UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 11, 2020
(Exact name of registrant as specified in its charter)
Commission File Number 001-00395
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
(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):
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
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. o
Item 2.02. Results of Operations and Financial Condition.
On February 11, 2020, the Company issued a press release setting forth its fourth quarter and full year 2019 financial results along with its fiscal year 2020 financial outlook. A copy of the press release is attached hereto as Exhibit 99.1 and hereby incorporated by reference.
Item 7.01. Regulation FD Disclosure.
On February 11, 2020, the Company will hold its previously announced conference call to discuss its fourth quarter and full year 2019 results and fiscal year 2020 financial outlook. A copy of supplementary materials that will be referred to in the conference call, and which were posted to the Company’s website, is attached hereto as Exhibit 99.2.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits:
The following exhibits are attached with this current report on Form 8-K:
Exhibit No. | Description |
99.1 | Press Release issued by the Company, dated February 11, 2020 |
99.2 | Supplemental materials, dated February 11, 2020 |
104 | Cover Page Interactive Data File, formatted in iXBRL |
Index to Exhibits
The following exhibits are attached with this current report on Form 8-K:
Exhibit No. Description
104 Cover Page Interactive Data File, formatted in iXBRL
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: February 11, 2020
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 | NEWS RELEASE | |
February 11, 2020
NCR Announces Fourth Quarter and Full Year 2019 Results
ATLANTA - NCR Corporation (NYSE: NCR) reported financial results today for the three months ended December 31, 2019. Fourth quarter, full year and other recent highlights include:
• | Fourth quarter revenue of $1.89 billion, up 5% as reported and up 6% constant currency |
• | Fourth quarter GAAP diluted EPS of $2.67; Fourth quarter Non-GAAP diluted EPS of $0.85 |
• | Full year revenue of $6.92 billion, up 8% as reported and up 10% constant currency |
• | Full year GAAP diluted EPS of $3.71; Full year Non-GAAP diluted EPS of $2.81 |
• | Full year cash from operations of $628 million; Full year free cash flow of $275 million |
• | Completed acquisition of Zynstra to further enhance our next generation store architecture |
• | 2020 guidance announced |
“Our fourth quarter results marked a strong finish to the year for NCR where we consistently delivered our revenue and earnings commitments,” said Michael Hayford, President and Chief Executive Officer. “This past year we strengthened our recurring revenue capabilities through our strategic growth platforms, began integrating our payments processing solution and generated year-over-year sales growth in each of our segments. We entered 2020 with strong momentum to accelerate our transition to a software and services-led enterprise and an as-a-Service company. The entire NCR team is aligned behind “NCR as-a-Service” as we look to move closer to our customers and elevate our agility and response to market dynamics. We believe these next steps will further position NCR for sustainable long-term growth as we deliver increased value to customers and help them provide differentiated experiences across their stores, restaurants and self-service banking platforms.”
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.
Fourth Quarter 2019 Operating Results
Revenue
Fourth quarter revenue of $1,886 million was up 5% year-over-year. Foreign currency fluctuations had an unfavorable impact on the revenue comparison of 1%. The following table shows revenue for the fourth quarter:
$ in millions | Q4 2019 | Q4 2018 | % Change | % Change Constant Currency | ||||||||||
Banking | $ | 944 | $ | 942 | — | % | 2 | % | ||||||
Retail | 609 | 556 | 10 | % | 10 | % | ||||||||
Hospitality | 232 | 222 | 5 | % | 5 | % | ||||||||
Other | 101 | 81 | 25 | % | 25 | % | ||||||||
Total Revenue | $ | 1,886 | $ | 1,801 | 5 | % | 6 | % | ||||||
Software | $ | 533 | $ | 502 | 6 | % | 6 | % | ||||||
Services | 673 | 633 | 6 | % | 7 | % | ||||||||
Hardware | 680 | 666 | 2 | % | 4 | % | ||||||||
ATM | 347 | 367 | (5 | %) | (3 | %) | ||||||||
SCO/POS | 333 | 299 | 11 | % | 11 | % | ||||||||
Total Revenue | $ | 1,886 | $ | 1,801 | 5 | % | 6 | % | ||||||
Recurring Revenue | $ | 812 | $ | 754 | 8 | % | 8 | % | ||||||
Banking revenue increased slightly due to growth in software and services partially offset by a 5% decline in ATM hardware revenue. Despite the decline in ATM hardware revenue in the fourth quarter of 2019, full year Banking revenue increased compared to the prior year period. Foreign currency fluctuations had an unfavorable impact of 2% on the revenue comparison.
Retail revenue increased 10% driven by growth in payments, self-checkout and services revenue. Foreign currency fluctuations had no impact on the revenue comparison.
Hospitality revenue increased 5% driven by higher cloud, payments and point-of-sale revenue. Foreign currency fluctuations had no impact on the revenue comparison.
Gross Margin
Fourth quarter gross margin of $532 million increased from $442 million in the prior year period. Gross margin rate was 28.2%, up from 24.5%. Fourth quarter gross margin (non-GAAP) of $541 million increased from $495 million in the prior year period. Gross margin rate (non-GAAP) was 28.7%, up from 27.5%. The increases in gross margin rate were driven by growth in payments due to a full quarter included the current year period from the Jetpay acquisition which closed in December of 2018 as well as improved hardware profitability.
Operating Expenses
Fourth quarter operating expenses of $350 million decreased from $379 million in the prior year period. The decrease in operating expenses was primarily due to restructuring and transformation expenses of $77 million incurred during the fourth quarter of 2018. Fourth quarter operating expenses (non-GAAP) of $324 million increased from $281 million in the prior year period. The increase in operating expenses (non-GAAP) was primarily due to higher employee-related and real estate costs.
Operating Income
Fourth quarter income from operations of $182 million increased from income from operations of $63 million in the prior year period. The increase in income from operations was due to less restructuring and transformation expenses
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incurred during the fourth quarter of 2019 compared to the prior year. Fourth quarter operating income (non-GAAP) of $217 million increased slightly from $214 million in the prior year period.
Other Expense/Income
Fourth quarter other expense of $99 million increased from $3 million in the prior year period. The pension mark-to-market adjustment was expense of $75 million in the fourth quarter of 2019 compared to income of $45 million in the fourth quarter of 2018. Additionally, fourth quarter other expense in 2019 included a $37 million gain from entity liquidations. Fourth quarter other expense (non-GAAP) of $60 million increased from $48 million in the prior year period. The increase was primarily due to higher interest expense.
Income Tax Expense/Benefit
Fourth quarter income tax was a benefit of $301 million compared to expense of $93 million in the prior year period. The fourth quarter effective income tax rate was (363)% compared to 155% in the prior year period. The income tax benefit was primarily due to the establishment of deferred tax assets from the transfer of certain intangible assets among our wholly-owned subsidiaries as well as a valuation allowance release. The prior year period included the impact of U.S. tax reform.
Fourth quarter income tax expense (non-GAAP) of $34 million decreased from $40 million in the prior year period. The fourth quarter effective income tax rate (non-GAAP) was 21.7% compared to 24.1% in the prior year period. The decrease in income tax expense (non-GAAP) was primarily due to favorable audit settlements in the current year and mix of earnings.
Net Income/Loss from Continuing Operations Attributable to NCR
Fourth quarter net income from continuing operations attributable to NCR of $384 million increased from net loss from continuing operations of $33 million in the prior year period. Fourth quarter net income from continuing operations attributable to NCR (non-GAAP) of $123 million decreased from $126 million in the prior year period.
Cash Flow
Fourth quarter cash provided by operating activities of $402 million decreased from cash provided by operating activities of $409 million in the prior year period. Free cash flow was $296 million in the fourth quarter of 2019 as compared to free cash flow of $317 million in the fourth quarter of 2018 driven by changes in working capital.
