Document


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): May 7, 2019
 

        
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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):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o 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 o

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. o







Item 2.02.     Results of Operations and Financial Condition.
On May 7, 2019, the Company issued a press release setting forth its first quarter 2019 financial results and fiscal year 2019 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 May 7, 2019, the Company will hold its previously announced conference call to discuss its first quarter 2019 results and fiscal year 2019 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 May 7, 2019
99.2
Supplemental materials, dated May 7, 2019

            
                        
                    



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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 May 7, 2019
99.2                Supplemental materials, dated May 7, 2019


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 J. Fernandez
 
 
Andre J. Fernandez
 
 
Executive Vice President and Chief Financial Officer
Date: May 7, 2019






























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Exhibit



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NEWS RELEASE


May 7, 2019         

NCR Announces First Quarter 2019 Results

ATLANTA - NCR Corporation (NYSE: NCR) reported financial results today for the three months ended March 31, 2019. First quarter and other recent highlights include:

Revenue of $1.54 billion, up 1% as reported and up 4% constant currency
Banking revenue up 5% as reported; Recurring revenue up 3% as reported
Net income attributable to NCR of $37 million; Adjusted EBITDA of $218 million
GAAP diluted EPS of $0.20; Non-GAAP diluted EPS of $0.48
Program to achieve at least $100 million cost savings in 2019 is on track
2019 guidance reaffirmed

“Our first quarter results represent a solid start to the year and keep us on track to achieve our full year targets,” said Michael Hayford, President and Chief Executive Officer. “Our performance included a return to growth and a strong quarter in our banking segment. We continue to improve execution and are making progress on the targeted investments needed to accelerate our mix shift towards higher margin software, services and recurring revenues. We remain confident our strategy will strengthen our long term growth profile and deliver increased value and competitive advantage to our customers.”

In this release, we use certain non-GAAP measures, including presenting certain measures on a constant currency basis. These non-GAAP measures include "free cash flow" and others with the words “non-GAAP," or "constant currency" in their titles. These non-GAAP measures are listed, described, and reconciled to their most directly comparable GAAP measures under the heading "Non-GAAP Financial Measures" later in this release.









First Quarter 2019 Operating Results

Revenue
First quarter revenue of $1,536 million was up 1% year-over-year. Foreign currency fluctuations had an unfavorable impact on the revenue comparison of 3%. The following table shows revenue for the first quarter:
$ in millions
Q1 2019
 
Q1 2018
 
% Change
 
% Change Constant Currency
Banking
$
758

 
$
721

 
5
%
 
9
%
Retail
511

 
521

 
(2
%)
 
1
%
Hospitality
193

 
204

 
(5
%)
 
(4
%)
Other
74

 
71

 
4
%
 
7
%
 
Total Revenue
$
1,536

 
$
1,517

 
1
%
 
4
%
 
 
 
 
 
 
 
 
 
Software
$
467

 
$
460

 
2
%
 
3
%
Services
585

 
601

 
(3
%)
 
1
%
Hardware
484

 
456

 
6
%
 
9
%
 
ATM
236

 
195

 
21
%
 
27
%
 
SCO/POS
248

 
261

 
(5
%)
 
(3
%)
 
Total Revenue
$
1,536

 
$
1,517

 
1
%
 
4
%

Banking revenue increased 5% due to 21% growth in ATM revenue driven by higher backlog conversion. The revenue growth was mainly driven by strength in North America. Foreign currency fluctuations had an unfavorable impact of 4% on the revenue comparison.

Retail revenue decreased 2% driven by a large implementation services project in the prior year partially offset by higher payment processing revenue and strength in self-checkout revenue. Foreign currency fluctuations had an unfavorable impact of 3% on the revenue comparison.

Hospitality revenue decreased 5% driven by lower hardware revenue partially offset by higher cloud and payments revenue. Foreign currency fluctuations had an unfavorable impact of 1% on the revenue comparison.

Gross Margin
First quarter gross margin of $411 million decreased from $420 million in the prior year period. Gross margin rate was 26.8%, down from 27.7%. First quarter gross margin (non-GAAP) of $425 million decreased from $431 million in the prior year period. Gross margin rate (non-GAAP) was 27.7%, down from 28.4%. The decreases in gross margin were primarily due to decreases in the Retail and Hospitality segments partially offset by an increase in the Banking segment.

Expenses
First quarter operating expenses of $311 million was flat with the prior year period. First quarter operating expenses (non-GAAP) of $278 million decreased from $283 million in the prior year period. The decrease in operating expenses (non-GAAP) was primarily due to cost reduction benefits realized.

Operating Income
First quarter income from operations of $100 million decreased from $109 million in the prior year period. First quarter operating income (non-GAAP) of $147 million decreased from $148 million in the prior year period.

2




Other (Expense)
First quarter other (expense) of $53 million increased from $46 million in the prior year period. First quarter other (expense) (non-GAAP) of $53 million increased from $46 million in the prior year period. The increase was due to higher interest expense.

Income Tax Expense (Benefit)
First quarter income tax expense of $9 million increased from $7 million in the prior year period. The first quarter effective income tax rate was 19% compared to 11% in the prior year period. First quarter income tax expense (non-GAAP) of $20 million increased from $16 million in the prior year period. The first quarter effective income tax rate (non-GAAP) was 21% compared to 16% in the prior year period. Income tax increased primarily due to favorable audit settlements realized in the prior year period offset by lower income before taxes in the quarter.

Net Income from Continuing Operations Attributable to NCR
First quarter net income from continuing operations attributable to NCR of $37 million decreased from net income from continuing operations of $55 million in the prior year period. First quarter net income from continuing operations attributable to NCR (non-GAAP) of $73 million decreased from $85 million in the prior year period.

Cash Flow
First quarter cash used by operating activities of $16 million decreased from cash used by operating activities of $24 million in the prior year period. Free cash outflow was $87 million in the first quarter of 2019 as compared to $99 million in the first quarter of 2018.
Restructuring and Transformation Initiatives
Our previously announced transformation and restructuring initiatives continue to progress. Our services performance and profit improvement program continues to deliver revenue growth and margin expansion. Our manufacturing transformation initiatives to move to a variable cost structure by reducing the number of manufacturing plants and ramping up production with contract manufacturers is substantially complete. Additionally, we are executing our spend optimization program to drive cost savings through operational efficiencies to generate at least $100 million of savings in 2019. This initiative will create efficiencies in our corporate functions, reduce spend in the non-strategic areas and limit discretionary spending. The benefits generated from the spend optimization program will largely offset higher real estate and people costs incurred in 2019. We incurred a pre-tax charge of $26 million in the first quarter of 2019 with a cash impact of $18 million. In 2019, for all initiatives, we expect to incur a pre-tax charge of $60 million and a cash impact of $70 million to $80 million.

