
Free Cash Flow $153 $106 $179 $225 $425 - $475 $409
Free Cash Flow as a % of non-GAAP net income ~95% 85%
$ in millions
10
NET DEBT & EBITDA METRICS
FY 2015 Q2 2016 Q3 2016
Debt $3,252 $3,457 $3,289
Cash (328) (332) (318)
Net Debt $2,924 $3,125 $2,971
Adjusted EBITDA $1,005 $1,020 (1) $1,047 (1)
Net Debt / Adjusted EBITDA 2.9x 3.1x 2.8x
$ in millions, except metrics
(1) Adjusted EBITDA for the trailing twelve-month period.
Significant de-leveraging in Q3 2016 due to higher free cash flow
11
Q4 2016 GUIDANCE
Q4 2016e Q4 2015
Revenue (1) $1,729 - $1,759 $1,680
Diluted EPS (GAAP) (2) $0.87 - $0.92 $0.27
Diluted EPS (non-GAAP) (3) (4) $1.01 - $1.06 $0.89
$ millions, except per share amounts
(1) Revenue is expected to be up approximately 3% to 5% as reported and 8% to 10% adjusted CC. The fourth quarter 2016
guidance includes an expected foreign currency benefit of $5 million, or roughly 0%. Adjusted CC revenue growth excludes ~
$80 million of IPS revenue, or roughly 5%, from Q4 2015.
(2) Q4 2016 guidance does not include an estimate of the pension mark-to-market adjustments.
(3) For Q4 2016, we expect non-GAAP EPS to be up 13% to 19% with no expected impact from foreign currency.
(4) For Q4 2016, we have assumed OIE of approximately $50 million, an effective tax rate of 22% and a share count of 157
million compared to OIE of $51 million, an effective tax rate of 25% and a share count of 175 million in Q4 2015.
12
2016 Guidance 2016 PreviousGuidance 2015
Revenue (1) $6,470 - $6,500 $6,325 - $6,400 $6,373
Diluted EPS (GAAP) (2) $2.25 - $2.30 $2.25 - $2.35 ($0.94)
Diluted EPS (non-GAAP) (3) (4) $2.97 - $3.02 $2.90 - $3.00 $2.76
Free Cash Flow $425 - $475 $425 - $475 $409
FY 2016 GUIDANCE
$ in millions, except per share amounts
(1) Revenue is expected to be up 1% to 2% as reported and up 5% to 6% adjusted CC. The 2016 guidance now includes an expected
foreign currency negative impact of $50 million for revenue, down from previous guidance of $70 million, or ~1%. Adjusted CC
revenue growth excludes ~$190 million of IPS revenue, or ~3%, from 2015.
(2) FY 2016 guidance does not include an estimate of the pension mark-to-market adjustments.
(3) For the 2016 guidance, we expect non-GAAP diluted EPS to be up 7% to 9%. On a constant currency basis, non-GAAP diluted
EPS is expected to be up 11% to 13% driven by $0.08 of negative impact from unfavorable foreign currency headwinds. Ongoing
pension expense was an additional $0.05 of headwind.
(4) For the 2016 guidance, we have assumed OIE of $205 million to $210 million, an effective tax rate of 25% and a share count of
157 million compared to OIE of $196 million, an effective tax rate of 23% and a share count of 172 million in 2015.
13
2016 SEGMENT REVENUE GUIDANCE
Segment 2016e CCGrowth (1)
FY 2016
Guidance
Prior FY 2016
Guidance FY 2015
Software 4 - 5% $1,825 - $1,835 $1,800 - $1,825 $1,747
Services 4- 5% $2,285 - $2,295 $2,240 - $2,270 2,218
Hardware (2) 7 - 8% $2,360 - $2,370 $2,285 - $2,305 2,408
Total (1) (2) 5 - 6% $6,470 - $6,500 $6,325 - $6,400 $6,373
$ in millions
(1) The 2016 guidance now includes an expected foreign currency negative impact of $50 million for revenue, down from previous
guidance of $70 million, or ~1%.