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Full Year 2019 Operating Results
Full year 2019 revenue of $6,915 million was up 8% from 2018. Foreign currency fluctuations had an unfavorable impact of 2% on the revenue comparison. The following table shows revenue for the full year:
$ in millions | FY 2019 | FY 2018 | % Change | % Change Constant Currency | ||||||||||
Banking | $ | 3,512 | $ | 3,183 | 10 | % | 13 | % | ||||||
Retail | 2,217 | 2,097 | 6 | % | 7 | % | ||||||||
Hospitality | 843 | 817 | 3 | % | 4 | % | ||||||||
Other | 343 | 308 | 11 | % | 13 | % | ||||||||
Total Revenue | $ | 6,915 | $ | 6,405 | 8 | % | 10 | % | ||||||
Software | $ | 2,008 | $ | 1,912 | 5 | % | 6 | % | ||||||
Services | 2,520 | 2,460 | 2 | % | 5 | % | ||||||||
Hardware | 2,387 | 2,033 | 17 | % | 20 | % | ||||||||
ATM | 1,263 | 979 | 29 | % | 33 | % | ||||||||
SCO/POS | 1,124 | 1,054 | 7 | % | 8 | % | ||||||||
Total Revenue | $ | 6,915 | $ | 6,405 | 8 | % | 10 | % | ||||||
Recurring Revenue | $ | 3,145 | $ | 2,970 | 6 | % | 8 | % | ||||||
Full year 2019 GAAP diluted EPS of $3.71 was up from $(0.72) in 2018. Full year diluted EPS (non-GAAP) of $2.81 was up from $2.62 in 2018.
Full year 2019 cash provided by operating activities was $628 million and full year free cash flow was $275 million.
Transformation Initiatives
In 2019, we successfully executed our spend optimization program to drive cost savings through operational efficiencies and achieved $100 million of savings. This initiative created efficiencies in our corporate functions, reduced spend in the non-strategic areas and limited discretionary spending. We incurred a pre-tax charge of $58 million in 2019 with a cash impact of $44 million.
In 2020, as we execute our transition to NCR as-a-Service, our efforts are centered around improving our organizational design and driving improved efficiencies. The primary areas of focus include our offerings, go to market strategy and support and delivery model. We expect to achieve $90 million annualized run-rate savings by the end of 2020 with $40 million of realized savings in 2020.
Full Year 2020 Outlook
In 2020, our revenue guidance is approximately 0% to 1%. Our non-GAAP diluted earnings per share guidance is $2.75 to $2.85. Non-GAAP diluted earnings per share guidance assumes an effective tax rate of 23% to 24% for 2020 compared to 21% in 2019. Our adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) is expected to be $1.06 billion to $1.10 billion. Additionally, we expect cash flow from operations to be $640 million to $735 million and free cash flow to be $250 million to $300 million. Our guidance includes the impact of our strategic shift to increase recurring revenue, which has a negative impact on our guidance for 2020.
With respect to our non-GAAP diluted earnings per share and Adjusted EBITDA guidance, we do not provide a reconciliation to the respective GAAP measures because we are unable to predict with reasonable certainty the reconciling items that may affect GAAP net income from continuing operations and GAAP earnings per share without unreasonable effort. The reconciling items are primarily the future impact of special tax items, capital structure transactions,
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restructuring, pension mark-to-market transactions, acquisitions or divestitures, or other events. These reconciling items are uncertain, depend on various factors and could significantly impact, either individually or in the aggregate, the GAAP measures. Refer to the heading "Non-GAAP Financial Measures" for additional information regarding our use of non-GAAP financial measures.
2019 Fourth Quarter Earnings Conference Call
A conference call is scheduled for today at 4:30 p.m. (ET) to discuss the fourth quarter and full year 2019 results and guidance for full year 2020. 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 2736619.
More information on NCR’s Q4 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 and hospitality industries. NCR is headquartered in Atlanta, Ga., with 36,000 employees globally. 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 transformation initiatives in 2020 including cost efficiencies and their expected impact; NCR’s financial guidance and outlook (including the section entitled “Full Year 2020 Outlook” and the table entitled "Reconciliation of Net Cash Provided by Operating Activities (GAAP) to Free Cash Flow (non-GAAP))”; execution of NCR's recurring revenue strategy and accelerated growth including its transformation to an as-a-Service company; NCR’s focus on strategic growth platforms; the impact of the acquisition of Zynstra on our Retail and Hospitality segments; NCR’s expected areas of focus to drive growth and create long-term stockholder value; NCR’s expected free cash flow generation and capital allocation strategy; earnings per share; and the effective tax rate in 2020. 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; our ability to generate accurate forecasts of product demand and to engage third-party suppliers appropriately to meet that demand, including the on-boarding of new or additional suppliers or disruptions in our supply chain due to the Wuhan coronavirus; 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 global tax legislation, modified or new global or regional trade agreements, the execution of the United Kingdom's exit from the European Union, uncertainty over further potential changes in Eurozone participation and fluctuations in oil and commodity prices; the impact of our indebtedness and its terms on our financial and operating activities; the transformation of our business model and our ability to sell higher-margin software and services; the possibility of disruptions in or problems with our data center hosting facilities; cybersecurity risks and compliance with data privacy and protection requirements; our ability to successfully introduce new solutions and compete in the information technology industry; our ability to improve execution in our sales and services organizations; defects or errors in our products; manufacturing disruptions, including those caused by or related to outsourced manufacturing; collectability difficulties in subcontracting relationships in certain geographical markets; the historical seasonality of our sales; foreign currency fluctuations; the availability and success of acquisitions, divestitures and alliances; our pension strategy and underfunded pension obligation; the success of our restructuring plans and cost reduction initiatives; tax rates; reliance on third party suppliers; development and protection of intellectual property; workforce turnover and the ability to attract and retain skilled employees; 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.
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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 from continuing operations 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, except for non-GAAP diluted earnings per share and Adjusted EBITDA guidance as noted under the 'Full Year 2020 Outlook' heading above.
Use of Certain Terms
Recurring revenue means revenue for products and services under contract for which revenue is recognized over time.
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Reconciliation of Gross Margin (GAAP) to Gross Margin (Non-GAAP)
$ in millions | Q4 2019 | Q4 2018 | |||||
Gross Margin (GAAP) | $ | 532 | $ | 442 | |||
Transformation and restructuring costs | 2 | 48 | |||||
Acquisition-related amortization of intangibles | 7 | 5 | |||||
Gross Margin (Non-GAAP) | $ | 541 | $ | 495 | |||
Reconciliation of Gross Margin Rate (GAAP) to Gross Margin Rate (Non-GAAP)
Q4 2019 | Q4 2018 | ||||
Gross Margin Rate (GAAP) | 28.2 | % | 24.5 | % | |
Transformation and restructuring costs | 0.1 | % | 2.7 | % | |
Acquisition-related amortization of intangibles | 0.4 | % | 0.3 | % | |
Gross Margin Rate (Non-GAAP) | 28.7 | % | 27.5 | % | |
Reconciliation of Operating Expenses (GAAP) to Operating Expenses (Non-GAAP)
$ in millions | Q4 2019 | Q4 2018 | |||||
Operating Expenses (GAAP) | $ | 350 | $ | 379 | |||
Transformation and restructuring costs | (9 | ) | (77 | ) | |||
Acquisition-related amortization of intangibles | (15 | ) | (16 | ) | |||
Acquisition-related costs | (2 | ) | (5 | ) | |||
Operating Expenses (Non-GAAP) | $ | 324 | $ | 281 | |||
Reconciliation of Income from Operations (GAAP) to Operating Income (Non-GAAP)
$ in millions | Q4 2019 | Q4 2018 | |||||
