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): November 7, 2018
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.) |
864 Spring Street NW
Atlanta, GA 30308
(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)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 7.01 | |
On November 7, 2018, members of the management team of NCR Corporation (the “Company”) will make presentations to attendees of the Company’s 2018 Investor Day regarding, among other things, the Company’s business, long-term strategy and its 2018 outlook. A copy of the materials to be used during the presentations is included as Exhibit 99.1 hereto. The materials and a live audio webcast of the presentations may be accessed through the Company’s website at www.ncr.com in the “Investor Relations” section.
| Item 9.01 | Financial Statements and Exhibits. |
| (d) | Exhibits: |
The following exhibit is attached with this current report on Form 8-K:
| Exhibit No. |
Description | |
| 99.1 | Presentation Materials of the Company, dated November 7, 2018 | |
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/ Andre Fernandez | |
| Andre Fernandez | ||
| Executive Vice President and Chief Financial Officer | ||
Date: November 7, 2018
Exhibit 99.1 New York City November 7, 2018 1Exhibit 99.1 New York City November 7, 2018 1
FORWARD-LOOKING STATEMENTS. Comments made during this presentation 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 full year 2018 financial guidance and the expected type and magnitude of the non-operational adjustments included in any forward-looking non-GAAP measures; NCR's expected areas of focus to drive growth and create long-term shareholder value; NCR’s leadership team and organization; NCR’s addressable markets; NCR’s spend optimization program, including a focus on Selling, General and Administrative Expenses (SG&A) and operating expense, and its expected benefits in 2019; NCR’s strategic growth platforms; NCR's Mission One (M1) Services initiative and its expected benefits on NCR's services revenue and gross margin profile; expectations regarding NCR’s revenue mix shifting to N O N - G A A P D I L U T E D E P S software and services; NCR’s expectations regarding hardware revenue, and ATM orders, ATM production rates and ATM revenue, including attached software and services revenue; NCR’s merger and acquisition strategy, and completed and targeted mergers and acquisitions and their expected benefits; expectations for accelerating recurring revenue and predictability; NCR's expected free cash flow generation and capital allocation strategy; and NCR's cloud revenue momentum. 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, 2018, and those factors detailed from time to time in NCR's other SEC reports. These materials are dated November 7, 2018, 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 non-GAAP diluted earnings per share and free cash flow. 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 these non-GAAP measures is also included in NCR's SEC reports. USE OF CERTAIN TERMS. As used in these materials, the term recurring revenue means the sum of cloud, hardware maintenance and software maintenance revenue. All statements of available market size and growth presented in these material were prepared by NCR based on its own research, estimates, and analysis. These presentation materials and the associated remarks made during this conference call are integrally related and are intended to be presented and understood together. 2FORWARD-LOOKING STATEMENTS. Comments made during this presentation 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 full year 2018 financial guidance and the expected type and magnitude of the non-operational adjustments included in any forward-looking non-GAAP measures; NCR's expected areas of focus to drive growth and create long-term shareholder value; NCR’s leadership team and organization; NCR’s addressable markets; NCR’s spend optimization program, including a focus on Selling, General and Administrative Expenses (SG&A) and operating expense, and its expected benefits in 2019; NCR’s strategic growth platforms; NCR's Mission One (M1) Services initiative and its expected benefits on NCR's services revenue and gross margin profile; expectations regarding NCR’s revenue mix shifting to N O N - G A A P D I L U T E D E P S software and services; NCR’s expectations regarding hardware revenue, and ATM orders, ATM production rates and ATM revenue, including attached software and services revenue; NCR’s merger and acquisition strategy, and completed and targeted mergers and acquisitions and their expected benefits; expectations for accelerating recurring revenue and predictability; NCR's expected free cash flow generation and capital allocation strategy; and NCR's cloud revenue momentum. 