(2) The growth rates for Hardware revenue and total revenue are normalized for the sale of the IPS business, which was ~$190 million
of Hardware revenue in 2015.
14
REVENUE, OI, EPS AND FCF TRENDING
Q3 YTD Fourth Quarter
$ % of Total $ % of Total
Revenue
2016 Guidance (mid-point) $4,741 73% $1,744 27%
Last 3 years $4,656 73% $1,706 27%
Last year $4,693 74% $1,680 26%
Operating Income (non-GAAP)
2016 Guidance (mid-point) $576 69% $259 31%
Last 3 years $542 69% $244 31%
Last year $560 68% $260 32%
Diluted EPS (non-GAAP)
2016 Guidance (mid-point) $1.96 65% $1.04 35%
Last 3 years $1.90 69% $0.86 31%
Last year $1.86 68% $0.89 32%
Free cash flow (non-GAAP)
2016 Guidance (mid-point) $179 40% $271 60%
Last 3 years $66 21% $243 79%
Last year $225 55% $184 45%
$ in millions, except per share amounts
15
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
16
SOFTWARE
Q3 2016 Update
• Revenue up 8% as reported and up 7% CC
◦ Software License revenue up 26% CC; unattached
license up 26% driven primarily by store
transformation; attached license up 24% contributing
to higher ATM and SCO revenue
◦ Software Maintenance revenue up 7% due to Software
License revenue growth in prior periods
◦ Cloud revenue up 6% CC driven by prior period bookings
in the financial services and hospitality industries
◦ Professional Services revenue was flat CC due to timing
of project rollouts, with strong backlog entering Q4
• Net ACV (Annual Contract Value) of $15M indicates strong
cloud growth in future periods, YTD Net ACV of $54M
compared to Q3 2015 YTD net ACV of $25M
• Operating income up $11 million driven by higher revenue
Key MetricsFinancial Results
Q3 2016 Q3 2015 %Change
%
Change
Constant
Currency
Software
License $90 $72 25% 26%
Unattached
License 49 39 26% 26%
Software
Maintenance 92 86 7% 7%
Cloud 142 133 7% 6%
Professional
Services 144 143 1% —%
Software
Revenue $468 $434 8% 7%
Non-GAAP
Gross Margin $239 $225 6% 6%
Non-GAAP Gross
Margin Rate 51.1% 51.8% (70) bps (40) bps
Operating
Income $146 $135 8% 8%
Operating Income
as a % of Revenue 31.2% 31.1% +10 bps +20 bps
Business Highlights
• Continued momentum in omni-channel wins, including
International Bank of Commerce and completed rollout of
Papa Murphy's
• Digital Enablement and Channel Transformation continue
to drive Cloud growth
• 86% growth in NCR Silver subscriber base
• 35% increase in NCR Secure Payments volume
• 9% growth in Digital Insight users
• 21% increase in Mobile Ordering platform sites and
transactions up 190% y/y
• NCR announced next generation consulting services to
advance our leadership in channel transformation and
address the growth in digital enablement needs of our
customers
$ in millions
17
SERVICES
Q3 2016 Update
• Revenue up 5% as reported and up 6% CC
◦ Strong growth in implementation services, hardware
maintenance and managed services
• Operating income up $7M due to higher revenue, operating
leverage and improved productivity and efficiency
Key Metrics
Q3 2016 Q3 2015 %Change
%
Change
Constant
Currency
Services
Revenue $591 $563 5% 6%
Non-GAAP
Gross Margin $129 $122 6% 6%
Non-GAAP Gross
Margin Rate 21.8% 21.7% +10 bps — bps
Operating
Income $56 $49 14% 13%
Operating Income
as a % of Revenue 9.5% 8.7% +80 bps +60 bps
Financial Results
Business Highlights
• Channel Transformation success driving hardware
maintenance wins, such as Santander, as well as
implementation services growth across the industries like
Domino's Pizza in Japan