Income (Loss) from Operations (GAAP) | $ | 182 | $ | 63 | |||
Transformation and restructuring costs | 11 | 125 | |||||
Acquisition-related amortization of intangibles | 22 | 21 | |||||
Acquisition-related costs | 2 | 5 | |||||
Operating Income (Non-GAAP) | $ | 217 | $ | 214 | |||
Reconciliation of Other Expense (GAAP) to Other Expense (Non-GAAP)
$ in millions | Q4 2019 | Q4 2018 | |||||
Other Expense (GAAP) | $ | (99 | ) | $ | (3 | ) | |
Debt refinancing | 1 | — | |||||
Internal reorganization and IP transfer | (37 | ) | — | ||||
Pension mark-to-market adjustments | 75 | (45 | ) | ||||
Other Expense (Non-GAAP) | $ | (60 | ) | $ | (48 | ) | |
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Reconciliation of Income Tax (Benefit) Expense (GAAP) to Income Tax Expense (Non-GAAP)
$ in millions | Q4 2019 | Q4 2018 | |||||
Income Tax (Benefit) Expense (GAAP) | $ | (301 | ) | $ | 93 | ||
Transformation and restructuring costs | 3 | 29 | |||||
Acquisition-related amortization of intangibles | 5 | 3 | |||||
Acquisition-related costs | — | 1 | |||||
Pension mark-to-market adjustments | 9 | (1 | ) | ||||
Impact of U.S. tax reform | — | (85 | ) | ||||
Debt refinancing | 1 | — | |||||
Valuation allowance release & other tax adjustments | 53 | — | |||||
Internal reorganization & IP transfer | 264 | — | |||||
Income Tax Expense (Non-GAAP) | $ | 34 | $ | 40 | |||
Reconciliation of Net Income from Continuing Operations Attributable to NCR (GAAP) to
Net Income from Continuing Operations Attributable to NCR (Non-GAAP)
$ in millions | Q4 2019 | Q4 2018 | |||||
Net Income (Loss) from Continuing Operations Attributable to NCR (GAAP) | $ | 384 | $ | (33 | ) | ||
Transformation and restructuring costs | 8 | 96 | |||||
Acquisition-related amortization of intangibles | 17 | 18 | |||||
Acquisition-related costs | 2 | 4 | |||||
Pension mark-to-market adjustments | 66 | (44 | ) | ||||
Internal reorganization & IP transfer | (301 | ) | — | ||||
Impact of U.S. tax reform | — | 85 | |||||
Debt refinancing | — | — | |||||
Valuation allowance release & other tax adjustments | (53 | ) | — | ||||
Net Income from Continuing Operations Attributable to NCR (Non-GAAP) | $ | 123 | $ | 126 | |||
Reconciliation of Diluted Earnings Per Share from Continuing Operations (GAAP) to
Non-GAAP Diluted Earnings Per Share from Continuing Operations (Non-GAAP)
Q4 2019 | Q4 2018 | FY 2019 | FY 2018 | ||||||||||||
Diluted Earnings Per Share (GAAP) (1) | $ | 2.67 | $ | (0.39 | ) | $ | 3.71 | $ | (0.72 | ) | |||||
Transformation & restructuring costs | 0.06 | 0.64 | 0.29 | 1.21 | |||||||||||
Goodwill & long-lived asset impairment charges | — | — | — | 1.16 | |||||||||||
Acquisition-related amortization of intangibles | 0.12 | 0.12 | 0.45 | 0.45 | |||||||||||
Acquisition-related costs | 0.01 | 0.03 | 0.03 | 0.03 | |||||||||||
Pension mark-to-market adjustments | 0.46 | (0.29 | ) | 0.44 | (0.29 | ) | |||||||||
Impact of U.S. tax reform | — | 0.57 | — | 0.30 | |||||||||||
Debt refinancing | — | — | 0.03 | — | |||||||||||
Valuation allowance release & other tax adjustments | (0.37 | ) | — | (0.52 | ) | — | |||||||||
Internal reorganization & IP transfer | (2.09 | ) | — | (2.00 | ) | — | |||||||||
Diluted Earnings Per Share (Non-GAAP) (1) | $ | 0.85 | $ | 0.84 | $ | 2.81 | $ | 2.62 | |||||||
(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. |
Reconciliation of Net Cash Provided by Operating Activities (GAAP) to Free Cash Flow (Non-GAAP)
$ in millions | Q4 2019 | Q4 2018 | FY 2019 | 2020 Guidance | |||||||||
Net cash used by operating activities | $ | 402 | $ | 409 | $ | 628 | $640 - $735 | ||||||
Total capital expenditures | (109 | ) | (79 | ) | (329 | ) | $350 - $375 | ||||||
Net cash provided by (used in) discontinued operations | 3 | (13 | ) | (24 | ) | $40 - $60 | |||||||
Free cash flow | $ | 296 | $ | 317 | $ | 275 | $250 - $300 | ||||||
Reconciliation of Revenue Growth % (GAAP) to
Revenue Growth Constant Currency % (Non-GAAP)
Three months ended December 31, 2019 | |||||
Revenue Growth % (GAAP) | Favorable (unfavorable) FX impact | Revenue Growth Constant Currency % (Non-GAAP) | |||
Banking | —% | (2)% | 2% | ||
Retail | 10% | —% | 10% | ||
Hospitality | 5% | —% | 5% | ||
Other | 25% | —% | 25% | ||
Total Revenue | 5% | (1)% | 6% | ||
For the year ended December 31, 2019 | |||||
Revenue Growth % (GAAP) | Favorable (unfavorable) FX impact | Revenue Growth Constant Currency % (Non-GAAP) | |||
Banking | 10% | (3)% | 13% | ||
Retail | 6% | (1)% | 7% | ||
Hospitality | 3% | (1)% | 4% | ||
Other | 11% | (2)% | 13% | ||
Total Revenue | 8% | (2)% | 10% | ||
9
Three months ended December 31, 2019 | |||||
Revenue Growth % (GAAP) | Favorable (unfavorable) FX impact | Revenue Growth Adjusted Constant Currency % (Non-GAAP) | |||
Software | 6% | —% | 6% | ||
Services | 6% | (1)% | 7% | ||
Hardware | 2% | (2)% | 4% | ||
ATM | (5)% | (2)% | (3)% | ||
SCO/POS | 11% | —% | 11% | ||
Total Revenue | 5% | (1)% | 6% | ||
For the year ended December 31, 2019 | |||||
Revenue Growth % (GAAP) | Favorable (unfavorable) FX impact | Revenue Growth Adjusted Constant Currency % (Non-GAAP) | |||
Software | 5% | (1)% | 6% | ||
Services | 2% | (3)% | 5% | ||
Hardware | 17% | (3)% | 20% | ||
ATM | 29% | (4)% | 33% | ||
SCO/POS | 7% | (1)% | 8% | ||
Total Revenue | 8% | (2)% | 10% | ||
10
 | NCR CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in millions, except per share amounts) | Schedule A |
For the Periods Ended December 31 | |||||||||||||||
Three Months | Twelve Months | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenue | |||||||||||||||
Products | $ | 766 | $ | 756 | $ | 2,681 | $ | 2,341 | |||||||
Services | 1,120 | 1,045 | 4,234 | 4,064 | |||||||||||
Total Revenue | 1,886 | 1,801 | 6,915 | 6,405 | |||||||||||
Cost of products | 599 | 644 | 2,146 | 1,988 | |||||||||||
Cost of services | 755 | 715 | 2,848 | 2,742 | |||||||||||
Total gross margin | 532 | 442 | 1,921 | 1,675 | |||||||||||
% of Revenue | 28.2 | % | 24.5 | % | 27.8 | % | 26.2 | % | |||||||
Selling, general and administrative expenses | 276 | 273 | 1,051 | 1,005 | |||||||||||
Research and development expenses | 74 | 62 | 259 | 252 | |||||||||||
Asset impairment charges | — | 44 | — | 227 | |||||||||||
Income (loss) from operations | 182 | 63 | 611 | 191 | |||||||||||
% of Revenue | 9.7 | % | 3.5 | % | 8.8 | % | 3.0 | % | |||||||
Interest expense | (54 | ) | (43 | ) | (197 | ) | (168 | ) | |||||||
Other expense, net | (45 | ) | 40 | (73 | ) | 16 | |||||||||
Total other expense, net | (99 | ) | (3 | ) | (270 | ) | (152 | ) | |||||||
Income (loss) from continuing operations before income taxes | 83 | 60 | 341 | 39 | |||||||||||
% of Revenue | 4.4 | % | 3.3 | % | 4.9 | % | 0.6 | % | |||||||
Income tax expense (benefit) | (301 | ) | 93 | (273 | ) | 73 | |||||||||
Income (loss) from continuing operations | 384 | (33 | ) | 614 | (34 | ) | |||||||||
Loss from discontinued operations, net of tax | (35 | ) | (14 | ) | (50 | ) | (52 | ) | |||||||
Net income (loss) | 349 | (47 | ) | 564 | (86 | ) | |||||||||
Net income (loss) attributable to noncontrolling interests | — | — | — | 2 | |||||||||||
Net income (loss) attributable to NCR | $ | 349 | $ | (47 | ) | $ | 564 | $ | (88 | ) | |||||
Amounts attributable to NCR common stockholders: | |||||||||||||||
Income (loss) from continuing operations | $ | 384 | $ | (33 | ) | $ | 614 | $ | (36 | ) | |||||
Dividends on convertible preferred stock | (6 | ) | (13 | ) | (110 | ) | (49 | ) | |||||||
Income (loss) from continuing operations attributable to NCR common stockholders | 378 | (46 | ) | 504 | (85 | ) | |||||||||
Loss from discontinued operations, net of tax | (35 | ) | (14 | ) | (50 | ) | (52 | ) | |||||||
Net income (loss) attributable to NCR common stockholders | $ | 343 | $ | (60 | ) | $ | 454 | $ | (137 | ) | |||||
Income (loss) per share attributable to NCR common stockholders: | |||||||||||||||
Income (loss) per common share from continuing operations | |||||||||||||||
Basic | $ | 2.96 | $ | (0.39 | ) | $ | 4.13 | $ | (0.72 | ) | |||||
Diluted (1) | $ | 2.67 | $ | (0.39 | ) | $ | 3.71 | $ | (0.72 | ) | |||||
Net income (loss) per common share | |||||||||||||||
Basic | $ | 2.69 | $ | (0.51 | ) | $ | 3.72 | $ | (1.16 | ) | |||||
Diluted (1) | $ | 2.43 | $ | (0.51 | ) | $ | 3.36 | $ | (1.16 | ) | |||||
Weighted average common shares outstanding | |||||||||||||||
Basic | 127.6 | 118.6 | 122.1 | 118.4 | |||||||||||
Diluted (1) | 143.9 | 118.6 | 145.2 | 118.4 | |||||||||||
(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.