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, 2018, and those factors detailed from time to time in NCR's other SEC reports. These materials are dated November 7, 2018, 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 non-GAAP diluted earnings per share and free cash flow. 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 these non-GAAP measures is also included in NCR's SEC reports. USE OF CERTAIN TERMS. As used in these materials, the term recurring revenue means the sum of cloud, hardware maintenance and software maintenance revenue. All statements of available market size and growth presented in these material were prepared by NCR based on its own research, estimates, and analysis. These presentation materials and the associated remarks made during this conference call are integrally related and are intended to be presented and understood together. 2
AGENDA § INTRODUCTION AND WELCOME Michael Nelson, VP Investor Relations § NCR OVERVIEW AND STRATEGY Mike Hayford, President and CEO § OPERATIONALIZING THE STRATEGY Owen Sullivan, Chief Operating Officer § NCR FINANCIAL OVERVIEW Andre Fernandez, Chief Financial Officer § Q&A NCR Leadership Team § DEMONSTRATIONS OF STRATEGIC GROWTH PLATFORMS 3AGENDA § INTRODUCTION AND WELCOME Michael Nelson, VP Investor Relations § NCR OVERVIEW AND STRATEGY Mike Hayford, President and CEO § OPERATIONALIZING THE STRATEGY Owen Sullivan, Chief Operating Officer § NCR FINANCIAL OVERVIEW Andre Fernandez, Chief Financial Officer § Q&A NCR Leadership Team § DEMONSTRATIONS OF STRATEGIC GROWTH PLATFORMS 3
Radiant JetPay, StopLift, Patent for Ritty’s acquisition and Zipscene Incorruptible cashier bought acquisitions First electric First commercially First self checkout systems cash register available computer with a solid state processor NCR Silver launched Retalix acquisition Sold 1 million First Sales NCR enters Mixed Media cash registers training U.K. Intelligent First UPC school deposit ATMs barcode launched scanned Alaric and NCR enters Digital Insight Japan acquisition 1884 1893 1895 1906 1911 1920 1958 1974 1997 2010 2011 2012 2013 2018 4Radiant JetPay, StopLift, Patent for Ritty’s acquisition and Zipscene Incorruptible cashier bought acquisitions First electric First commercially First self checkout systems cash register available computer with a solid state processor NCR Silver launched Retalix acquisition Sold 1 million First Sales NCR enters Mixed Media cash registers training U.K. Intelligent First UPC school deposit ATMs barcode launched scanned Alaric and NCR enters Digital Insight Japan acquisition 1884 1893 1895 1906 1911 1920 1958 1974 1997 2010 2011 2012 2013 2018 4
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A B O U T N C R $6.4B $984M 20,000+ 1,270 SERVICE PROFESSIONALS Trailing 12 month 34,000 Trailing 12 PATENTS HELD EBITDA month revenue in 90 countries PROFESSIONALS BY NCR around the world TOP 100 7th 18M TECHNOLOGY DIGITAL BANKING MOST REPUTABLE BRAND IN INNOVATORS USERS TECHNOLOGY 8M 134 years as 75,000 SERVICE a technology SITES USING REQUESTS Aloha Platform innovator REMOTELY RESOLVED 6A B O U T N C R $6.4B $984M 20,000+ 1,270 SERVICE PROFESSIONALS Trailing 12 month 34,000 Trailing 12 PATENTS HELD EBITDA month revenue in 90 countries PROFESSIONALS BY NCR around the world TOP 100 7th 18M TECHNOLOGY DIGITAL BANKING MOST REPUTABLE BRAND IN INNOVATORS USERS TECHNOLOGY 8M 134 years as 75,000 SERVICE a technology SITES USING REQUESTS Aloha Platform innovator REMOTELY RESOLVED 6
H O S P I T A L I T Y R E T A I L F I N A N C I A L #1 #1 #1 GLOBAL MARKET SHARE LEADER IN POINT OF SALE PROVIDER OF MULTI-VENDOR IN RETAIL SELF-CHECKOUT SOFTWARE RESTAURANTS ATM SOFTWARE INSTALLED BASE GLOBALLY ATM FAMILY (SelfServ) MARKET LEADER IN ENTERPRISE POINT OF SALE SOFTWARE FOR GROCERY, DRUG AND CONVENIENCE STORE SEGMENT Source: RBR 7H O S P I T A L I T Y R E T A I L F I N A N C I A L #1 #1 #1 GLOBAL MARKET SHARE LEADER IN POINT OF SALE PROVIDER OF MULTI-VENDOR IN RETAIL SELF-CHECKOUT SOFTWARE RESTAURANTS ATM SOFTWARE INSTALLED BASE GLOBALLY ATM FAMILY (SelfServ) MARKET LEADER IN ENTERPRISE POINT OF SALE SOFTWARE FOR GROCERY, DRUG AND CONVENIENCE STORE SEGMENT Source: RBR 7
NCR VISION To be the leading software and services-led enterprise provider in the vertical industries we serve. FINANCIAL RETAIL HOSPITALITY 8NCR VISION To be the leading software and services-led enterprise provider in the vertical industries we serve. FINANCIAL RETAIL HOSPITALITY 8
NCR Shareholder Value Creation will be driven by: Mix shift Top-Line Spend to Software Revenue Growth Optimization & Services 9NCR Shareholder Value Creation will be driven by: Mix shift Top-Line Spend to Software Revenue Growth Optimization & Services 9