• Expanding higher value managed service offerings in
adjacent services such as software distribution, endpoint
security and cash management
• Driving increased availability and efficiency for CFI
customers through managed services
• Business process improvements favorably impacting
productivity, including Big Data analytics, predictive
monitoring and customer onboarding. IoT based
managed service solution enabled a ~25% reduction in
time it took to onboard recent CFIs
• Services file value up year-over-year
$ in millions
18
HARDWARE
Q3 2016 Update
• Revenue was slightly up as reported and up 16% adjusted
CC driven by continued momentum in Channel
Transformation
◦ ATM revenue up 11% CC driven by new product
introduction and acceptance of omni-channel ready
products
◦ SCO revenue up significantly due to Store
Transformation traction globally
◦ POS revenue growth higher due to new product
introductions and replacement cycle
• Operating income down $2M but up 10% on a constant
currency basis
Key Metrics
Q3
2016
Q3
2015
%
Change
% Change
Constant
Currency (1)
ATMs $324 $291 11% 11%
Self-Checkout
(SCO) 104 56 86% 86%
Point-of-Sale
(POS) 185 183 1% 2%
Interactive
Printer
Solutions (IPS)
5 86 (94)% (14)%
Hardware
Revenue $618 $616 —% 16%
Non-GAAP
Gross Margin $123 $126 (2)% 3%
Non-GAAP Gross
Margin Rate 19.9% 20.5% (60) bps +30 bps
Operating
Income $28 $30 (7)% 10%
Operating Income
as a % of Revenue 4.5% 4.9% (40) bps +40 bps
Financial Results
• Channel Transformation driving strategic wins in the quarter
including Coles Supermarkets and State Bank of India
• SCO order volumes continue to accelerate driven by Store
Transformation in existing customers and new customers
globally along with higher lane density within the stores
• New POS hardware portfolio ramping faster than expected
driven by replacement cycles and new customer
installations showing continued demand for enterprise
hardened POS hardware
• Increasing year over year demand for mobile POS hardware
due to our new Orderman 7 device
• NCR holds #1 position in ePOS for North America for the
2nd consecutive year
Business Highlights
$ in millions
(1) Revenue adjusted for the divestiture of IPS.
19
▪ 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; raising
revenue and non-GAAP EPS guidance & reaffirming cash flow
guidance
▪ Focused on sales funnel, orders, and revenue growth in Q4 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
Q3 SUMMARY
SUPPLEMENTARY
NON-GAAP MATERIALS
21
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), Operating Expenses (non-
GAAP), Income Tax Expense (non-GAAP) and Net Income (non-GAAP). NCR’s operating income (non-GAAP), diluted earnings per share (non-GAAP),
gross margin (non-GAAP), gross margin rate (non-GAAP), operating expenses (non-GAAP), interest and other expense (non-GAAP), income tax expense
(non-GAAP) and net income (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, expenses, interest and other expense, effective tax rate and net income, 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 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. 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. Free cash flow (FCF) does not have a uniform definition under GAAP and, therefore, NCR's definition may differ from
other companies' definition of this measure.
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.
22
NON-GAAP MEASURES
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.