11
| NCR CORPORATION REVENUE AND OPERATING INCOME SUMMARY (Unaudited) (in millions) | Schedule B |
For the Periods Ended December 31 | |||||||||||||||||||||||
Three Months | Twelve Months | ||||||||||||||||||||||
2019 | 2018 | % Change | % Change Constant Currency | 2019 | 2018 | % Change | % Change Constant Currency | ||||||||||||||||
Revenue by segment | |||||||||||||||||||||||
Banking | $ | 944 | $ | 942 | —% | 2% | $ | 3,512 | $ | 3,183 | 10% | 13% | |||||||||||
Retail | 609 | 556 | 10% | 10% | 2,217 | 2,097 | 6% | 7% | |||||||||||||||
Hospitality | 232 | 222 | 5% | 5% | 843 | 817 | 3% | 4% | |||||||||||||||
Other | 101 | 81 | 25% | 25% | 343 | 308 | 11% | 13% | |||||||||||||||
Total Revenue | $ | 1,886 | $ | 1,801 | 5% | 6% | $ | 6,915 | $ | 6,405 | 8% | 10% | |||||||||||
Operating income by segment | |||||||||||||||||||||||
Banking | $ | 144 | $ | 132 | $ | 514 | $ | 412 | |||||||||||||||
Banking operating income margin % | 15.3 | % | 14.0 | % | 14.6 | % | 12.9 | % | |||||||||||||||
Retail | 42 | 37 | 144 | 142 | |||||||||||||||||||
Retail operating income margin % | 6.9 | % | 6.7 | % | 6.5 | % | 6.8 | % | |||||||||||||||
Hospitality | 17 | 32 | 56 | 85 | |||||||||||||||||||
Hospitality operating income margin % | 7.3 | % | 14.4 | % | 6.6 | % | 10.4 | % | |||||||||||||||
Other | 14 | 13 | 44 | 49 | |||||||||||||||||||
All Other operating income margin % | 13.9 | % | 16.0 | % | 12.8 | % | 15.9 | % | |||||||||||||||
Subtotal-segment operating income | $ | 217 | $ | 214 | $ | 758 | $ | 688 | |||||||||||||||
Total Revenue operating income margin % | 11.5 | % | 11.9 | % | 11.0 | % | 10.7 | % | |||||||||||||||
Other adjustments (1) | 35 | 151 | 147 | 497 | |||||||||||||||||||
Total income from operations | $ | 182 | $ | 63 | $ | 611 | $ | 191 | |||||||||||||||
(1) | The following table presents the other adjustments for NCR: |
For the Periods Ended December 31 | |||||||||||||||
Three Months | Twelve Months | ||||||||||||||
In millions | 2019 | 2018 | 2019 | 2018 | |||||||||||
Transformation and restructuring costs | $ | 11 | $ | 125 | $ | 58 | $ | 223 | |||||||
Asset impairment charges | — | — | — | 183 | |||||||||||
Acquisition-related amortization of intangible assets | 22 | 21 | 86 | 85 | |||||||||||
Acquisition-related costs | 2 | 5 | 3 | 6 | |||||||||||
Total other adjustments | $ | 35 | $ | 151 | $ | 147 | $ | 497 | |||||||
12
| NCR CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) (in millions, except per share amounts) | Schedule C |
December 31, 2019 | September 30, 2019 | December 31, 2018 | |||||||||
Assets | |||||||||||
Current assets | |||||||||||
Cash and cash equivalents | $ | 509 | $ | 388 | $ | 464 | |||||
Accounts receivable, net | 1,490 | 1,487 | 1,356 | ||||||||
Inventories | 784 | 865 | 806 | ||||||||
Other current assets | 361 | 416 | 397 | ||||||||
Total current assets | 3,144 | 3,156 | 3,023 | ||||||||
Property, plant and equipment, net | 413 | 382 | 359 | ||||||||
Goodwill | 2,832 | 2,754 | 2,692 | ||||||||
Intangibles, net | 607 | 549 | 595 | ||||||||
Operating lease assets | 391 | 397 | — | ||||||||
Prepaid pension cost | 178 | 153 | 140 | ||||||||
Deferred income taxes | 821 | 488 | 448 | ||||||||
Other assets | 601 | 572 | 504 | ||||||||
Total assets | $ | 8,987 | $ | 8,451 | $ | 7,761 | |||||
Liabilities and stockholders’ equity | |||||||||||
Current liabilities | |||||||||||
Short-term borrowings | $ | 282 | $ | 208 | $ | 185 | |||||
Accounts payable | 840 | 800 | 897 | ||||||||
Payroll and benefits liabilities | 308 | 260 | 238 | ||||||||
Contract liabilities | 502 | 513 | 461 | ||||||||
Other current liabilities | 606 | 565 | 501 | ||||||||
Total current liabilities | 2,538 | 2,346 | 2,282 | ||||||||
Long-term debt | 3,277 | 3,422 | 2,980 | ||||||||
Pension and indemnity plan liabilities | 858 | 763 | 759 | ||||||||
Postretirement and postemployment benefits liabilities | 111 | 121 | 118 | ||||||||
Income tax accruals | 92 | 95 | 91 | ||||||||
Operating lease liabilities | 369 | 378 | — | ||||||||
Other liabilities | 240 | 195 | 259 | ||||||||
Total liabilities | 7,485 | 7,320 | 6,489 | ||||||||
Redeemable noncontrolling interests | — | 11 | 14 | ||||||||
Series A convertible preferred stock: par value $0.01 per share, 3.0 shares authorized, 0.4, 0.4 and 0.9 shares issued and outstanding as of December 31, 2019, September 30, 2019 and December 31, 2018, respectively; redemption amount and liquidation preference of $399, $394 and $871 as of December 31, 2019, September 30, 2019 and December 31, 2018, respectively | 395 | 389 | 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 December 31, 2019, September 30, 2019 and December 31, 2018, respectively | — | — | — | ||||||||
Common stock: par value $0.01 per share, 500.0 shares authorized, 127.7, 127.4 and 118.7 shares issued and outstanding as of December 31, 2019, September 30, 2019 and December 31, 2018, respectively | 1 | 1 | 1 | ||||||||
Paid-in capital | 312 | 269 | 34 | ||||||||
Retained earnings | 1,060 | 717 | 606 | ||||||||
Accumulated other comprehensive loss | (269 | ) | (261 | ) | (246 | ) | |||||
Total NCR stockholders' equity | 1,104 | 726 | 395 | ||||||||
Noncontrolling interests in subsidiaries | 3 | 5 | 4 | ||||||||
Total stockholders' equity | 1,107 | 731 | 399 | ||||||||
Total liabilities and stockholders' equity | $ | 8,987 | $ | 8,451 | $ | 7,761 | |||||
13
| NCR CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in millions) | Schedule D |
For the Periods Ended December 31 | |||||||||||||||
Three Months | Twelve Months | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Operating activities | |||||||||||||||
Net income | $ | 349 | $ | (47 | ) | $ | 564 | $ | (86 | ) | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||
Loss from discontinued operations | 35 | 14 | 50 | 52 | |||||||||||
Depreciation and amortization | 84 | 81 | 333 | 330 | |||||||||||
Stock-based compensation expense | 31 | 17 | 107 | 72 | |||||||||||
Deferred income taxes | (320 | ) | 29 | (355 | ) | 14 | |||||||||
Gain on sale of property, plant and equipment | — | — | (6 | ) | (2 | ) | |||||||||
Impairment of long-lived and other assets | 2 | 46 | 2 | 239 | |||||||||||
Changes in assets and liabilities: | |||||||||||||||
Receivables | 10 | (53 | ) | (144 | ) | (155 | ) | ||||||||
Inventories | 83 | 112 | 5 | (70 | ) | ||||||||||
Current payables and accrued expenses | 48 | 167 | (20 | ) | 198 | ||||||||||
Contract liabilities | (6 | ) | 23 | 31 | (13 | ) | |||||||||
Employee benefit plans | 72 | (42 | ) | 59 | (60 | ) | |||||||||
Other assets and liabilities | 14 | 62 | 2 | 53 | |||||||||||
Net cash provided by operating activities | 402 | 409 | 628 | 572 | |||||||||||
Investing activities | |||||||||||||||
Expenditures for property, plant and equipment | (38 | ) | (39 | ) | (91 | ) | (143 | ) | |||||||
Proceeds from sales of property, plant and equipment | — | — | 11 | 3 | |||||||||||
Additions to capitalized software | (71 | ) | (40 | ) | (238 | ) | (170 | ) | |||||||
Business acquisitions, net | (117 | ) | (206 | ) | (203 | ) | (206 | ) | |||||||
Net change in funds held for clients | (13 | ) | — | (15 | ) | — | |||||||||