FUTURE Drive 3-5% Growth NEAR-TERM: Drive 1-3% Growth EXECUTE ON TODAY: STRATEGIC Stabilize Growth SHIFT THE MIX GROWTH PLATFORMS STRATEGIC GROWTH BUILD THE TEAM PLATFORMS SIMPLIFY TO COMPLEMENTARY DRIVE EXECUTION ACQUISITIONS/ PARTNERSHIPS STARTS WITH THE CUSTOMER 10FUTURE Drive 3-5% Growth NEAR-TERM: Drive 1-3% Growth EXECUTE ON TODAY: STRATEGIC Stabilize Growth SHIFT THE MIX GROWTH PLATFORMS STRATEGIC GROWTH BUILD THE TEAM PLATFORMS SIMPLIFY TO COMPLEMENTARY DRIVE EXECUTION ACQUISITIONS/ PARTNERSHIPS STARTS WITH THE CUSTOMER 10
Mike Hayford CEO Andre J. Fernandez, Jim Bedore Debra Bronder Owen Sullivan EVP and Chief EVP, General Counsel & SVP, Chief HR Officer EVP, Chief Operating Officer Financial Officer Corporate Secretary NCR BANKING GROUP NCR COMMERCE GROUP Frank D'Angelo Paul Langenbahn EVP and President, EVP and President, NCR Banking Group NCR Commerce Group GLOBAL SALES GLOBAL SERVICES PROFESSIONAL SERVICES CORPORATE MARKETING Marija Zivanovic-Smith Dan Campbell Mithu Bhargava Bob Ciminera SVP, Corporate Marketing EVP, Global Sales EVP, Global Services SVP, Professional Services & Communications SW ENGINEERING & INNOVATION INFORMATION TECHNOLOGY HARDWARE AND MANUFACTURING PRODUCT MANAGEMENT Dirk Izzo Adrian Button Bill VanCuren Tim Vanderham SVP, Product SVP, Chief Information SVP, Hardware Product SVP, Chief Technology Officer Management Operations Officer 11Mike Hayford CEO Andre J. Fernandez, Jim Bedore Debra Bronder Owen Sullivan EVP and Chief EVP, General Counsel & SVP, Chief HR Officer EVP, Chief Operating Officer Financial Officer Corporate Secretary NCR BANKING GROUP NCR COMMERCE GROUP Frank D'Angelo Paul Langenbahn EVP and President, EVP and President, NCR Banking Group NCR Commerce Group GLOBAL SALES GLOBAL SERVICES PROFESSIONAL SERVICES CORPORATE MARKETING Marija Zivanovic-Smith Dan Campbell Mithu Bhargava Bob Ciminera SVP, Corporate Marketing EVP, Global Sales EVP, Global Services SVP, Professional Services & Communications SW ENGINEERING & INNOVATION INFORMATION TECHNOLOGY HARDWARE AND MANUFACTURING PRODUCT MANAGEMENT Dirk Izzo Adrian Button Bill VanCuren Tim Vanderham SVP, Product SVP, Chief Information SVP, Hardware Product SVP, Chief Technology Officer Management Operations Officer 11
O R G A N I Z E D F O R C U S T O M E R S U C C E S S GLOBAL CUSTOMERS NCR BANKING GROUP NCR COMMERCE GROUP Digital Banking | Branch | ATM Retail | Hospitality | SMB | JetPay S H A R E D S E R V I C E S Software Delivery / Leveraged Product Management Sales Hardware Delivery Services Delivery Professional Services Infrastructure & Marketing P A Y M E N T S | D A T A | D I G I T A L C O N N E C T E D S E R V I C E S 12O R G A N I Z E D F O R C U S T O M E R S U C C E S S GLOBAL CUSTOMERS NCR BANKING GROUP NCR COMMERCE GROUP Digital Banking | Branch | ATM Retail | Hospitality | SMB | JetPay S H A R E D S E R V I C E S Software Delivery / Leveraged Product Management Sales Hardware Delivery Services Delivery Professional Services Infrastructure & Marketing P A Y M E N T S | D A T A | D I G I T A L C O N N E C T E D S E R V I C E S 12
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N C R I S W E L L P O S I T I O N E D T O H E L P O U R C U S T O M E R S C O M P E T E I N T H E E V O L V I N G D I G I T A L W O R L D PHYSICAL PRESENCE DIGITAL WORLD 14N C R I S W E L L P O S I T I O N E D T O H E L P O U R C U S T O M E R S C O M P E T E I N T H E E V O L V I N G D I G I T A L W O R L D PHYSICAL PRESENCE DIGITAL WORLD 14
• Digital First • Digital First • Digital First Banking Restaurant Retail • Digital Small • Digital Business • Digital Connected Essentials Convenience Services and Fuel 15• Digital First • Digital First • Digital First Banking Restaurant Retail • Digital Small • Digital Business • Digital Connected Essentials Convenience Services and Fuel 15
D I G I T A L F I R S T B A N K I N G Enabling the transformation of retail banking 1 Branch Transformation Digital Transaction Zone Digital Banking Common Transaction Services 16D I G I T A L F I R S T B A N K I N G Enabling the transformation of retail banking 1 Branch Transformation Digital Transaction Zone Digital Banking Common Transaction Services 16
D I G I T A L F I R S T B A N K I N G Enabling the transformation of retail banking 1 Total Digital First Banking $26.1B Current Market Capabilities Expansion $15.7B $10.4B Source: NCR estimates based on RBR, Ovum data Total Addressable Market 2023 16D I G I T A L F I R S T B A N K I N G Enabling the transformation of retail banking 1 Total Digital First Banking $26.1B Current Market Capabilities Expansion $15.7B $10.4B Source: NCR estimates based on RBR, Ovum data Total Addressable Market 2023 16
D I G I T A L F I R S T B A N K I N G ATM – Transaction zone for digital 1 17D I G I T A L F I R S T B A N K I N G ATM – Transaction zone for digital 1 17