23
Net Income from Continuing Operations Attributable to NCR (GAAP) to
Adjusted EBITDA (non-GAAP)
in millions
2015 Q2 2016LTM
Q3 2016
LTM
Net Income from Continuing Operations Attributable to NCR (GAAP) ($154) $258 $263
Pension Mark-to-Market Adjustments 454 30 29
Restructuring/Transformation Costs 74 65 61
Acquisition-Related Amortization of Intangibles 125 126 126
Acquisition-Related Purchase Price Adjustment — — —
Acquisition-Related Costs 11 9 9
Reserve related to a subcontract in MEA 20 20 20
Divestiture and Liquidation Losses 34 39 39
OFAC and FCPA Investigations(1) 1 — —
Net Income from Continuing Operations Attributable to Noncontrolling
Interests 4 (1) —
Interest Expense 173 173 172
Interest Income (5) (5) (5)
Depreciation and Amortization 171 190 198
Income Taxes 55 65 80
Stock Compensation Expense 42 51 55
Adjusted EBITDA (non-GAAP) $1,005 $1,020 $1,047
(1) Estimated expenses for 2016 will be affected by, among other things, the status and progress of the OFAC matter. There can be no assurance that the Company will not
be subject to fines or other remedial measures as a result of OFAC's investigation.
GAAP TO NON-GAAP RECONCILIATION
24
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 expenses 288 (8) (17) (2) 261
Total 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
GAAP TO NON-GAAP RECONCILIATION
Q3 2016 QTD
25
in millions (except per share amounts)
Q3 QTD
2016
GAAP
Q3 QTD
2016
non-GAAP
Income (loss) from continuing operations attributable to NCR
common stockholders:
Income (loss) from continuing operations (attributable to NCR) $107 $135
Dividends on convertible preferred shares — —
Income (loss) from continuing operations attributable to NCR common
stockholders
$107 $135
Weighted average outstanding shares:
Weighted average diluted shares outstanding 127.0 127.0
Weighted as-if converted preferred shares 28.4 28.4
Total shares used in diluted earnings per share 155.4 155.4
Diluted earnings per share (1) $0.69 $0.87
GAAP TO NON-GAAP RECONCILIATION
Q3 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.
26
in millions (except per share amounts)
Q3 QTD
2015 GAAP
Restructuring /
Transformation
Costs
Acquisition-
related
amortization of
intangibles
Acquisition-
related costs
Pension mark-to-
market
adjustments
Q3 QTD 2015
non-GAAP
Product revenue $688 $— $— $— $— $688
Service revenue 925 — — — — 925
Total revenue 1,613 — — — — 1,613
Cost of products 512 — (9) — — 503
Cost of services 644 — (6) — (1) 637
Gross margin 457 — 15 — 1 473
Gross margin rate 28.3% —% 0.9% —% 0.1% 29.3%
Selling, general and administrative expenses 224 — (16) (2) — 206
Research and development expenses 53 — — — — 53
Restructuring-related charges 12 (12) — — — —
Total expenses 289 (12) (16) (2) — 259
Total expense as a % of revenue 17.9% (0.7)% (1.0)% (0.1)% —% 16.1%
Income (loss) from operations 168 12 31 2 1 214
Income (loss) from operations as a % of revenue 10.4% 0.7% 2.0% 0.1% 0.1% 13.3%
Interest and Other (expense) income, net (49) — — — — (49)
Income (loss) from continuing operations before
income taxes
119 12 31 2 1 165
Income tax expense (benefit) 16 4 10 — — 30
Effective tax rate 13% 18%
Income (loss) from continuing operations 103 8 21 2 1 135
Net income (loss) attributable to noncontrolling
interests
1 — — — — 1
Income (loss) from continuing operations
(attributable to NCR)
$102 $8 $21 $2 $1 $134
Diluted earnings per share $0.59 $0.05 $0.12 $0.01 $0.01 $0.78
Diluted shares outstanding 172.3 172.3
GAAP TO NON-GAAP RECONCILIATION
Q3 2015 QTD
27
in millions (except per share amounts)
Q3 YTD
2016
GAAP
Restructuring /
Transformation
Costs
Acquisition-
related
amortization
of intangibles
Acquisition- related
costs
Divestiture
and
Liquidation
Losses
Q3 YTD
2016
non-GAAP
Product revenue $1,932 $— $— $— $— $1,932