Other investing activities, net | 4 | — | 9 | (4 | ) | ||||||||||
Net cash used in investing activities | (235 | ) | (285 | ) | (527 | ) | (520 | ) | |||||||
Financing activities | |||||||||||||||
Short term borrowings, net | (4 | ) | (8 | ) | — | (1 | ) | ||||||||
Payments on term credit facilities | (2 | ) | — | (761 | ) | (51 | ) | ||||||||
Borrowings on term credit facility | 400 | — | 750 | — | |||||||||||
Payments on revolving credit facilities | (1,137 | ) | (800 | ) | (3,216 | ) | (2,233 | ) | |||||||
Borrowings on revolving credit facilities | 1,076 | 845 | 3,535 | 2,453 | |||||||||||
Payments of senior unsecured notes | (400 | ) | — | (900 | ) | — | |||||||||
Proceeds from issuance of senior unsecured notes | — | — | 1,000 | — | |||||||||||
Debt issuance costs | (4 | ) | — | (32 | ) | — | |||||||||
Repurchase of Series A Preferred Stock | — | — | (302 | ) | — | ||||||||||
Repurchases of Common Stock | — | — | (96 | ) | (210 | ) | |||||||||
Proceeds from employee stock plans | 4 | 4 | 16 | 20 | |||||||||||
Purchase of non-controlling interest | (3 | ) | — | (3 | ) | — | |||||||||
Tax withholding payments on behalf of employees | — | (6 | ) | (29 | ) | (36 | ) | ||||||||
Net change in client funds obligations | 13 | — | 15 | — | |||||||||||
Other financing activities | (7 | ) | — | (8 | ) | — | |||||||||
Net cash used in financing activities | (64 | ) | 35 | (31 | ) | (58 | ) | ||||||||
Cash flows from discontinued operations | |||||||||||||||
Net cash provided by (used in) discontinued operations | 3 | (13 | ) | (24 | ) | (36 | ) | ||||||||
Effect of exchange rate changes on cash and cash equivalents | 1 | (13 | ) | (6 | ) | (25 | ) | ||||||||
Decrease in cash, cash equivalents, and restricted cash | 107 | 133 | 40 | (67 | ) | ||||||||||
Cash, cash equivalents and restricted cash at beginning of period | 409 | 343 | 476 | 543 | |||||||||||
Cash, cash equivalents, and restricted cash at end of period | $ | 516 | $ | 476 | $ | 516 | $ | 476 | |||||||
14
Q4 2019 EARNINGS CONFERENCE CALL MICHAEL HAYFORD, PRESIDENT & CEO OWEN SULLIVAN, COO ANDRE FERNANDEZ, CFO February 11, 2020 1
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 2020 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 NCR's transformation to an as-a-Service Company, strategic growth platforms, revenue shift to recurring software and services revenue and its impact on revenue and revenue growth acceleration; NCR's 2020 transformation initiatives and related expected investments and results; areas of focus to improve productivity; payments platform integration; NCR's investment priorities and their expected benefits in 2020; NCR's acquisition strategy; NCR's capital structure and the effects of recent transactions including benefits to NCR and impact on earnings per share; and NCR's expected free cash flow generation and capital allocation strategy; and NCR's effective tax rate in 2020. 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 February 11, 2020, 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; 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. With respect to our non-GAAP diluted earnings per share and adjusted EBITDA guidance, we are no longer providing a reconciliation to the respective GAAP measures because we are unable to predict with reasonable certainty the reconciling items that may affect GAAP net income from continuing operations and GAAP earnings per share without unreasonable effort. The reconciling items are primarily the future impact of special tax items, capital structure transactions, restructuring, pension mark-to-market transactions, acquisitions or divestitures, or other events. These reconciling items are uncertain, depend on various factors and could significantly impact, either individually or in the aggregate, the GAAP measures. USE OF CERTAIN TERMS. As used in these materials: (i) the term "recurring revenue" means revenue for products and services under contract for which revenue is recognized over time and (ii) the term "CC" means constant currency. These presentation materials and the associated remarks made during this conference call are integrally related and are intended to be presented and understood together. 3
OVERVIEW SOLID 2019 Continued to IMPROVE EXECUTION REVENUE GROWTH across all segments/industries RECURRING REVENUE up 8% CC Progress building STRATEGIC GROWTH PLATFORMS 2020 GUIDANCE: Revenue growth 0% - 1%; Non-GAAP EPS $2.75 - $2.85; FCF $250M-$300M 4
FY 2019 FINANCIAL RESULTS Revenue FX Impact Adjusted EBITDA ($119) million $6.92 $1,058 $6.41 billion $957 million billion million FY 2018 FY 2019 FY 2018 FY 2019 Revenue up 8% as reported and up 10% CC Adjusted EBITDA up 11% Non-GAAP Diluted EPS Free Cash Flow FX Impact ($0.16) $275 $2.81 $223 million $2.62 million FY 2018 FY 2019 FY 2018 FY 2019 Non-GAAP EPS up 7% as reported and up 14% CC Free cash flow up due to increased earnings 5
SHIFT TO AS-A-SERVICE COMPANY to drive increased recurring revenue across our strategic growth platforms Offerings Go To Market Delivery 6
M&A UPDATE Disciplined approach on acquisition strategy with 8 deals in 2019 for under $230M purchase price * Online and mobile banking Edge virtualization Brazil based IT services and digital platform provider technology provider for retail software assets for financial for large banks and hospitality sectors and retail sectors Purchase of remaining interest in NCR Manaus expands addressable market in Brazil POS solutions providers to restaurants and merchants in the hospitality sector * Expected to close during first half of 2020 7
TOTAL NCR $ in millions except for share amounts Fourth Quarter Full Year +8% As +5% As Reported Reported +10% CC +7% As +6% CC $6,915 Reported +1% As +14% CC $1,886 Reported +6% CC $1,801 $6,405 $2.62 $2.81 $0.84 $0.85 2018 2019 2018 2019 2018 2019 2018 2019 Revenue Non-GAAP EPS Revenue Non-GAAP EPS 2019 Key Highlights • Revenue up 10% CC driven by a 33% CC growth in ATM revenue due to higher backlog conversion and growth in software and services revenue • Non-GAAP EPS up 14% CC driven by higher software and services revenue and improved hardware profitability 8
BANKING $ in millions Fourth Quarter Full Year +10% As +0% As Reported Reported +13% CC +25% As +2% CC $3,512 Reported $942 $944 +9% As +31% CC Reported $3,183 +14% CC $514 $144 $412 $132 2018 2019 2018 2019 2018 2019 2018 2019 Revenue Operating Income Revenue Operating Income 2019 Key Highlights • Revenue up 13% CC driven by a 33% CC growth in ATM revenue due to higher backlog conversion and higher ATM-related software as well as growth in services revenue • Operating Income up 31% CC driven by higher volume and a favorable mix of revenue with improved hardware profitability 9
RETAIL $ in millions Fourth Quarter Full Year +6% As +10% As Reported Reported +7% CC +1% As +10% CC Reported +14% As $2,217 +11% CC $609 Reported $2,097 $556 +21% CC $142 $144 $42 $37 2018 2019 2018 2019 2018 2019 2018 2019 Revenue Operating Income Revenue Operating Income 2019 Key Highlights • Revenue up 7% CC driven by increase in payments, self-checkout and services revenue • Operating Income up 11% CC driven by higher software and services revenue and improved hardware profitability 10