D I G I T A L F I R S T R E S T A U R A N T #1 Provider of Enterprise Restaurant Systems in North America 2 Enterprise software solutions that run the Restaurant Integrated Payments Mobile Ordering and Delivery Digital Connected Services 18D I G I T A L F I R S T R E S T A U R A N T #1 Provider of Enterprise Restaurant Systems in North America 2 Enterprise software solutions that run the Restaurant Integrated Payments Mobile Ordering and Delivery Digital Connected Services 18
D I G I T A L F I R S T R E S T A U R A N T #1 Provider of Enterprise Restaurant Systems in North America 2 Total Digital First Restaurant $9.7B Current Market Capabilities Expansion $6.0B $3.7B Source: NCR estimates based on IHL, Euromonitor data Total Addressable Market 2023 18D I G I T A L F I R S T R E S T A U R A N T #1 Provider of Enterprise Restaurant Systems in North America 2 Total Digital First Restaurant $9.7B Current Market Capabilities Expansion $6.0B $3.7B Source: NCR estimates based on IHL, Euromonitor data Total Addressable Market 2023 18
D I G I T A L F I R S T R E T A I L #1 global provider of enterprise software for retail stores 3 Enterprise software solutions that run the retail store Integrated Payments Self-Checkout with Fraud Protection Digital Connected Services 19D I G I T A L F I R S T R E T A I L #1 global provider of enterprise software for retail stores 3 Enterprise software solutions that run the retail store Integrated Payments Self-Checkout with Fraud Protection Digital Connected Services 19
D I G I T A L F I R S T R E T A I L #1 global provider of enterprise software for retail stores 3 Total Digital First Retail $22.2B Current Market Capabilities Expansion $17.2B $5.0B Source: NCR estimates based on IHL, Euromonitor data Total Addressable Market 2023 19D I G I T A L F I R S T R E T A I L #1 global provider of enterprise software for retail stores 3 Total Digital First Retail $22.2B Current Market Capabilities Expansion $17.2B $5.0B Source: NCR estimates based on IHL, Euromonitor data Total Addressable Market 2023 19
D I G I T A L C O N N E C T E D S E R V I C E S 4 Wall-to-wall multivendor service support Managed Services Break/Fix Services Multi-Vendor Maintenance IoT-enabled Services 20D I G I T A L C O N N E C T E D S E R V I C E S 4 Wall-to-wall multivendor service support Managed Services Break/Fix Services Multi-Vendor Maintenance IoT-enabled Services 20
D I G I T A L C O N N E C T E D S E R V I C E S 4 Wall-to-wall multivendor service support Total Digital Connected Business $27.5B Current Market Capabilities Expansion $20.7B $6.8B Source: NCR estimates based on IDC, IHL,Gartner, Total Addressable Market 2023 HDI data 20D I G I T A L C O N N E C T E D S E R V I C E S 4 Wall-to-wall multivendor service support Total Digital Connected Business $27.5B Current Market Capabilities Expansion $20.7B $6.8B Source: NCR estimates based on IDC, IHL,Gartner, Total Addressable Market 2023 HDI data 20
D I G I T A L F I R S T C O N V E N I E N C E A N D F U E L #1 Provider in North America of Enterprise Solutions that run the 5 Store, Pump and Kitchen Enterprise software solutions that run convenience store, pump and food service Integrated Payments Consumer Self-ordering and Self-checkout 1:1 marketing at the pump and in the store 21D I G I T A L F I R S T C O N V E N I E N C E A N D F U E L #1 Provider in North America of Enterprise Solutions that run the 5 Store, Pump and Kitchen Enterprise software solutions that run convenience store, pump and food service Integrated Payments Consumer Self-ordering and Self-checkout 1:1 marketing at the pump and in the store 21
D I G I T A L F I R S T C O N V E N I E N C E A N D F U E L #1 Provider in North America of Enterprise Solutions that run the 5 Store, Pump and Kitchen Total Digital First Convenience & Fuel $3.4B Current Market Capabilities Expansion $1.8B $1.6B Source: NCR estimates based on IHL, Euromonitor, Total Addressable Market 2023 Gartner data 21D I G I T A L F I R S T C O N V E N I E N C E A N D F U E L #1 Provider in North America of Enterprise Solutions that run the 5 Store, Pump and Kitchen Total Digital First Convenience & Fuel $3.4B Current Market Capabilities Expansion $1.8B $1.6B Source: NCR estimates based on IHL, Euromonitor, Total Addressable Market 2023 Gartner data 21
D I G I T A L S M A L L B U S I N E S S E S S E N T I A L S Turnkey software that runs the small business 6 Cloud based Point of Sale Inventory Management Human Capital Management Integrated Payments 22D I G I T A L S M A L L B U S I N E S S E S S E N T I A L S Turnkey software that runs the small business 6 Cloud based Point of Sale Inventory Management Human Capital Management Integrated Payments 22
D I G I T A L S M A L L B U S I N E S S E S S E N T I A L S Turnkey software that runs the small business 6 Total Digital Small Business $7.0B Current Market Capabilities Expansion $2.9B $4.1B Source: NCR estimates based on Square Public Filings, Total Addressable Market 2023 World Bank, IHL data 22D I G I T A L S M A L L B U S I N E S S E S S E N T I A L S Turnkey software that runs the small business 6 Total Digital Small Business $7.0B Current Market Capabilities Expansion $2.9B $4.1B Source: NCR estimates based on Square Public Filings, Total Addressable Market 2023 World Bank, IHL data 22