Full Year 2019 Outlook

We are reaffirming our 2019 guidance. Our revenue growth is expected to be approximately 1% to 2%. Our GAAP diluted earnings per share guidance is expected to be $1.91 to $2.01, and our non-GAAP diluted earnings per share guidance is expected to be $2.75 to $2.85. Non-GAAP diluted earnings per share guidance assumes an effective tax rate of 23% to 24% for 2019 compared to 21% in 2018. We expect net income attributable to NCR to be $290 million to $305 million and adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) to be $1.04 billion to $1.08 billion. Additionally, we expect cash flow from operations to be $705 million to $730 million and free cash flow to be $300 million to $350 million.


2019 First Quarter Earnings Conference Call

A conference call is scheduled for today at 4:30 p.m. (EDT) to discuss the first quarter 2019 results and guidance for full year 2019. Access to the conference call and accompanying slides, as well as a replay of the call, are available on NCR's web site at http://investor.ncr.com/. Additionally, the live call can be accessed by dialing 888-820-9413 (United States/Canada Toll-free) or 786-460-7169 (International Toll) and entering the participant passcode 6612880.


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More information on NCR’s Q1 2019 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 a leading software- and services-led enterprise provider in the financial, retail, hospitality, telecom and technology industries. NCR is headquartered in Atlanta, Ga., with 34,000 employees and does business in 180 countries. NCR is a trademark of NCR Corporation in the United States and other countries.

Website: www.ncr.com
Twitter: @NCRCorporation
Facebook: www.facebook.com/ncrcorp
LinkedIn: https://www.linkedin.com/company/ncr-corporation
YouTube: www.youtube.com/user/ncrcorporation

News Media Contact
Scott Sykes
NCR Corporation
212.589.8428
scott.sykes@ncr.com

Investor Contact
Michael Nelson
NCR Corporation
678.808.6995
michael.nelson@ncr.com

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Note to Investors This release contains forward-looking statements. Forward-looking statements use words such as “expect,” “anticipate,” “outlook,” “intend,” “plan,” “believe,” “will,” “should,” “would,” “could,” and words of similar meaning. Statements that describe or relate to NCR’s plans, goals, intentions, strategies, or financial outlook, and statements that do not relate to historical or current fact, are examples of forward-looking statements. The forward-looking statements in this release include statements about NCR’s financial guidance and outlook (including the section entitled “Full Year 2019 Outlook” and the tables entitled "Reconciliation of Diluted Earnings Per Share from Continuing Operations (GAAP) to Non-GAAP Diluted Earnings Per Share from Continuing Operations (non-GAAP)" and "Reconciliation of Net Income for Continuing Operations Attributable to NCR (GAAP) to Earnings Before Interest, Depreciation, Taxes and Amortization (Adjusted EBITDA)"; NCR’s areas of focus on strategic growth and expected results and impact of its spend optimization program in 2019; NCR’s expected areas of focus to drive growth and create long-term stockholder value;NCR's cost savings program and its expected benefits in 2019; NCR’s expected free cash flow generation and capital allocation strategy; earnings per share; the effective tax rate in 2019; and the expected impact of NCR's previously announced restructuring and transformation activities. Forward-looking statements are based on our current beliefs, expectations and assumptions, which may not prove to be accurate, and involve a number of known and unknown risks and uncertainties, many of which are out of NCR’s control. Forward-looking statements are not guarantees of future performance, and there are a number of important factors that could cause actual outcomes and results to differ materially from the results contemplated by such forward-looking statements, including those factors relating to: the strength of demand and pricing for ATMs and other financial services hardware and its effect on the results of our businesses and reportable segments; domestic and global economic and credit conditions including, in particular, those resulting from the imposition or threat of protectionist trade policies or import or export tariffs, global and regional market conditions and spending trends in the financial services and retail industries, new comprehensive U.S. tax legislation, modified or new global or regional trade agreements, the determination by the United Kingdom to exit the European Union, uncertainty over further potential changes in Eurozone participation and fluctuations in oil and commodity prices; 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; our ability to successfully introduce new solutions and compete in the information technology industry; cybersecurity risks and compliance with data privacy and protection requirements; the possibility of disruptions in or problems with our data center hosting facilities; defects or errors in our products; the impact of our indebtedness and its terms on our financial and operating activities; the historical seasonality of our sales; tax rates and new U.S. tax legislation; foreign currency fluctuations; the success of our restructuring plans and cost reduction initiatives, including those in our Hardware segment; manufacturing disruptions, including those caused by or related to outsourced manufacturing; the availability and success of acquisitions, divestitures and alliances; our pension strategy and underfunded pension obligation; reliance on third party suppliers; the impact of the terms of our strategic relationship with Blackstone and our Series A Convertible Preferred Stock; our multinational operations, including in new and emerging markets; collectability difficulties in subcontracting relationships in certain geographical markets; development and protection of intellectual property; workforce turnover and the ability to attract and retain skilled employees; uncertainties or delays associated with the transition of key business leaders; 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.


5




Non-GAAP Financial Measures

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.

Non-GAAP Diluted Earnings Per Share (EPS), Gross Margin (non-GAAP), Gross Margin Rate (non-GAAP), Operating Expenses (non-GAAP), Operating Income (non-GAAP), Operating Margin Rate (non-GAAP), Other (Expense) (non-GAAP), Income Tax Expense (non-GAAP), Effective Income Tax Rate (non-GAAP), and Net Income from Continuing Operations Attributable to NCR (non-GAAP). NCR’s non-GAAP diluted EPS, gross margin (non-GAAP), gross margin rate (non-GAAP), operating expenses (non-GAAP), operating income (non-GAAP), operating margin rate (non-GAAP), other (expense) (non-GAAP), income tax expense (non-GAAP), effective income tax rate (non-GAAP), and net income from continuing operations attributable to NCR (non-GAAP) are determined by excluding, as applicable, pension mark-to-market adjustments, pension settlements, pension curtailments and pension special termination benefits and other special items, including amortization of acquisition related intangibles, from NCR’s GAAP earnings per share, gross margin, gross margin rate, expenses, income from operations, operating margin rate, other (expense), income tax expense, effective income tax rate and net income from continuing operations attributable to NCR, respectively. Due to the non-operational nature of these pension and other special items, NCR's management uses these non-GAAP measures to evaluate year-over-year operating performance. NCR also uses operating income (non-GAAP) and diluted EPS (non-GAAP), to manage and determine the effectiveness of its business managers and as a basis for incentive compensation. NCR believes these measures are useful for investors because they provide a more complete understanding of NCR's underlying operational performance, as well as consistency and comparability with NCR's past reports of financial results.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) 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 net income attributable to NCR plus interest expense, net; plus income tax expense (benefit); plus depreciation and amortization; plus other income (expense); plus pension mark-to-market adjustments, pension settlements, pension curtailments and pension special termination benefits and other special items, including amortization of acquisition related intangibles.