HOSPITALITY $ in millions Fourth Quarter Full Year +3% As +5% As Reported Reported +4% CC -34% As +5% CC $817 $843 Reported $232 -47% As -34% CC $222 Reported -45% CC $32 $85 $17 $56 2018 2019 2018 2019 2018 2019 2018 2019 Revenue Operating Income Revenue Operating Income 2019 Key Highlights • Revenue up 4% CC driven by increase in cloud, payments and point-of-sale revenue • Operating Income down 34% CC driven by several large customer installations in the prior year and increased investment in services support and payments 11
FY 19 SUPPLEMENTAL REVENUE $ in millions FY 2019 FY 2018 % Change % Change CC Software $2,008 $1,912 5% 6% Services $2,520 $2,460 2% 5% Hardware $2,387 $2,033 17% 20% ATM $1,263 $979 29% 33% SCO/POS $1,124 $1,054 7% 8% Total Revenue $6,915 $6,405 8% 10% Recurring Revenue $3,145 $2,970 6% 8% 2019 Key Highlights • Software growth of 6% CC driven by an increase in cloud, payments and professional services revenue • Services growth of 5% CC driven by an increase in hardware sales and managed services offerings • Hardware growth of 20% CC driven by 33% CC growth in ATM revenue and 8% CC growth in SCO/POS revenue 12
FREE CASH FLOW, NET DEBT & EBITDA $ in millions Free Cash Flow FY 2019 FY 2018 Cash provided by Operating Activities $628 $572 Total capital expenditures ($329) ($313) Cash used in Discontinued Operations ($24) ($36) Free Cash Flow $275 $223 Net Debt & EBITDA Q4 2019 Q3 2019 Q4 2018 Debt $3,559 $3,630 $3,165 Cash ($509) ($388) ($464) Net Debt $3,050 $3,242 $2,701 Adjusted EBITDA LTM $1,058 $1,045 $957 Net Debt / Adjusted EBITDA 2.9x 3.1x 2.8x 13
2019 PRODUCTIVITY INITIATIVES • Manufacturing transformation largely complete ◦ Improved product delivery performance ◦ Significant progress to hardware profitability • Completed $100M spend optimization program ◦ Maintained Opex / Revenue percentage flat offsetting higher real estate and employee-related costs • Services Transformation ◦ Focus on improving customer experience ◦ Investments in parts and additional technicians 14
STRATEGY ACTIVATION • Shift to recurring ◦ Organization design ◦ Targeted business processes • Driving efficiencies as we evolve to NCR-as-a-Service ◦ $90M annualized run-rate saving by year-end 2020 ◦ $40M realized savings in 2020 15
2020 GUIDANCE - AS REPORTED $ in millions, except per share amounts Guidance Revenue Growth 0% - 1% Adjusted EBITDA $1,060 - $1,100 Non-GAAP Diluted EPS (1) $2.75 - $2.85 Cash Flow from Operations $640 - $735 Free Cash Flow $250 - $300 (1) For FY 2020, we have assumed an effective tax rate of 23% to 24% and a share count of 147 million compared to an effective tax rate of 21% and a share count of 150.6 million in 2019. 16
2020 EARNINGS BRIDGES $ in millions, except per share amounts Adjusted EBITDA Non-GAAP EPS $1,060 - $1,100 $1,058 $2.75 - $2.81 $2.85 2019 Shift to Business Cost 2020 2019 Shift to Other Business Cost 2020 Recurring Growth Efficiencies Guidance Recurring Growth Efficiencies Guidance Revenue * Revenue * * See NCR's definition of Recurring Revenue on slide 3 17
NCR LONG-TERM VALUE CREATION STRATEGY NEAR TERM: NCR AS-A-SERVICE FUTURE: 1-3% Growth 80/60/20 3-5% Growth SHIFT THE MIX Software & Services 65% to 80% Recurring Revenue 45% to 60% MARGIN EXPANSION Business Mix Shift, Efficiencies, Pricing Discipline EBITDA Margin 15.3% to 20% CAPITAL ALLOCATION Operating Cash Flow $600M - $900M / year, CapEx $250M - $300M / year Limit Stock Dilution, M&A $300M-$400M / year 18
SUPPLEMENTARY MATERIALS 19
Q4 & FY 2019 GAAP RESULTS $ in millions, except per share amounts % Change % Change Q4 2019 Q4 2018 As Reported FY 2019 FY 2018 As Reported Revenue $1,886 $1,801 5% $6,915 $6,405 8% Gross Margin 532 442 20% 1,921 1,675 15% Gross Margin Rate 28.2% 24.5% 27.8% 26.2% Operating Expenses 350 379 (8)% 1,310 1,484 (12)% % of Revenue 18.6% 21.0% 18.9% 23.2% Operating Income 182 63 Fav 611 191 Fav % of Revenue 9.7% 3.5% 8.8% 3.0% Interest and other expense (99) (3) Fav (270) (152) Fav Income Tax Expense (Benefit) (301) 93 Fav (273) 73 Fav Effective Income Tax Rate (362.7)% 155.0% (80.1)% 187.2% Net Income from Continuing Operations (attributable to NCR) $384 ($33) Fav $614 ($36) Fav Diluted EPS $2.67 ($0.39) Fav $3.71 ($0.72) Fav FAV denotes percent change greater than 100% 20
Q4 & FY 2019 OPERATIONAL RESULTS $ in millions, except per share amounts % Change % Change % Change Q4 2019 Q4 2018 As Constant FY 2019 FY 2018 % Change As Constant Reported Currency Reported Currency Revenue $1,886 $1,801 5% 6% $6,915 $6,405 8% 10% Gross Margin (non-GAAP) 541 495 9% 12% 1,966 1,800 9% 12% Gross Margin Rate (non-GAAP) 28.7% 27.5% 120 bps 160 bps 28.4% 28.1% 30 bps 60 bps Operating Expenses (non-GAAP) 324 281 15% 16% $1,208 $1,112 9% 10% % of Revenue 17.2% 15.6% 160bps 160bps 17.5% 17.4% 10 bps 10 bps Operating Income (non-GAAP) 217 214 1% 6% 758 688 10% 16% % of Revenue 11.5% 11.9% (40)bps —bps 11.0% 10.7% 30 bps 60 bps Interest and other expense (non-GAAP) (60) (48) 25% 25% (225) (197) (14%) (14%) Income Tax Expense (non-GAAP) 34 40 (15)% (13)% 110 94 17% 16% Effective Income Tax Rate (non-GAAP) 21.7% 24.1% 20.6% 19.1% Net Income (Loss) From Continuing Operations (attributable to NCR) (non- 123 126 (2)% 4% 423 394 7% 18% GAAP) Diluted EPS (non-GAAP) $0.85 $0.84 1% 6% $2.81 $2.62 7% 14% 21
NON-GAAP MEASURES While NCR reports its results in accordance with generally accepted accounting principles (GAAP) in the United States, comments made during this conference call and in these materials will include non-GAAP measures. These measures are included to provide additional useful information regarding NCR's financial results, and are not a substitute for their comparable GAAP measures. Operating Income (non-GAAP), Diluted EPS (non-GAAP), Gross Margin (non-GAAP), Gross Margin Rate (non-GAAP), 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. 22
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 from continuing operations 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. 23
NON-GAAP MEASURES 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. With respect to our non-GAAP diluted earnings per share and Adjusted EBITDA guidance, we are no longer providing a reconciliation to the respective GAAP measures because we are unable to predict with reasonable certainty the reconciling items that may affect GAAP net income from continuing operations and GAAP earnings per share without unreasonable effort. The reconciling items are primarily the future impact of special tax items, capital structure transactions, restructuring, pension mark-to-market transactions, acquisitions or divestitures, or other events. These reconciling items are uncertain, depend on various factors and could significantly impact, either individually or in the aggregate, the GAAP measures. Refer to the heading "Non-GAAP Financial Measures" for additional information regarding our use of non-GAAP financial measures. 24