Service revenue 2,809 — — — — 2,809
Total revenue 4,741 — — — — 4,741
Cost of products 1,487 — (27) — — 1,460
Cost of services 1,951 (4) (18) — — 1,929
Gross margin 1,303 4 45 — — 1,352
Gross margin rate 27.5% 0.1% 0.9% —% —% 28.5%
Selling, general and administrative expenses 678 (6) (50) (5) — 617
Research and development expenses 159 — — — — 159
Restructuring-related charges 13 (13) — — — —
Total expenses 850 (19) (50) (5) — 776
Total expense as a % of revenue 17.9% (0.4)% (1.0)% (0.1)% —% 16.4%
Income (loss) from operations 453 23 95 5 — 576
Income (loss) from operations as a % of revenue 9.6% 0.5% 1.9% 0.1% —% 12.1%
Interest and Other (expense) income, net (163) — — — 5 (158)
Income (loss) from continuing operations before income taxes 290 23 95 5 5 418
Income tax expense (benefit) 75 3 31 2 — 111
Effective tax rate 26% 27%
Income (loss) from continuing operations 215 20 64 3 5 307
Net income (loss) attributable to noncontrolling interests — — — — — —
Income (loss) from continuing operations (attributable to
NCR) $215 $20 $64 $3 $5 $307
Diluted earnings per share $1.37 $0.13 $0.41 $0.02 $0.03 $1.96
GAAP TO NON-GAAP RECONCILIATION
Q3 2016 YTD
28
in millions (except per share amounts)
Q3 YTD
2016
GAAP
Q3 YTD
2016
non-GAAP
Income (loss) from continuing operations attributable to NCR
common stockholders:
Income (loss) from continuing operations (attributable to NCR) $215 $307
Dividends on convertible preferred shares — —
Income (loss) from continuing operations attributable to NCR common
stockholders
$215 $307
Weighted average outstanding shares:
Weighted average diluted shares outstanding 128.8 128.8
Weighted as-if converted preferred shares 28.0 28.0
Total shares used in diluted earnings per share 156.8 156.8
Diluted earnings per share (1) $1.37 $1.96
GAAP TO NON-GAAP RECONCILIATION
Q3 2016 YTD
(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.
29
in millions (except per share amounts)
Q3 YTD
2015
GAAP
Restructuring
plan
Acquisition-
related
amortization
of intangibles
Acquisition-
related
costs
OFAC and
FCPA
Investigations
Pension
(expense)
benefit
Q3 YTD 2015
non-GAAP
Product revenue $1,995 $— $— $— $— $— $1,995
Service revenue 2,698 — — — — — 2,698
Total revenue 4,693 — — — — — 4,693
Cost of products 1,539 (3) (28) — — (10) 1,498
Cost of services 2,161 — (19) — — (292) 1,850
Gross margin 993 3 47 — — 302 1,345
Gross margin rate 21.2% 0.1% 1.0% —% —% 6.4% 28.7%
Selling, general and administrative expenses 788 — (47) (7) (1) (113) 620
Research and development expenses 175 — — — — (10) 165
Restructuring-related charges 33 (33) — — — — —
Total expenses 996 (33) (47) (7) (1) (123) 785
Total expense as a % of revenue 21.2% (0.7)% (1.0)% (0.1)% —% (2.7)% 16.7%
Income (loss) from operations (3) 36 94 7 1 425 560
Income (loss) from operations as a % of revenue (0.1)% 0.8% 2.0% 0.1% —% 9.1% 11.9%
Interest and Other (expense) income, net (145) — — — — — (145)
Income (loss) from continuing operations before
income taxes (148) 36 94 7 1 425 415
Income tax expense (benefit) 50 10 30 2 1 (2) 91
Effective tax rate (34)% 22%
Income (loss) from continuing operations (198) 26 64 5 — 427 324
Net income (loss) attributable to noncontrolling
interests 4 — — — — — 4
Income (loss) from continuing operations
(attributable to NCR) ($202) $26 $64 $5 $— $427 $320
Diluted earnings per share ($1.19) $0.15 $0.37 $0.03 $— $2.48 $1.86
Diluted Shares outstanding 169.5 172.0
GAAP TO NON-GAAP RECONCILIATION
Q3 2015 YTD
30
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
(expense)
benefit
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 expenses 338 (29) (15) (4) (20) — (18) 252
Total 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
GAAP TO NON-GAAP RECONCILIATION
Q4 2015 QTD
31
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.