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Targeted M&A to enhance our solution offerings D E A L D E A L T A R G E T P R O F I L E F L O W P R O F I L E § Tuck in acquisitions that utilize the NCR § 4 to 6 deals per year § Enterprise Value brand & distribution to accelerate growth ~$100M on average § Product-focused, up- § Companies in existing markets sell, cross-sell § Accretive to earnings § Upsell or cross sell to NCR customers in 12 to 24 months § Focus on recurring revenue streams in § Up to $500M per year software and services § ROIC 13-15% § Dedicated integration and execution team 24Targeted M&A to enhance our solution offerings D E A L D E A L T A R G E T P R O F I L E F L O W P R O F I L E § Tuck in acquisitions that utilize the NCR § 4 to 6 deals per year § Enterprise Value brand & distribution to accelerate growth ~$100M on average § Product-focused, up- § Companies in existing markets sell, cross-sell § Accretive to earnings § Upsell or cross sell to NCR customers in 12 to 24 months § Focus on recurring revenue streams in § Up to $500M per year software and services § ROIC 13-15% § Dedicated integration and execution team 24
§ Integrated payments to enterprise point of sale systems § Full end-to-end merchant acquiring services § Accelerates NCR’s strategy of increasing recurring revenue and expanding margins 25§ Integrated payments to enterprise point of sale systems § Full end-to-end merchant acquiring services § Accelerates NCR’s strategy of increasing recurring revenue and expanding margins 25
Payments Value Chain Payment Processing Revenue Merchant Acquirer Payment Card Issuer Point of Enterprise NCR Connected & Processor Network & Processor Sale Device Software / Systems Payments Payment Gateway Merchant Merchant 26Payments Value Chain Payment Processing Revenue Merchant Acquirer Payment Card Issuer Point of Enterprise NCR Connected & Processor Network & Processor Sale Device Software / Systems Payments Payment Gateway Merchant Merchant 26
Payments Value Chain Payment Processing Revenue Merchant Acquirer Payment Card Issuer Point of Enterprise NCR Connected Mer& chan Prot c e Ass cqui or rer Network & Processor Sale Device Software / Systems Payments & Processor Payment Gateway Merchant Merchant 26Payments Value Chain Payment Processing Revenue Merchant Acquirer Payment Card Issuer Point of Enterprise NCR Connected Mer& chan Prot c e Ass cqui or rer Network & Processor Sale Device Software / Systems Payments & Processor Payment Gateway Merchant Merchant 26
§ AI and computer vision anti-fraud solution for consumer self-service § Accelerate growth in self-checkout and store transformation § Cloud-based/SaaS revenue stream § Key enabler of frictionless commerce strategy 27§ AI and computer vision anti-fraud solution for consumer self-service § Accelerate growth in self-checkout and store transformation § Cloud-based/SaaS revenue stream § Key enabler of frictionless commerce strategy 27
§ Aggregates data from restaurant customers § Enriching data with insights that provide marketing decisions back to restaurant § Enables NCR to begin monetizing the wealth of data we collect 28§ Aggregates data from restaurant customers § Enriching data with insights that provide marketing decisions back to restaurant § Enables NCR to begin monetizing the wealth of data we collect 28
INVESTMENT HIGHLIGHTS Global Focus on Simplified Strong Brand Customer Business Growth & Equity Base Model Mix Shift 29INVESTMENT HIGHLIGHTS Global Focus on Simplified Strong Brand Customer Business Growth & Equity Base Model Mix Shift 29
AGENDA § INTRODUCTION AND WELCOME Michael Nelson, VP Investor Relations § NCR OVERVIEW AND STRATEGY Mike Hayford, President and CEO § OPERATIONALIZING THE STRATEGY 3 Owen Sullivan, Chief Operating Officer § NCR FINANCIAL OVERVIEW Andre Fernandez, Chief Financial Officer § Q&A NCR Leadership Team § DEMONSTRATIONS OF STRATEGIC GROWTH PLATFORMS 30AGENDA § INTRODUCTION AND WELCOME Michael Nelson, VP Investor Relations § NCR OVERVIEW AND STRATEGY Mike Hayford, President and CEO § OPERATIONALIZING THE STRATEGY 3 Owen Sullivan, Chief Operating Officer § NCR FINANCIAL OVERVIEW Andre Fernandez, Chief Financial Officer § Q&A NCR Leadership Team § DEMONSTRATIONS OF STRATEGIC GROWTH PLATFORMS 30
A F R E S H P E R S P E C T I V E CUSTOMER DELIVERY & ACCOUNTABILITY FOCUS EXECUTION New Structure Aligns Decisions to Customer Needs and Strategic Growth 31A F R E S H P E R S P E C T I V E CUSTOMER DELIVERY & ACCOUNTABILITY FOCUS EXECUTION New Structure Aligns Decisions to Customer Needs and Strategic Growth 31