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 does not have uniform definitions under GAAP and, therefore, NCR's definitions may differ from other companies' definitions of these measures.

Constant Currency. NCR presents certain financial measures, such as period-over-period revenue growth, on a constant currency basis, which excludes the effects of foreign currency translation by translating prior period results at current period monthly average exchange rates. Due 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’s management believes that presentation of financial measures without this result 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.


6



Reconciliation of Gross Margin (GAAP) to Gross Margin (non-GAAP)
$ in millions
Q1 2019
 
Q1 2018
Gross Margin (GAAP)
$
411

 
$
420

Transformation and restructuring costs
8

 
4

Acquisition-related amortization of intangibles
6

 
7

Gross Margin (Non-GAAP)
$
425

 
$
431


Reconciliation of Gross Margin Rate (GAAP) to Gross Margin Rate (non-GAAP)

 
Q1 2019
 
Q1 2018
Gross Margin Rate (GAAP)
26.8
%
 
27.7
%
Transformation and restructuring costs
0.5
%
 
0.2
%
Acquisition-related amortization of intangibles
0.4
%
 
0.5
%
Gross Margin Rate (Non-GAAP)
27.7
%
 
28.4
%

Reconciliation of Operating Expenses (GAAP) to Operating Expenses (non-GAAP)
$ in millions
Q1 2019
 
Q1 2018
Operating Expenses (GAAP)
$
311

 
$
311

Transformation and restructuring costs
(18
)
 
(12
)
Acquisition-related amortization of intangibles
(15
)
 
(16
)
Operating Expenses (Non-GAAP)
$
278

 
$
283


Reconciliation of Income from Operations (GAAP) to Operating Income (non-GAAP)
$ in millions
Q1 2019
 
Q1 2018
Income from Operations (GAAP)
$
100

 
$
109

Transformation and restructuring costs
26

 
16

Acquisition-related amortization of intangibles
21

 
23

Operating Income (Non-GAAP)
$
147

 
$
148



Reconciliation of Income Tax Expense (GAAP) to Income Tax Expense (non-GAAP)
$ in millions
Q1 2019
 
Q1 2018
Income Tax Expense (GAAP)
$
9

 
$
7

Transformation and restructuring costs
6

 
4

Acquisition-related amortization of intangibles
5

 
5

Income Tax Expense (Non-GAAP)
$
20

 
$
16


Reconciliation of Net Income from Continuing Operations Attributable to NCR (GAAP) to
Net Income from Continuing Operations Attributable to NCR (non-GAAP)
$ in millions
Q1 2019
 
Q1 2018
Net Income from Continuing Operations Attributable to NCR (GAAP)
$
37

 
$
55

Transformation and restructuring costs
20

 
12

Acquisition-related amortization of intangibles
16

 
18

Net Income from Continuing Operations Attributable to NCR (Non-GAAP)
$
73

 
$
85



7



Reconciliation of Diluted Earnings Per Share from Continuing Operations (GAAP) to
Non-GAAP Diluted Earnings Per Share from Continuing Operations (non-GAAP)

Q1 2019 Actual

Q1 2018 Actual
 
2019 Guidance(2)
Diluted Earnings Per Share (GAAP) (1)
$
0.20


$
0.35

 
$1.91 - $2.01

Transformation & restructuring costs
0.13


0.08

 
0.31

Acquisition-related amortization of intangibles
0.11

 
0.12

 
0.48

Acquisition-related costs



 
0.05

Diluted Earnings Per Share (non-GAAP) (1)
$
0.48


$
0.56

 
$2.75 - $2.85


(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 may or may not be significant.

Reconciliation of Net Income from Continuing Operations Attributable to NCR (GAAP) to Earnings Before Interest, Depreciation, Taxes and Amortization (Adjusted EBITDA)
$ in millions
Q1 2019 Actual
2019 Guidance
Net Income Attributable to NCR (GAAP)
$
37

$290 - $305

Transformation and restructuring costs
26

60

Acquisition-related amortization of intangibles
21

95

Acquisition-related costs

10

Interest, net
44

180 - 195

Taxes
9

85 - 95

Depreciation & Amortization (excluding acquisition-related amortization of intangibles)
58

240

Stock Compensation
23

80

Adjusted EBITDA (Non-GAAP)
$
218

$1,040 - $1,080


Reconciliation of Net Cash Provided by Operating Activities (GAAP) to Free Cash Flow (non-GAAP)
$ in millions
Q1 2019 QTD
 
Q1 2018 QTD
Net cash used by operating activities
$
(16
)
 
$
(24
)
Total capital expenditures
(65
)
 
(71
)
Net cash used in discontinued operations
(6
)
 
(4
)
Free cash flow
$
(87
)
 
$
(99
)



8




Reconciliation of Revenue Growth % (GAAP) to
Revenue Growth Constant Currency % (non-GAAP)
 
Three months ended March 31, 2019

Revenue Growth % (GAAP)
 
Favorable (unfavorable) FX impact
 
Revenue Growth Constant Currency %
(non-GAAP)
Banking
5%
 
(4)%
 
9%
Retail
(2)%
 
(3)%
 
1%
Hospitality
(5)%
 
(1)%
 
(4)%
Other
4%
 
(3)%
 
7%
Total Revenue
1%
 
(3)%
 
4%

 
Three months ended March 31, 2019
 
Revenue Growth % (GAAP)
 
Favorable (unfavorable) FX impact
 
Revenue Growth Adjusted Constant Currency %
(non-GAAP)
Software
2%
 
(1)%
 
3%
Services
(3)%
 
(4)%
 
1%
Hardware
6%
 
(3)%
 
9%
      ATM
21%
 
(6)%
 
27%
     SCO/POS
(5)%
 
(2)%
 
(3)%
Total Revenue
1%
 
(3)%
 
4%




9



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NCR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in millions, except per share amounts)
Schedule A
 