32
in millions (except per share amounts)
FY 2015
GAAP
Restructuring /
Transformation
Costs
Acquisition-
related
amortization
of intangibles
Acquisition-
related
costs
Reserve
related to a
subcontract in
MEA
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
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
GAAP TO NON-GAAP RECONCILIATION
2016
Guidance Q4 2016e
Diluted EPS (GAAP) (1) $2.25 - $2.30 $0.87 - $0.92
Restructuring Plan 0.14 0.01
Acquisition-Related Amortization of Intangibles 0.53 0.13
Acquisition-Related Costs 0.02 —
Divestiture and Liquidation Losses 0.03 —
Non-GAAP Diluted EPS $2.97 - $3.02 $1.01 - $1.06
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.
35
GAAP TO NON-GAAP RECONCILIATION
Revenue Growth % (GAAP) to
Revenue Growth Adjusted Constant Currency % (non-GAAP)
Q3 2016 QTD
Revenue Growth %
(GAAP)
Favorable (unfavorable)
FX impact
Divestiture
impact
Revenue Growth
Adjusted Constant
Currency % (non-GAAP)
Software License 25% (1)% —% 26%
Software
Maintenance 7% —% —% 7%
Cloud 7% 1% —% 6%
Professional
Services 1% 1% —% —%
Software 8% 1% —% 7%
Services 5% (1)% —% 6%
ATMs 11% —% —% 11%
Self-Checkout (SCO) 86% —% —% 86%
Point-of-Sale (POS) 1% (1)% —% 2%
Interactive Printer
Solutions (94)% —% (80)% (14)%
Hardware —% (1)% (15)% 16%
Total Revenue 4% —% (6)% 10%
36
GAAP TO NON-GAAP RECONCILIATION
Revenue Growth % (GAAP) to
Revenue Growth Adjusted Constant Currency % (non-GAAP)
Q3 2016 QTD
Revenue Growth
% (GAAP)
Favorable
(unfavorable) FX
impact
Divestiture
impact
Revenue Growth
Adjusted
Constant
Currency %
(non-GAAP)
Americas 10% 1% (6)% 15%
Europe, Middle East
Africa (5)% (6)% (5)% 6%
Asia Pacific 1% 7% (4)% (2)%
Total Revenue 4% —% (6)% 10%
37
GAAP TO NON-GAAP RECONCILIATION
Operating Income Growth % (GAAP) to
Operating Income Growth % on a Constant Currency Basis (non-GAAP)
Q3 2016 QTD
Operating Income
Growth % Reported
Favorable
(unfavorable) FX
impact
Constant Currency
Operating Income
Growth % (non-GAAP)
Software 8% —% 8%
Services 14% 1% 13%
Hardware (7)% (17)% 10%
Total Operating
Income 7% (3)% 10%
38
GAAP TO NON-GAAP RECONCILIATION
Operating Income Growth bps (GAAP) to
Operating Income Growth bps on a Constant Currency Basis (non-GAAP)
Q3 2016 QTD
Operating Income
bps Growth Reported
Favorable
(unfavorable) FX
impact
Constant Currency
Operating Income
bps Growth (non-
GAAP)
Software +10 bps -10 bps +20 bps
Services +80 bps +20 bps +60 bps
Hardware -40 bps -80 bps +40 bps
Total Operating Income +40 bps -20 bps +60 bps
39