O R G A N I Z E D F O R C U S T O M E R S U C C E S S GLOBAL CUSTOMERS NCR BANKING GROUP NCR COMMERCE GROUP Digital Banking | Branch | ATM Retail | Hospitality | SMB | JetPay S H A R E D S E R V I C E S Software Delivery / Leveraged Product Management Sales Hardware Delivery Services Delivery Professional Services Infrastructure & Marketing P A Y M E N T S | D A T A | D I G I T A L C O N N E C T E D S E R V I C E S 32O R G A N I Z E D F O R C U S T O M E R S U C C E S S GLOBAL CUSTOMERS NCR BANKING GROUP NCR COMMERCE GROUP Digital Banking | Branch | ATM Retail | Hospitality | SMB | JetPay S H A R E D S E R V I C E S Software Delivery / Leveraged Product Management Sales Hardware Delivery Services Delivery Professional Services Infrastructure & Marketing P A Y M E N T S | D A T A | D I G I T A L C O N N E C T E D S E R V I C E S 32
C R I T I C A L I M P E R A T I V E S MANUFACTURING S E R V I C E S D E L I V E R I N G G O T O S T R A T E G I C & SUPPLY CHAIN S U C C E S S P R O D U C T S & M A R K E T P A R T N E R S H I P S TRANSFORMATION S O L U T I O N S E X C E L L E N C E 33C R I T I C A L I M P E R A T I V E S MANUFACTURING S E R V I C E S D E L I V E R I N G G O T O S T R A T E G I C & SUPPLY CHAIN S U C C E S S P R O D U C T S & M A R K E T P A R T N E R S H I P S TRANSFORMATION S O L U T I O N S E X C E L L E N C E 33
C R I T I C A L I M P E R A T I V E S MANUFACTURING S E R V I C E S D E L I V E R I N G G O T O S T R A T E G I C & SUPPLY CHAIN S U C C E S S P R O D U C T S & M A R K E T P A R T N E R S H I P S TRANSFORMATION S O L U T I O N S E X C E L L E N C E 33C R I T I C A L I M P E R A T I V E S MANUFACTURING S E R V I C E S D E L I V E R I N G G O T O S T R A T E G I C & SUPPLY CHAIN S U C C E S S P R O D U C T S & M A R K E T P A R T N E R S H I P S TRANSFORMATION S O L U T I O N S E X C E L L E N C E 33
R A T I O N A L D E C I S I O N S T I E D T O M A R K E T O P P O R T U N I T I E S SPEND 1 OPTIMIZATION INVESTING IN 2 THE FUTURE STRATEGIC GROWTH PLATFORMS 34R A T I O N A L D E C I S I O N S T I E D T O M A R K E T O P P O R T U N I T I E S SPEND 1 OPTIMIZATION INVESTING IN 2 THE FUTURE STRATEGIC GROWTH PLATFORMS 34
C R I T I C A L I M P E R A T I V E S C U S T O M E R D E L I V E R Y & A C C O U N T A B I L I T Y F O C U S E X E C U T I O N MANUFACTURING S E R V I C E S D E L I V E R I N G G O T O S T R A T E G I C & SUPPLY CHAIN S U C C E S S P R O D U C T S & P A R T N E R S H I P S M A R K E T TRANSFORMATION S O L U T I O N S E X C E L L E N C E 35C R I T I C A L I M P E R A T I V E S C U S T O M E R D E L I V E R Y & A C C O U N T A B I L I T Y F O C U S E X E C U T I O N MANUFACTURING S E R V I C E S D E L I V E R I N G G O T O S T R A T E G I C & SUPPLY CHAIN S U C C E S S P R O D U C T S & P A R T N E R S H I P S M A R K E T TRANSFORMATION S O L U T I O N S E X C E L L E N C E 35
AGENDA § INTRODUCTION AND WELCOME Michael Nelson, VP Investor Relations § NCR OVERVIEW AND STRATEGY Mike Hayford, President and CEO § OPERATIONALIZING THE STRATEGY Owen Sullivan, Chief Operating Officer § NCR FINANCIAL OVERVIEW 4 Andre Fernandez, Chief Financial Officer § Q&A NCR Leadership Team § DEMONSTRATIONS OF STRATEGIC GROWTH PLATFORMS 36AGENDA § INTRODUCTION AND WELCOME Michael Nelson, VP Investor Relations § NCR OVERVIEW AND STRATEGY Mike Hayford, President and CEO § OPERATIONALIZING THE STRATEGY Owen Sullivan, Chief Operating Officer § NCR FINANCIAL OVERVIEW 4 Andre Fernandez, Chief Financial Officer § Q&A NCR Leadership Team § DEMONSTRATIONS OF STRATEGIC GROWTH PLATFORMS 36
C R I T I C A L I M P E R A T I V E S 2 0 1 8 NON-GAAP GROSS REVENUE MARGIN H I G H L I G H T S $6.3B - 28% - $6.5B JetPay Acquisition 28.5% $184M 100- NON-GAAP FREE CASH FLOW 5-7% 6-7% ~10% DILUTED EPS 150 bps Cloud Services ATM Order Total $250M $2.55 - Revenue Margin Growth Est. Backlog Expansion Growth Est. Growth - $300M $2.75 37C R I T I C A L I M P E R A T I V E S 2 0 1 8 NON-GAAP GROSS REVENUE MARGIN H I G H L I G H T S $6.3B - 28% - $6.5B JetPay Acquisition 28.5% $184M 100- NON-GAAP FREE CASH FLOW 5-7% 6-7% ~10% DILUTED EPS 150 bps Cloud Services ATM Order Total $250M $2.55 - Revenue Margin Growth Est. Backlog Expansion Growth Est. Growth - $300M $2.75 37
S T R A T E G I C U S E S O F C A S H SHARE REPURCHASE $210M as of 11/6/2018 38S T R A T E G I C U S E S O F C A S H SHARE REPURCHASE $210M as of 11/6/2018 38
B A L A N C I N G T H E C O R E B U S I N E S S & I N V E S T I N G I N T H E F U T U R E SPEND 1 OPTIMIZATION INVESTING IN 2 THE FUTURE STRATEGIC GROWTH PLATFORMS 39B A L A N C I N G T H E C O R E B U S I N E S S & I N V E S T I N G I N T H E F U T U R E SPEND 1 OPTIMIZATION INVESTING IN 2 THE FUTURE STRATEGIC GROWTH PLATFORMS 39