For the Periods Ended March 31
 
Three Months
 
2019
 
2018
Revenue
 
 
 
Products
$
539

 
$
526

Services
997

 
991

Total Revenue
1,536

 
1,517

Cost of products
453

 
420

Cost of services
672

 
677

Total gross margin
411

 
420

% of Revenue
26.8
%
 
27.7
%
Selling, general and administrative expenses
252

 
245

Research and development expenses
59

 
66

Income from operations
100

 
109

% of Revenue
6.5
%
 
7.2
%
Interest expense
(45
)
 
(41
)
Other expense, net
(8
)
 
(5
)
Total other expense, net
(53
)
 
(46
)
Income from continuing operations before income taxes
47

 
63

% of Revenue
3.1
%
 
4.2
%
Income tax expense
9

 
7

Income from continuing operations
38

 
56

Loss from discontinued operations, net of tax

 
(35
)
Net income
38

 
21

Net income attributable to noncontrolling interests
1

 
1

Net income attributable to NCR
$
37

 
$
20

Amounts attributable to NCR common stockholders:
 
 
 
Income from continuing operations
$
37

 
$
55

Dividends on convertible preferred stock
(13
)
 
(12
)
Income from continuing operations attributable to NCR common stockholders
24

 
43

Loss from discontinued operations, net of tax

 
(35
)
Net income attributable to NCR common stockholders
$
24

 
$
8

Income per share attributable to NCR common stockholders:
 
 
 
Income per common share from continuing operations
 
 
 
Basic
$
0.20

 
$
0.36

Diluted (1)
$
0.20

 
$
0.35

Net income per common share
 
 
 
Basic
$
0.20

 
$
0.07

Diluted (1)
$
0.20

 
$
0.06

Weighted average common shares outstanding
 
 
 
Basic
119.3

 
119.2

Diluted (1)
122.2

 
123.8


(1) Diluted EPS is determined using the most dilutive measure, either including the impact of the dividends and deemed dividends on NCR's Series A Convertible Preferred Shares in the calculation of net income or loss per common share from continuing operations and net income or loss per common share or including the impact of the conversion of such preferred stock into common stock in the calculation of the weighted average diluted shares outstanding.


10





http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12886588&doc=5
NCR CORPORATION
REVENUE AND OPERATING INCOME SUMMARY
(Unaudited)
(in millions)
Schedule B

 
For the Periods Ended March 31
 
Three Months
 
2019
 
2018
 
% Change
 
% Change Constant Currency
Revenue by segment
 
 
 
 
 
 
 
Banking
$
758

 
$
721

 
5%
 
9%
Retail
511

 
521

 
(2)%
 
1%
Hospitality
193

 
204

 
(5)%
 
(4)%
Other
74

 
71

 
4%
 
7%
Total Revenue
$
1,536

 
$
1,517

 
1%
 
4%
Operating income by segment
 
 
 
 
 
 
 
Banking
$
95

 
$
84

 
 
 
 
Banking operating income margin %
12.5
%
 
11.7
%
 
 
 
 
Retail
26

 
35

 
 
 
 
Retail operating income margin %
5.1
%
 
6.7
%
 
 
 
 
Hospitality
16

 
19

 
 
 
 
Hospitality operating income margin %
8.3
%
 
9.3
%
 
 
 
 
Other
10

 
10

 
 
 
 
All Other operating income margin %
13.5
%
 
14.1
%
 
 
 
 
Subtotal-segment operating income
$
147

 
$
148

 
 
 
 
             Total Revenue operating income margin %
9.6
%
 
9.8
%
 
 
 
 
Other adjustments (1)
47

 
39

 
 
 
 
Total income from operations
$
100

 
109

 
 
 
 

(1) 
The following table presents the other adjustments for NCR:
 
For the Periods Ended March 31
 
Three Months
In millions
2019
 
2018
Transformation and restructuring costs
$
26

 
$
16

Acquisition-related amortization of intangible assets
21

 
23

Total other adjustments
$
47

 
$
39



11



http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12886588&doc=5
NCR CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in millions, except per share amounts)
Schedule C
 
March 31,
2019
 
December 31, 2018
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
414

 
$
464

Accounts receivable, net
1,335

 
1,356

Inventories
874

 
806

Other current assets
393

 
397

Total current assets
3,016

 
3,023

Property, plant and equipment, net
373

 
359

Goodwill
2,705

 
2,692

Intangibles, net
573

 
595

Operating lease assets
433

 

Prepaid pension cost
148

 
140

Deferred income taxes
453

 
448

Other assets
497

 
504

Total assets
$
8,198

 
$
7,761

Liabilities and stockholders’ equity
 
 
 
Current liabilities
 
 
 
Short-term borrowings
$
297

 
$
185

Accounts payable
788

 
897

Payroll and benefits liabilities
184

 
238

Contract liabilities
566

 
461

Other current liabilities
546

 
501

Total current liabilities
2,381

 
2,282

Long-term debt
2,914

 
2,980

Pension and indemnity plan liabilities
760

 
759

Postretirement and postemployment benefits liabilities
120

 
118

Income tax accruals
93

 
91

Operating lease liabilities
406

 

Other liabilities
184

 
259

Total liabilities
6,858

 
6,489

Redeemable noncontrolling interests
14

 
14

Series A convertible preferred stock: par value $0.01 per share, 3.0 shares authorized, 0.9 and 0.9 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively; redemption amount and liquidation preference of $883 and $871 as of March 31, 2019 and December 31, 2018, respectively
872

 
859

Stockholders' equity
 
 
 
NCR stockholders' equity:
 
 
 
Preferred stock: par value $0.01 per share, 100.0 shares authorized, no shares issued and outstanding as of March 31, 2019 and December 31, 2019, respectively

 

Common stock: par value $0.01 per share, 500.0 shares authorized, 119.8 and 118.7 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively
1

 
1

Paid-in capital
48

 
34

Retained earnings
630

 
606

Accumulated other comprehensive loss
(230
)
 
(246
)
Total NCR stockholders' equity
449

 
395

Noncontrolling interests in subsidiaries
5

 
4

Total stockholders' equity
454

 
399

Total liabilities and stockholders' equity
$
8,198

 
$
7,761


12



http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12886588&doc=5
NCR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in millions)
Schedule D
 
For the Periods Ended March 31
 
Three Months
 
2019
 
2018
Operating activities
 
 
 
Net income
$
38

 
$
21

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Loss from discontinued operations

 
35

Depreciation and amortization
81

 
86

Stock-based compensation expense
23

 
14

Deferred income taxes
(5
)
 