GAAP TO NON-GAAP RECONCILIATION $ in millions Net Income from Continuing Operations (GAAP) to Adjusted EBITDA (non-GAAP) Q4 2019 Q3 2019 Q4 2018 LTM LTM LTM Q4 2019 Q4 2018 Net (Loss) Income from Continuing Operations Attributable to NCR (GAAP) $ 614 $ 197 $ (36) $ 384 $ (33) Pension Mark-to-Market Adjustments 75 (45) (45) 75 (45) Transformation & Restructuring Costs 58 172 223 11 125 Acquisition-Related Amortization of Intangibles 86 85 85 22 21 Acquisition-Related Costs 3 6 6 2 5 Long-lived and Intangible Asset Impairment Charges — — 183 — — Internal reorganization & IP Transfer (37) — — (37) — Interest Expense 197 186 168 54 43 Interest Income (4) (5) (5) (1) (2) Depreciation and Amortization 232 235 241 59 62 Income Taxes (273) 121 73 (301) 93 Stock Compensation Expense 107 93 64 31 17 Adjusted EBITDA (non-GAAP) $ 1,058 $ 1,045 $ 957 $ 299 $ 286 25
GAAP TO NON-GAAP RECONCILIATION Q4 2019 $ in millions, except per share amounts Transformation Acquisition- Int Pension Q4 QTD Q4 QTD & related Acquisition Debt VA Reorg & mark-to- 2019 2019 Restructuring amortization - related Refinancing Release IP market non- GAAP costs of intangibles costs & Other Transfer adjustments GAAP Product revenue $766 $— $— $— $— $— $— $— $766 Service revenue 1,120 — — — — — — — 1,120 Total revenue 1,886 — — — — — — — 1,886 Cost of products 599 — (3) — — — — — 596 Cost of services 755 (2) (4) — — — — — 749 Gross margin 532 2 7 — — — — — 541 Gross margin rate 28.2% 0.1% 0.4% —% —% —% —% —% 28.7% Selling, general and administrative 276 (6) (15) (2) — — — — 253 expenses Research and development 74 (3) — — — — — — 71 Totalexpenses operating expenses 350 (9) (15) (2) — — — — 324 Total operating expense as a % of revenue 18.6% (0.5)% (0.8)% (0.1)% —% —% —% —% 17.2% Income from operations 182 11 22 2 — — — — 217 Income from operations as a % of 9.7% 0.6% 1.1% 0.1% —% —% —% —% 11.5% revenue Interest and Other (expense) (99) — — — 1 — (37) 75 (60) Income from continuing operations 83 11 22 2 1 — (37) 75 157 before income taxes Income tax (benefit) expense (301) 3 5 — 1 53 264 9 34 Effective income tax rate (362.7)% 21.7% Income from continuing operations 384 8 17 2 — (53) (301) 66 123 Net income (loss) attributable to — — — — — — — — — noncontrolling interests Income from continuing $384 $8 $17 $2 $— ($53) ($301) $66 $123 operations (attributable to NCR) Diluted earnings per share $2.67 $0.06 $0.12 $0.01 $— ($0.37) ($2.09) $0.46 $0.85 Diluted shares outstanding 143.9 143.9 26
GAAP TO NON-GAAP RECONCILIATION Q4 2019 $ in millions, except per share amounts Q4 QTD 2019 Q4 QTD 2019 GAAP non-GAAP Income from continuing operations attributable to NCR common stockholders: Income from continuing operations (attributable to NCR) $384 $123 Dividends on convertible preferred shares — — Income from continuing operations attributable to NCR common stockholders $384 $123 Weighted average outstanding shares: Weighted average diluted shares outstanding 130.7 130.7 Weighted as-if converted preferred shares 13.2 13.2 Total shares used in diluted earnings per share 143.9 143.9 Diluted earnings per share (1) $2.67 $0.85 (1) GAAP EPS is determined using the most dilutive measure, either including the impact of the dividends or deemed 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. 27
GAAP TO NON-GAAP RECONCILIATION Q4 2018 $ in millions, except per share amounts Acquisition- Impact Q4 QTD Transformation related Acquisition- of U.S. Pension mark- Q4 QTD 2018 & Restructuring amortization related Tax to-market 2018 non- GAAP Costs of costs Reform adjustments GAAP intangibles Product revenue $756 $— $— $— $— $— $756 Service revenue 1,045 — — — — — 1,045 Total revenue 1,801 — — — — — 1,801 Cost of products 644 (19) (1) — — — 624 Cost of services 715 (29) (4) — — — 682 Gross margin 442 48 5 — — — 495 Gross margin rate 24.5% 2.7% 0.3% —% —% —% 27.5% Selling, general and administrative expenses 273 (29) (16) (5) — — 223 Research and development expenses 62 (4) — — — — 58 Asset impairment charges 44 (44) — — — — — Total expenses 379 (77) (16) (5) — — 281 Total expense as a % of revenue 21.0% (4.2)% (0.9)% (0.3)% —% —% 15.6% Income from operations 63 125 21 5 — — 214 Income from operations as a % of revenue 3.5% 6.9% 1.2% 0.3% —% —% 11.9% Interest and Other (expense) income, net (3) — — — — (45) (48) Income from continuing operations before income taxes 60 125 21 5 — (45) 166 Income tax expense 93 29 3 1 (85) (1) 40 Effective income tax rate 155.0% 24.1% Income from continuing operations (33) 96 18 4 85 (44) 126 Net income attributable to noncontrolling interests — — — — — — — Income from continuing operations (attributable to NCR) ($33) $96 $18 $4 $85 ($44) $126 Diluted (loss) earnings per share ($0.39) $0.64 $0.12 $0.03 $0.57 ($0.29) $0.84 Diluted shares outstanding 118.6 149.9 28
GAAP TO NON-GAAP RECONCILIATION Q4 2018 $ in millions, except per share amounts Q4 QTD 2018 Q4 QTD 2018 GAAP non-GAAP Income from continuing operations attributable to NCR common stockholders: Income from continuing operations (attributable to NCR) ($33) $126 Dividends on convertible preferred shares (13) — Income from continuing operations attributable to NCR common ($46) $126 stockholders Weighted average outstanding shares: Weighted average diluted shares outstanding 118.6 121.1 Weighted as-if converted preferred shares — 28.8 Total shares used in diluted earnings per share 118.6 149.9 Diluted earnings per share (1) ($0.39) $0.84 (1) GAAP EPS is determined using the most dilutive measure, either including the impact of the dividends or deemed 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. 29
GAAP TO NON-GAAP RECONCILIATION FY 2019 $ in millions, except per share amounts Acquisition- Transformation related Acquisition- VA Int Reorg Pension FY 2019 & Restructuring amortization related Debt Release & IP mark-to- FY 2019 GAAP costs of costs Refinancing & Other Transfer market non-GAAP intangibles adjustments Product revenue $2,681 $— $— $— $— $— $— $— $2,681 Service revenue 4,234 — — — — — — — 4,234 Total revenue 6,915 — — — — — — — 6,915 Cost of products 2,146 (12) (10) — — — — — 2,124 Cost of services 2,848 (9) (14) — — — — — 2,825 Gross margin 1,921 21 24 — — — — — 1,966 Gross margin rate 27.8% 0.3% 0.3% —% —% —% —% —% 28.4% Selling, general and 1,051 (31) (62) (3) — — — — 955 administrative expenses Research and development expenses 259 (6) — — — — — — 253 Total operating expenses 1,310 (37) (62) (3) — — — — 1,208 Total operating expense 18.9% (0.5)% (0.9)% —% —% —% —% —% 17.5% as a % of revenue Income from operations 611 58 86 3 — — — — 758 Income from operations as 8.8% 0.9% 1.3% —% —% —% —% —% 11.0% a % of revenue Interest and Other (270) — — — 7 — (37) 75 (225) Income from continuing 341 58 86 3 7 — (37) 75 533 operations before income Income tax (benefit) (273) 14 18 (2) 2 78 264 9 110 Effective income tax (80.1)% 20.6% Income from continuing 614 44 68 5 5 (78) (301) 66 423 Net income (loss) — — — — — — — — attributable to Income from continuing $614 $44 $68 $5 $5 ($78) ($301) $66 $423 operations (attributable to Diluted earnings per $3.71 $0.29 $0.45 $0.03 $0.03 ($0.52) ($2.00) $0.44 $2.81 Diluted shares outstanding 145.2 150.6 30