M A R G I N E R O S I O N A N D C O S T C R E E P H A V E N E G A T I V E L Y I M P A C T E D P R O F I T A B I L I T Y Current Observations § Gross Margin % down and Opex up § Over $200m of cash restructuring: 2015 – 2018 § Capex not driving margin improvement 2015 2016 2017 2018 § No Operating Income Cash Restructure Non-GAAP Gross Margin % Growth Non-GAAP OpEx % Rev Non-GAAP Op Income % 40M A R G I N E R O S I O N A N D C O S T C R E E P H A V E N E G A T I V E L Y I M P A C T E D P R O F I T A B I L I T Y Current Observations § Gross Margin % down and Opex up § Over $200m of cash restructuring: 2015 – 2018 § Capex not driving margin improvement 2015 2016 2017 2018 § No Operating Income Cash Restructure Non-GAAP Gross Margin % Growth Non-GAAP OpEx % Rev Non-GAAP Op Income % 40
P R O D U C T I V I T Y F O C U S A R E A S “Mission One” Hardware Network SG&A / Opex 1. 2. 3. § Service performance and § Plant rationalization and § Announced on Oct. 30 productivity initiatives contract manufacturing 2018 Earnings Call § Remote diagnostics, § Closing three facilities § Reduce SG&A and dispatch reduction, parts and outsourcing key discretionary spend supply chain management functions § Driving revenue and § Higher utilization rates § Generate at least $100M GM expansion and more variable cost of savings in 2019 structure 41P R O D U C T I V I T Y F O C U S A R E A S “Mission One” Hardware Network SG&A / Opex 1. 2. 3. § Service performance and § Plant rationalization and § Announced on Oct. 30 productivity initiatives contract manufacturing 2018 Earnings Call § Remote diagnostics, § Closing three facilities § Reduce SG&A and dispatch reduction, parts and outsourcing key discretionary spend supply chain management functions § Driving revenue and § Higher utilization rates § Generate at least $100M GM expansion and more variable cost of savings in 2019 structure 41
R E V E N U E M I X S H I F T I N G T O S O F T W A R E A N D S E R V I C E S 2023 Targets 2018 68% 32% 80% 20% Software/Services Hardware Software/Services Hardware 60-70% Recurring Revenue* 48% Recurring Revenue* *NCR’s definition of recurring revenue includes maintenance and cloud revenue. 42R E V E N U E M I X S H I F T I N G T O S O F T W A R E A N D S E R V I C E S 2023 Targets 2018 68% 32% 80% 20% Software/Services Hardware Software/Services Hardware 60-70% Recurring Revenue* 48% Recurring Revenue* *NCR’s definition of recurring revenue includes maintenance and cloud revenue. 42
A T M F I N A N C I A L S Revenue ATM Economics 2018 2023 Targets Recurring Maintenance Higher Margin Software Other ATM Other ATM Hardware § ATM business revenues are projected to Total Deal Value be roughly flat over next 5 years. ATM business is profitable and drives § Other business revenues are projected recurring higher margin Software and to grow at a higher rate. Services maintenance revenue 43A T M F I N A N C I A L S Revenue ATM Economics 2018 2023 Targets Recurring Maintenance Higher Margin Software Other ATM Other ATM Hardware § ATM business revenues are projected to Total Deal Value be roughly flat over next 5 years. ATM business is profitable and drives § Other business revenues are projected recurring higher margin Software and to grow at a higher rate. Services maintenance revenue 43
F I N A N C I A L P O L I C Y Disciplined Drive free Maintain Balanced Shareholder approach to cash flow strong liquidity allocation of return and M&A & Capex capital with reinvestment in appropriate the business leverage 44F I N A N C I A L P O L I C Y Disciplined Drive free Maintain Balanced Shareholder approach to cash flow strong liquidity allocation of return and M&A & Capex capital with reinvestment in appropriate the business leverage 44
D E B T & M A T U R I T I E S P R O F I L E ($ millions) Pension Contributions 5.000% Notes 4.625% Notes $36 5.875% Notes $500 $100 6.375% Notes $400 $88 Term Loan A $700 $585 $600 $84 $90 $109 $0 2018 2019 2020 2021* 2022 2023 2024*** § Weighted average interest rate on NCR’s $3.1 billion of debt is 5.1%** Additional outstanding borrowings as of 9/30 : AR Securitization $175, Revolver $0 *$1.1B revolver matures in 2021 § 70% of NCR’s debt carries a fixed interest **As of 9/30/2018 ***Earliest potential put option for preferred shares per Investment Agreement. rate and 30% is floating (LIBOR)** 45D E B T & M A T U R I T I E S P R O F I L E ($ millions) Pension Contributions 5.000% Notes 4.625% Notes $36 5.875% Notes $500 $100 6.375% Notes $400 $88 Term Loan A $700 $585 $600 $84 $90 $109 $0 2018 2019 2020 2021* 2022 2023 2024*** § Weighted average interest rate on NCR’s $3.1 billion of debt is 5.1%** Additional outstanding borrowings as of 9/30 : AR Securitization $175, Revolver $0 *$1.1B revolver matures in 2021 § 70% of NCR’s debt carries a fixed interest **As of 9/30/2018 ***Earliest potential put option for preferred shares per Investment Agreement. rate and 30% is floating (LIBOR)** 45