4

Changes in assets and liabilities:
 
 
 
Receivables
21

 
(114
)
Inventories
(68
)
 
(42
)
Current payables and accrued expenses
(192
)
 
(77
)
Contract liabilities
100

 
75

Employee benefit plans
(4
)
 
(3
)
Other assets and liabilities
(10
)
 
(23
)
Net cash used in operating activities
(16
)
 
(24
)
Investing activities
 
 
 
Expenditures for property, plant and equipment
(22
)
 
(29
)
Additions to capitalized software
(43
)
 
(42
)
Business acquisition, net
(6
)
 

Other investing activities, net
3

 
(3
)
Net cash used in investing activities
(68
)
 
(74
)
Financing activities
 
 
 
Short term borrowings, net
7

 
(1
)
Payments on term credit facilities
(17
)
 
(34
)
Payments on revolving credit facilities
(375
)
 
(498
)
Borrowings on revolving credit facilities
430

 
613

Repurchases of Company common stock

 
(165
)
Proceeds from employee stock plans
4

 
5

Tax withholding payments on behalf of employees
(13
)
 
(11
)
Net cash provided by (used in) financing activities
36

 
(91
)
Cash flows from discontinued operations


 

Net cash used in discontinued operations
(6
)
 
(4
)
Effect of exchange rate changes on cash and cash equivalents
1

 
5

Decrease in cash, cash equivalents, and restricted cash
(53
)
 
(188
)
Cash, cash equivalents and restricted cash at beginning of period
476

 
543

Cash, cash equivalents, and restricted cash at end of period
$
423

 
$
355


13




http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12886588&doc=6
NCR CORPORATION
REVENUE AND OPERATING INCOME SUMMARY
(Unaudited)
(in millions)
Schedule E

 
2018
 
Q1
Q2
Q3
Q4
Total
Revenue by segment
 
 
 
 
 
Banking
$
721

$
725

$
795

$
942

$
3,183

Retail
521

537

483

556

2,097

Hospitality
204

198

193

222

817

Other
71

77

79

81

308

Total Revenue
$
1,517

$
1,537

$
1,550

$
1,801

$
6,405

Operating income by segment
 
 
 
 
 
Banking
$
84

$
94

$
102

$
132

$
412

Banking operating income margin %
11.7
%
13.0
%
12.8
%
14.0
%
12.9
%
Retail
35

41

29

37

142

Retail operating income margin %
6.7
%
7.6
%
6.0
%
6.7
%
6.8
%
Hospitality
19

19

15

32

85

Hospitality operating income margin %
9.3
%
9.6
%
7.8
%
14.4
%
10.4
%
Other
10

11

15

13

49

Other operating income margin %
14.1
%
14.3
%
19.0
%
16.0
%
15.9
%
Subtotal-segment operating income
$
148

$
165

$
161

$
214

$
688

Total operating income margin %
9.8
%
10.7
%
10.4
%
11.9
%
10.7
%
Other adjustments (1)
39

271

36

151

497

Total income from operations
$
109

$
(106
)
$
125

$
63

$
191


(1) 
The following table presents the other adjustments for NCR:
 
 
2018
In millions
 
Q1
Q2
Q3
Q4
Total
Restructuring and transformation costs
 
$
16

$
66

$
16

$
125

$
223

Asset impairment charges
 

183



183

Acquisition-related amortization of intangible assets
 
23

21

20

21

85

Acquisition-related costs
 

1


5

6

Total other adjustments
 
$
39

$
271

$
36

$
151

497









14




http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12886588&doc=6
NCR CORPORATION
REVENUE AND OPERATING INCOME SUMMARY
(Unaudited)
(in millions)
Schedule F

 
2017
 
Q1
Q2
Q3
Q4
Total
Revenue by segment
 
 
 
 
 
Banking
$
704

$
764

$
828

$
879

$
3,175

Retail
509

544

528

588

2,169

Hospitality
195

210

230

243

878

Other
70

75

77

72

294

Total Revenue
$
1,478

$
1,593

$
1,663

$
1,782

$
6,516

Operating income by segment
 
 
 
 
 
Banking
$
68

$
105

$
123

$
125

$
421

Banking operating income margin %
9.7
%
13.7
%
14.9
%
14.2
%
13.3
%
Retail
49

61

57

64

231

Retail operating income margin %
9.6
%
11.2
%
10.8
%
10.9
%
10.7
%
Hospitality
32

34

38

36

140

Hospitality operating income margin %
16.4
%
16.2
%
16.5
%
14.8
%
15.9
%
Other
9

12

16

11

48

Other operating income margin %
12.9
%
16.0
%
20.8
%
15.3
%
16.3
%
Subtotal-segment operating income
$
158

$
212

$
234

$
236

$
840

Total operating income margin %
10.7
%
13.3
%
14.1
%
13.2
%
12.9
%
Other adjustments (1)
43

37

35

34

149

Total income from operations
$
115

$
175

$
199

$
202

$
691


(1) 
The following table presents the other adjustments for NCR:
 
 
2017
In millions
 
Q1
Q2
Q3
Q4
Total
Restructuring and transformation costs
 
$
13

$
8

$
5

$
3

$
29

Acquisition-related amortization of intangible assets
 
29

28

29

29

115

Acquisition-related costs
 
1

1

1

2

5

Total other adjustments
 
$
43

$
37

$
35

$
34

$
149



15
q12019callslidesfinal
Q1 2019 EARNINGS CONFERENCE CALL MICHAEL HAYFORD, PRESIDENT & CEO OWEN SULLIVAN, COO ANDRE FERNANDEZ, CFO May 7, 2019


 
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 full year 2019 financial guidance and the expected type and magnitude of the non-operational adjustments included in any forward-looking non-GAAP measures; NCR's strategy and expected areas of focus to drive stockholder value creation including strategic growth platforms, revenue shift and spend optimization, and related expected investments and results; areas of focus to improve productivity; areas of focus for payments integration; NCR's investment priorities and their expected benefits in 2019; and NCR's expected free cash flow generation and capital allocation strategy. Forward-looking statements are not guarantees of future performance, and there are a number of important factors that could cause actual outcomes and results to differ materially from the results contemplated by such forward-looking statements, including those factors listed in Item 1a "Risk Factors" of NCR's Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on February 28, 2019, and those factors detailed from time to time in NCR's other SEC reports. These materials are dated May 7, 2019, 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. 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