GAAP TO NON-GAAP RECONCILIATION FY 2019 $ in millions, except per share amounts FY 2019 non- FY 2019 GAAP GAAP Income from continuing operations attributable to NCR common stockholders: Income from continuing operations (attributable to NCR) $614 $423 Dividends on convertible preferred shares ($76) $— Income from continuing operations attributable to NCR common stockholders $538 $423 Weighted average outstanding shares: Weighted average diluted shares outstanding 125.7 125.7 Weighted as-if converted preferred shares 19.5 24.9 Total shares used in diluted earnings per share 145.2 150.6 Diluted earnings per share (1) $3.71 $2.81 (1) GAAP EPS is determined using the most dilutive measure, either including the impact of the dividends or deemed 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. 31
GAAP TO NON-GAAP RECONCILIATION FY 2018 $ in millions, except per share amounts Acquisition- Transformation Goodwill & related Impact of Pension FY 2018 FY 2018 & Long-lived amortization Acquisition- U.S. Tax mark-to- non- GAAP Restructuring Asset of related costs Reform market GAAP costs Impairments intangibles adjustments Product revenue $2,341 $— $— $— $— $— $— $2,341 Service revenue 4,064 — — — — — — 4,064 Total revenue 6,405 — — — — — — 6,405 Cost of products 1,988 (59) — (10) — — — 1,919 Cost of services 2,742 (43) — (13) — — — 2,686 Gross margin 1,675 102 — 23 — — — 1,800 Gross margin rate 26.2% 1.5% —% 0.4% —% —% —% 28.1% Selling, general and administrative expenses 1,005 (67) — (62) (6) — — 870 Research and development expenses 252 (10) — — — — — 242 Asset impairment charges 227 (44) (183) — — — — — Total operating expenses 1,484 (121) (183) (62) (6) — — 1,112 Total operating expense as a % of 23.2% (1.9)% (2.8)% (1.0)% (0.1)% —% —% 17.4% Incomerevenue from operations 191 223 183 85 6 — — 688 Income from operations as a % of 3.0% 3.4% 2.9% 1.3% 0.1% —% —% 10.7% Interest and Other (expense) income, (152) — — — — — (45) (197) Income from continuing operations 39 223 183 85 6 — (45) 491 before income taxes Income tax (benefit) expense 73 41 8 17 1 (45) (1) 94 Effective income tax rate 187.2% 19.1% Income from continuing operations (34) 182 175 68 5 45 (44) 397 Net income (loss) attributable to 2 — 1 — — — — 3 noncontrolling interests Income from continuing operations ($36) $182 $174 $68 $5 $45 ($44) $394 (attributable to NCR) Diluted earnings per share ($0.72) $1.21 $1.16 $0.45 $0.03 $0.30 ($0.29) $2.62 Diluted shares outstanding 118.4 150.2 32
GAAP TO NON-GAAP RECONCILIATION FY 2018 $ in millions, except per share amounts FY 2018 non- FY 2018 GAAP GAAP Income from continuing operations attributable to NCR common stockholders: Income from continuing operations (attributable to NCR) ($36) $394 Dividends on convertible preferred shares ($49) $— Income from continuing operations attributable to NCR common stockholders ($85) $394 Weighted average outstanding shares: Weighted average diluted shares outstanding 118.4 121.9 Weighted as-if converted preferred shares — 28.3 Total shares used in diluted earnings per share 118.4 150.2 Diluted earnings per share (1) ($0.72) $2.62 (1) GAAP EPS is determined using the most dilutive measure, either including the impact of the dividends or deemed 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. 33
GAAP TO NON-GAAP RECONCILIATION Q4 & FY 2019 $ in millions Operating Income (non-GAAP) to Operating Income (GAAP) Q4 2019 FY 2019 Operating Income Operating Income Banking $144 $514 Retail 42 144 Hospitality 17 56 Other 14 44 Total Operating Income (non-GAAP) 217 758 Less: Transformation and restructuring costs 11 58 Acquisition-related amortization of intangibles 22 86 Acquisition-related costs 2 3 Total Operating Income (GAAP) $182 $611 34
GAAP TO NON-GAAP RECONCILIATION Q4 & FY 2018 $ in millions Operating Income (non-GAAP) to Operating Income (GAAP) Q4 2018 FY 2018 Operating Income Operating Income Banking $132 $412 Retail 37 142 Hospitality 32 85 Other 13 49 Total Operating Income (non-GAAP) 214 688 Less: Transformation and restructuring costs 125 223 Asset impairment charges — 183 Acquisition-related amortization of intangibles 21 85 Acquisition-related costs 5 6 Total Operating Income (GAAP) $63 $191 35
GAAP TO NON-GAAP RECONCILIATION Q4 & FY 2019 Revenue Growth % (GAAP) to Revenue Growth Constant Currency % (non-GAAP) Q4 2019 FY 2019 Constant Favorable Constant Revenue Favorable Currency Revenue Growth (unfavorable) FX Currency Growth % (unfavorable) FX Revenue % Reported impact Revenue Growth Reported impact Growth % (non- % (non-GAAP) GAAP) Banking —% (2%) 2% 10% (3%) 13% Retail 10% —% 10% 6% (1%) 7% Hospitality 5% —% 5% 3% (1%) 4% Other 25% —% 25% 11% (2%) 13% Total Revenue 5% (1)% 6% 8% (2%) 10% 36
GAAP TO NON-GAAP RECONCILIATION Q4 2019 Revenue Growth % (GAAP) to Revenue Growth Constant Currency % (non-GAAP) Q4 2019 Constant Currency Revenue Growth % Favorable (unfavorable) FX Revenue Growth % (non- Reported impact GAAP) Software 5% (1%) 6% Services 2% (3%) 5% Hardware 17% (3%) 20% ATM 29% (4%) 33% SCO/POS 7% (1%) 8% Total Revenue 8% (2%) 10% Recurring Revenue 6% (2%) 8% 37
GAAP TO NON-GAAP RECONCILIATION Q4 & FY 2019 Operating Income % (GAAP) to Operating Income Constant Currency % (non-GAAP) Q4 2019 FY 2019 Operating Favorable Operating Operating Favorable Operating Income Growth (unfavorable) FX Income Growth Income Growth (unfavorable) FX Income Growth % (GAAP) impact % (non-GAAP) % (GAAP) impact % (non-GAAP) Banking 9% (5%) 14% 25% (6%) 31% Retail 14% (7%) 21% 1% (10%) 11% Hospitality (47%) (2%) (45%) (34%) —% (34%) Other 8% —% 8% (10%) —% (10%) Total Operating Income 1% (5)% 6% 10% (6%) 16% 38
GAAP TO NON-GAAP RECONCILIATION Q4 2019 Favorable % Change Q4 Operational Results % Change As (unfavorable) FX Constant Reported impact Currency Revenue 5% (1%) 6% Gross Margin (non-GAAP) 9% (3)% 12% Gross Margin Rate (non-GAAP) 120 bps (40 bps) 160 bps Operating Expenses (non-GAAP) 15% (1%) 16% % of Revenue 160 bps — bps 160 bps Operating Income (non-GAAP) 1% (5%) 6% % of Revenue (40)bps (40)bps —bps Interest and other expense (non-GAAP) 25% —% 25% Income Tax Expense (non-GAAP) (15)% (2)% (13)% Net Income (Loss) From Continuing Operations (attributable to NCR) (non-GAAP) (2)% (6)% 4% Diluted EPS (non-GAAP) 1% (5%) 6% 39
GAAP TO NON-GAAP RECONCILIATION Q4 2019 Favorable % Change FY19 Operational Results % Change As (unfavorable) FX Constant Reported impact Currency Revenue 8% (2%) 10% Gross Margin (non-GAAP) 9% (3)% 12% Gross Margin Rate (non-GAAP) 30 bps (30 bps) 60 bps Operating Expenses (non-GAAP) 9% (1%) 10% % of Revenue 10 bps — bps 10 bps Operating Income (non-GAAP) 10% (6%) 16% % of Revenue 30 bps (30) bps 60 bps Interest and other expense (non-GAAP) 14% —% 14% Income Tax Expense (non-GAAP) 17% 1% 16% Net Income (Loss) From Continuing Operations (attributable to NCR) (non-GAAP) 7% (11)% 18% Diluted EPS (non-GAAP) 7% (7%) 14% 40
GAAP TO NON-GAAP RECONCILIATION $ in millions Free Cash Flow 2020 Guidance Cash Provided by Operating Activities $640 - $735 Less: Total capital expenditures $350 - $375 Less: Cash used in Discontinued Operations $40 - $60 Free Cash Flow $250 - $300 41
THANK YOU 42