T A R G E T O P E R A T I N G M O D E L Three to five years out Sustained revenue Sustained low double Expanded shareholder digit eps growth growth of 3-5% value through increased with new mix multiple 46T A R G E T O P E R A T I N G M O D E L Three to five years out Sustained revenue Sustained low double Expanded shareholder digit eps growth growth of 3-5% value through increased with new mix multiple 46
Mike Hayford CEO 47Mike Hayford CEO 47
INVESTMENT HIGHLIGHTS Global Focus on Simplified Strong Brand Customer Business Growth & Equity Base Model Mix Shift 48INVESTMENT HIGHLIGHTS Global Focus on Simplified Strong Brand Customer Business Growth & Equity Base Model Mix Shift 48
AGENDA § INTRODUCTION AND WELCOME Michael Nelson, VP Investor Relations § NCR OVERVIEW AND STRATEGY Mike Hayford, President and CEO § OPERATIONALIZING THE STRATEGY Owen Sullivan, Chief Operating Officer § NCR FINANCIAL OVERVIEW Andre Fernandez, Chief Financial Officer 5 § Q&A NCR Leadership Team § DEMONSTRATIONS OF STRATEGIC GROWTH PLATFORMS 49AGENDA § INTRODUCTION AND WELCOME Michael Nelson, VP Investor Relations § NCR OVERVIEW AND STRATEGY Mike Hayford, President and CEO § OPERATIONALIZING THE STRATEGY Owen Sullivan, Chief Operating Officer § NCR FINANCIAL OVERVIEW Andre Fernandez, Chief Financial Officer 5 § Q&A NCR Leadership Team § DEMONSTRATIONS OF STRATEGIC GROWTH PLATFORMS 49
New York Stock Exchange – Freedom Hall 5 3 1 4 6 2 50New York Stock Exchange – Freedom Hall 5 3 1 4 6 2 50
THANK YOU 51THANK YOU 51
SUPPLEMENTARY MATERIALS 52SUPPLEMENTARY MATERIALS 52
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. N O N - G A A P D I L U T E D E P S NCR’s Non-GAAP diluted earnings per share is 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. Due to the non-operational nature of these pension and other special items, NCR's management uses this non-GAAP measure to evaluate year-over-year operating performance. NCR also uses this measure to manage and determine the effectiveness of its business managers and as a basis for incentive compensation. NCR believes this measure is useful for investors because it provides a more complete understanding of NCR's underlying operational performance, as well as consistency and comparability with NCR's past reports of financial results. F R E E C A S H F L O W 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 does not have a uniform definition under GAAP and, therefore, NCR's definitions may differ from other companies' definitions of these measures. 53While 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. N O N - G A A P D I L U T E D E P S NCR’s Non-GAAP diluted earnings per share is 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. Due to the non-operational nature of these pension and other special items, NCR's management uses this non-GAAP measure to evaluate year-over-year operating performance. NCR also uses this measure to manage and determine the effectiveness of its business managers and as a basis for incentive compensation. NCR believes this measure is useful for investors because it provides a more complete understanding of NCR's underlying operational performance, as well as consistency and comparability with NCR's past reports of financial results. F R E E C A S H F L O W 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 does not have a uniform definition under GAAP and, therefore, NCR's definitions may differ from other companies' definitions of these measures. 53
D I L U T E D E P S T O N O N - G A A P D I L U T E D E P S 2018 FY Guidance (1) Diluted EPS $0.10 - $0.68 Transformation and Restructuring Costs $0.75 - $1.00 Asset Impairment Charges $1.16 Impact of US Tax Reform ($0.27) Acquisition-Related Amortization of Intangibles $0.42 Acquisition-Related Costs $0.05 (1) (2) Non-GAAP Diluted EPS $2.55 - $2.75 (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, pension mark-to-market adjustments, taxes or other events, which are difficult to predict and which may or may not be significant. 54D I L U T E D E P S T O N O N - G A A P D I L U T E D E P S 2018 FY Guidance (1) Diluted EPS $0.10 - $0.68 Transformation and Restructuring Costs $0.75 - $1.00 Asset Impairment Charges $1.16 Impact of US Tax Reform ($0.27) Acquisition-Related Amortization of Intangibles $0.42 Acquisition-Related Costs $0.05 (1) (2) Non-GAAP Diluted EPS $2.55 - $2.75 (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, pension mark-to-market adjustments, taxes or other events, which are difficult to predict and which may or may not be significant. 54
F R E E C A S H F L O W 2018 FY Guidance Cash Provided by Operating Activities $640 - $670 Total Capital Expenditures (330) – (350) Cash Used in Discontinued Operations 40 Free Cash Flow $250 - $300 $ in millions 55F R E E C A S H F L O W 2018 FY Guidance Cash Provided by Operating Activities $640 - $670 Total Capital Expenditures (330) – (350) Cash Used in Discontinued Operations 40 Free Cash Flow $250 - $300 $ in millions 55