 
NOTES TO INVESTORS NON-GAAP MEASURES. While NCR reports its results in accordance with generally accepted accounting principles in the United States (GAAP), comments made during this conference call and in these materials will include or make reference to certain "non-GAAP" measures, including: selected measures, such as period-over-period revenue growth, expressed on a constant currency (CC) basis; gross margin rate (non-GAAP); diluted earnings per share (non-GAAP); free cash flow (FCF); gross margin (non-GAAP); net debt; adjusted EBITDA; the ratio of net debt to adjusted EBITDA; operating income (non-GAAP); interest and other expense (non-GAAP); income tax expense (non-GAAP); effective income tax rate (non-GAAP); and net income (non- GAAP). These measures are included to provide additional useful information regarding NCR's financial results, and are not a substitute for their comparable GAAP measures. Explanations of these non-GAAP measures, and reconciliations of these non- GAAP measures to their directly comparable GAAP measures, are included in the accompanying "Supplementary Materials" and are available on the Investor Relations page of NCR's website at www.ncr.com. Descriptions of many of these non-GAAP measures are also included in NCR's SEC reports. USE OF CERTAIN TERMS. As used in these materials: (i) the term "recurring revenue" means revenue for services under contract for which revenue is recognized over time; (ii) the term "CC" means constant currency; and (iii) the term "FCF" means free cash flow. 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


 
OVERVIEW RESULTS IN LINE with expectations Continued to IMPROVE EXECUTION BANKING REVENUE up 9% cc; ATM revenue up 27% cc RECURRING REVENUE up 6% cc 2019 GUIDANCE reaffirmed 4


 
Q1 2019 FINANCIAL RESULTS Revenue Adjusted EBITDA FX Impact ($46m) $1.52 $1.54 $217 $218 billion billion million million Q1 2018 Q1 2019 Q1 2018 Q1 2019 Revenue up 1% as reported and up 4% CC; Adjusted EBITDA in line with expectations Recurring revenue up 6% CC, 49% of total revenue Non-GAAP Diluted EPS Free Cash Flow FX Impact ($0.05) ($99) $(87) $0.56 $0.48 million million Q1 2018 Q1 2019 Q1 2018 Q1 2019 Non-GAAP EPS in line with expectations Change driven by working capital improvements 5


 
STRATEGIC GROWTH PLATFORMS Digital Digital Digital First First First Banking Restaurant Retail Digital Digital Digital Connected Convenience Small Services and Fuel Business Essentials 6


 
PAYMENTS INTEGRATION Payments Q1 Plan On Track for Pricing Customers Live NCR Silver & Established Aloha GA* 2H19 * General Availability 7


 
PRODUCTIVITY FOCUS AREAS SERVICES HARDWARE SPEND TRANSFORMATION NETWORK OPTIMIZATION • Service • Manufacturing • $100m savings in performance and transformation 2019 on track productivity initiatives largely initiative complete • Savings realized • 2019 on track to offsets higher real • Driving revenue reduce loss by estate and people and margin > 50% versus costs expansion 2018 • Improved price / • ~80% targeted mix actions completed 8


 
BANKING $ in millions Revenue Operating Income $721 $758 $95 $84 Q1 18 Q1 19 Q1 18 Q1 19 Key Highlights • Revenue up 9% CC driven by 27% CC growth in ATM revenue • Operating Income up 20% CC driven by higher volume and favorable impact of productivity initiatives 9


 
RETAIL $ in millions Revenue Operating Income $521 $511 $35 $26 Q1 18 Q1 19 Q1 18 Q1 19 Key Highlights • Revenue up 1% CC driven by increase in Payments and Self-Checkout revenue partially offset by a large implementation services project in the prior year • Operating Income down 18% CC driven by an unfavorable mix of revenue 10


 
HOSPITALITY $ in millions Revenue Operating Income $204 $193 $19 $16 Q1 18 Q1 19 Q1 18 Q1 19 Key Highlights • Revenue down 4% CC driven by lower hardware sales partially offset by higher cloud and payments revenue • Operating Income down 15% CC driven by a decline in hardware revenue and continued investment in customer satisfaction initiatives partially offset by an increase in software revenue 11


 
SUPPLEMENTAL REVENUE Q1 2019 Q1 2018 % Change % Change CC Software $467 $460 2% 3% Services $585 $601 (3%) 1% Hardware $484 $456 6% 9% ATM $236 $195 21% 27% SCO/POS $248 $261 (5%) (3%) Total Revenue $1,536 $1,517 1% 4% $ in millions Key Highlights • Software growth of 3% CC driven by a favorable mix of more cloud and payments revenue • Services growth of 1% CC driven by increase in recurring revenue partially offset by large implementation services project in the prior period • Hardware growth of 9% CC driven by a 27% CC growth in ATM revenue partially offset by declines in SCO/POS 12


 
FREE CASH FLOW, NET DEBT & EBITDA Free Cash Flow Q1 2019 Q1 2018 Cash used in Operating Activities ($16) ($24) Total capital expenditures ($65) ($71) Cash used in Discontinued Operations (6) (4) Free Cash Flow ($87) ($99) $ in millions Net Debt & EBITDA Q1 2019 Q4 2018 Q1 2018 Debt $3,211 $3,165 $3,072 Cash ($414) ($464) ($348) Net Debt 2,797 2,701 2,724 Adjusted EBITDA(1) $958 $957 $1,116 Net Debt / Adjusted EBITDA 2.9x 2.8x 2.4x (1) Adjusted EBITDA for the trailing twelve-month period $ in millions 13


 
2019 GUIDANCE REAFFIRMED FY 2019 Guidance Revenue Growth 1% - 2% Net Income Attributable to NCR $290 - $305 Adjusted EBITDA $1,040 - $1,080 GAAP Diluted EPS $1.91 - $2.01 Non-GAAP Diluted EPS $2.75 - $2.85 Cash Flow from Operations $705 - $730 Free Cash Flow $300 - $350 $ in millions, except per share amounts 14


 
LOOKING FORWARD • Solid execution in Q1 reinforces full year confidence • Deliver profitable growth • Mix shift to software, services and recurring revenue • Improve cost structure • Allocate capital to highest growth and return on investment opportunities • Drive cash flow generation 15


 
SUPPLEMENTARY MATERIALS


 
Q1 2019 GAAP RESULTS % Change Q1 2019 Q1 2018 As Reported Revenue $1,536 $1,517 1% Gross Margin 411 420 (2)% Gross Margin Rate 26.8% 27.7% Operating Expenses 311 311 —% % of Revenue 20.2% 20.5% Operating Income 100 109 (8)% % of Revenue 6.5% 7.2% Interest and other expense (53) (46) 15% Income Tax (Benefit) Expense 9 7 29% Effective Income Tax Rate 19.1% 11.1% Net Income 37 55 (33%) Diluted EPS $0.20 $0.35 (43)% $ in millions, except per share amounts 17


 
Q1 2019 OPERATIONAL RESULTS % Change % Change Q1 2019 Q1 2018 As Constant Reported Currency Revenue $1,536 $1,517 1% 4% Gross Margin (non-GAAP) 425 431 (1)% 2% Gross Margin Rate (non-GAAP) 27.7% 28.4% (70 bps) (70 bps) Operating Expenses (non-GAAP) 278 283 (2%) 1% % of Revenue 18.1% 18.7% Operating Income (non-GAAP) 147 148 (1%) 5% % of Revenue 9.6% 9.8% (20)bps —bps Interest and other expense (non-GAAP) (53) (46) (15%) (13%) Income Tax Expense (non-GAAP) 20 16 25% Effective Income Tax Rate (non-GAAP) 21.3% 15.7% Net Income (non-GAAP) 73 85 (14)% (5)% Diluted EPS (non-GAAP) $0.48 $0.56 (14%) (6%) $ in millions, except per share amounts 18


 
NON-GAAP MEASURES While NCR reports its results in accordance with generally accepted accounting principles (GAAP) in the United States, comments made during this conference call and in these materials will include non-GAAP measures. These measures are included to provide additional useful information regarding NCR's financial results, and are not a substitute for their comparable GAAP measures. Operating Income (non-GAAP), Diluted EPS (non-GAAP), Gross Margin (non-GAAP), Gross Margin Rate (non-GAAP), Interest and Other expense (non-GAAP), Effective Income Tax Rate (non-GAAP), Net Income (non-GAAP), Operating Expenses (non-GAAP) and Income Tax Expense (non-GAAP). NCR’s operating income (non-GAAP), diluted earnings per share (non-GAAP), gross margin (non- GAAP), gross margin rate (non-GAAP), interest and other expense (non-GAAP), effective income tax rate (non-GAAP), and net income (non-GAAP), operating expenses (non-GAAP) and income tax expense (non-GAAP) are determined by excluding pension mark-to- market adjustments, pension settlements, pension curtailments and pension special termination benefits and other special items, including amortization of acquisition related intangibles, from NCR's GAAP income (loss) from operations, earnings per share, gross margin, gross margin rate, interest and other expense, effective income tax rate, net income, operating expenses and income tax expense, respectively. Due to the non-operational nature of these pension and other special items, NCR's management uses these non-GAAP measures to evaluate year-over-year operating performance. NCR also uses operating income (non-GAAP) and non-GAAP diluted EPS, to manage and determine the effectiveness of its business managers and as a basis for incentive compensation. NCR believes these measures are useful for investors because they provide a more complete understanding of NCR's underlying operational performance, as well as consistency and comparability with NCR's past reports of financial results. Free Cash Flow. 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 definition may differ from other companies' definition of this measure. 19


 
NON-GAAP MEASURES Constant Currency. NCR presents certain financial measures, such as period-over-period revenue growth, on a constant currency basis, which excludes the effects of foreign currency translation by translating prior period results at current period monthly average exchange rates. Due 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’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. 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 net income attributable to NCR plus interest expense, net; plus income tax expense (benefit); plus depreciation and amortization; plus other income (expense); plus pension mark-to-market adjustments, pension settlements, pension curtailments and pension special termination benefits and other special items, including amortization of acquisition related intangibles. 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. 20


 
GAAP TO NON-GAAP RECONCILIATION Net Income from Continuing Operations (GAAP) to Adjusted EBITDA (non-GAAP) Q1 2019 Q1 2018 LTM LTM Q1 2019 Q1 2018 Net (Loss) Income from Continuing Operations Attributable to NCR (GAAP) $ (54) $ 235 $ 37 $ 55 Pension Mark-to-Market Adjustments (45) 28 — — Transformation/Restructuring Costs 233 32 26 16 Acquisition-Related Amortization of Intangibles 83 109 21 23 Acquisition-Related Costs 6 4 — — Long-lived and Intangible Asset Impairment Charges 183 — — — Interest Expense 172 165 45 41 Interest Income (5) (3) (1) (1) Depreciation and Amortization 237 239 58 62 Income Taxes 75 235 9 7 Stock Compensation Expense 73 72 23 14 Adjusted EBITDA (non-GAAP) $ 958 $ 1,116 $ 218 $ 217 $ in millions 21


 
GAAP TO NON-GAAP RECONCILIATION Q1 2019 QTD Transformation Acquisition- Q1 QTD 2019 and related Q1 QTD 2019 GAAP Restructuring amortization of non-GAAP costs intangibles Product revenue $539 $— $— $539 Service revenue 997 — — 997 Total revenue 1,536 — — 1,536 Cost of products 453 (3) (3) 447 Cost of services 672 (5) (3) 664 Gross margin 411 8 6 425 Gross margin rate 26.8% 0.5% 0.4% 27.7% Selling, general and administrative expenses $252 (15) (15) $222 Research and development expenses 59 (3) — 56 Total operating expenses $311 (18) (15) $278 Total operating expense as a % of revenue 20.2% (1.1)% (1.0)% 18.1% Income from operations 100 26 21 147 Income from operations as a % of revenue 6.5% 1.7% 1.4% 9.6% Interest and Other (expense) income, net (53) — — (53) Income from continuing operations before income taxes 47 26 21 94 Income tax (benefit) expense 9 6 5 20 Effective income tax rate 19.1% 21.3% Income from continuing operations 38 20 16 74 Net income attributable to noncontrolling interests 1 — — 1 Income from continuing operations (attributable to NCR) $37 $20 $16 $73 Diluted earnings per share 0.20 0.13 0.11 0.48 Diluted shares outstanding 122.2 151.4 $ in millions, except per share amounts 22


 
GAAP TO NON-GAAP RECONCILIATION Q1 2019 QTD Q1 QTD 2019 Q1 QTD 2019 GAAP non-GAAP Income from continuing operations attributable to NCR common stockholders: Income from continuing operations (attributable to NCR) $37 $73 Dividends on convertible preferred shares $(13) — Income from continuing operations attributable to NCR common stockholders $24 $73 Weighted average outstanding shares: Weighted average diluted shares outstanding 122.2 122.2 Weighted as-if converted preferred shares — 29.2 Total shares used in diluted earnings per share 122.2 151.4 Diluted earnings per share (1) 0.20 0.48 $ in millions, except per share amounts (1) GAAP EPS is determined using the most dilutive measure, either including the impact of the dividends on NCR's Series A Convertible Preferred Shares in the calculation of net income or loss available to common stockholders or including the impact of the conversion of such preferred stock into common stock in the calculation of the weighted average diluted shares outstanding. Non-GAAP EPS is always determined using the as-if converted preferred shares and shares that would be issued for stock compensation awards. Therefore, GAAP diluted EPS and non-GAAP diluted EPS may be calculated using different methods, and may not mathematically reconcile. 23


 
GAAP TO NON-GAAP RECONCILIATION Q1 2018 QTD Acquisition- Q1 QTD Transformati related Q1 QTD 2018 on Costs amortizatio 2018 non- GAAP n of GAAP intangibles Product revenue 526 $— $— 526 Service revenue 991 — — 991 Total revenue 1,517 — — 1,517 Cost of products 420 — (4) 416 Cost of services 677 (4) (3) 670 Gross margin 420 4 7 431 Gross margin rate 27.7% 0.2% 0.5% 28.4% Selling, general and administrative expenses 245 (10) (16) 219 Research and development expenses 66 (2) — 64 Total expenses 311 (12) (16) 283 Total expense as a % of revenue 20.5% (0.7)% (1.1)% 18.7% Income from operations 109 16 23 148 Income from operations as a % of revenue 7.2% 1.1% 1.5% 9.8% Interest and Other (expense) income, net (46) — — (46) Income from continuing operations before income taxes 63 16 23 102 Income tax expense 7 4 5 16 Effective income tax rate 11.1% 15.7% Income from continuing operations 56 12 18 86 Net income attributable to noncontrolling interests 1 — — 1 Income from continuing operations (attributable to NCR) 55 12 18 85 Diluted (loss) earnings per share $0.35 $0.08 $0.12 $0.56 Diluted shares outstanding 123.8 151.5 $ in millions, except per share amounts 24


 
GAAP TO NON-GAAP RECONCILIATION Q1 2018 QTD Q1 QTD 2018 Q1 QTD 2018 GAAP non-GAAP Income from continuing operations attributable to NCR common stockholders: Income from continuing operations (attributable to NCR) $55 $85 Dividends on convertible preferred shares (12) — Income from continuing operations attributable to NCR common 43 85 stockholders Weighted average outstanding shares: Weighted average diluted shares outstanding 123.8 123.8 Weighted as-if converted preferred shares — 27.7 Total shares used in diluted earnings per share 123.8 151.5 Diluted earnings per share (1) $0.35 $0.56 $ in millions, except per share amounts (1) GAAP EPS is determined using the most dilutive measure, either including the impact of the dividends on NCR's Series A Convertible Preferred Shares in the calculation of net income or loss available to common stockholders or including the impact of the conversion of such preferred stock into common stock in the calculation of the weighted average diluted shares outstanding. Non-GAAP EPS is always determined using the as-if converted preferred shares and shares that would be issued for stock compensation awards. Therefore, GAAP diluted EPS and non-GAAP diluted EPS may be calculated using different methods, and may not mathematically reconcile. 25


 
GAAP TO NON-GAAP RECONCILIATION Q1 2019 QTD Operating Income and Operating Income Rate (non-GAAP) to Operating Income and Operating Income Rate (GAAP) Operating Income Operating Income Rate Banking $95 12.5% Retail 26 5.1% Hospitality 16 8.3% Other 10 13.5% Total Operating Income (non-GAAP) 147 9.6% Less: Transformation & Restructuring costs 26 1.7% Acquisition-related amortization of intangibles 21 1.4% Total Operating Income (GAAP) $100 6.5% $ in millions 26


 
GAAP TO NON-GAAP RECONCILIATION Q1 2018 QTD Operating Income and Operating Income Rate (non-GAAP) to Operating Income and Operating Income Rate (GAAP) Operating Income Operating Income Rate Banking $84 11.7% Retail 35 6.7% Hospitality 19 9.3% Other 10 14.1% Total Operating Income (non-GAAP) 148 9.8% Less: Transformation Costs 16 1.1% Acquisition-related amortization of intangibles 23 1.5% Total Operating Income (GAAP) $109 7.2% $ in millions 27


 
GAAP TO NON-GAAP RECONCILIATION Revenue Growth % (GAAP) to Revenue Growth Constant Currency % (non-GAAP) Revenue Growth Revenue Growth Favorable Constant % (GAAP) (unfavorable) FX Currency % impact (non-GAAP) Banking 5% (4%) 9% Retail (2%) (3%) 1% Hospitality (5%) (1%) (4%) Other 4% (3%) 7% Total Revenue Growth % 1% (3)% 4% 28


 
GAAP TO NON-GAAP RECONCILIATION Operating Income % (GAAP) to Operating Income Constant Currency % (non-GAAP) Operating Favorable Operating Income Growth (unfavorable) FX Income Growth % (GAAP) impact % (non-GAAP) Banking 13% (7%) 20% Retail (26%) (8%) (18%) Hospitality (16%) (1%) (15%) Other —% —% —% Total Operating Income % (1%) (6)% 5% 29


 
GAAP TO NON-GAAP RECONCILIATION Diluted Earnings Per Share 2019 Guidance Diluted EPS (GAAP) (1) (2) $1.91 - $2.01 Transformation & Restructuring costs $0.31 Acquisition-Related Amortization of Intangibles $0.48 Acquisition-Related Costs $0.05 Non-GAAP Diluted EPS (1) (3) $2.75 - $2.85 (1) Non-GAAP 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. (3) For FY 2019, we have assumed an effective tax rate of 23% to 24% and a share count of 151 million compared to an effective tax rate of 19% and a share count of 150 million in FY 2018. 30


 
GAAP TO NON-GAAP RECONCILIATION Earnings Before Interest, Taxes, Depreciation & Amortization (Adjusted EBITDA) 2019 Guidance Net Income Attributable to NCR (GAAP) $290 - $305 Transformation & Restructuring costs 60 Acquisition-Related Amortization of Intangibles 95 Acquisition-Related Costs 10 Interest 180 - 195 Taxes 85 - 95 Depreciation & Amortization 240 Stock Compensation 80 Adjusted EBITDA (Non-GAAP) $1,040 - $1,080 $ in millions 31


 
GAAP TO NON-GAAP RECONCILIATION 2019 Guidance Cash Provided by Operating Activities $705 - $730 Less: Total capital expenditures (350) - (375) Less: Cash used in Discontinued Operations (30) Free Cash Flow $300 - $350 $ in millions 32