SEC Filing | NCR Corporation

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ncr-20220630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________

FORM 10-Q

________________________

(Mark One)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


			For the quarterly period ended June 30, 2022


or


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________


			Commission File Number: 001-00395

________________________

https://cdn.kscope.io/e5c77cb684f9cbbe63bed0628cf9b1f0-ncr-20220630_g1.jpg

NCR CORPORATION

(Exact name of registrant as specified in its charter)

________________________


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) (Zip Code)

Registrant’s telephone number, including area code: (937) 445-1936

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	NCR	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of July 15, 2022, there were approximately 136.9 million shares of the registrant's common stock issued and outstanding.

Table of Contents

TABLE OF CONTENTS


PART I. Financial Information

	Description	Page

Item 1.	Financial Statements	3

	Condensed Consolidated Statements of Operations (Unaudited) Three and Six Months Ended June 3 0 , 2022 and 2021	3

	Condensed Consolidated Statements of Comprehensive Income (Unaudited) Three and Six Months Ended June 30 , 2022 and 2021	4

	Condensed Consolidated Balance Sheets (Unaudited) June 30 , 2022 and December 31, 2021	5

	Condensed Consolidated Statements of Cash Flows (Unaudited) Six Months Ended June 30 , 2022 and 2021	6

	Condensed Consolidated Statements of Changes in Stockholder's Equity (Unaudited) Three and Six Months Ended June 30 , 2022 and 2021	7

	Notes to Condensed Consolidated Financial Statements (Unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	58

Item 4.	Controls and Procedures	59

PART II. Other Information

	Description	Page

Item 1.	Legal Proceedings	60

Item 1A.	Risk Factors	60

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	60

Item 6.	Exhibits	61

	Signatures	62

Table of Contents

Part I. Financial Information

Item 1. FINANCIAL STATEMENTS

NCR Corporation

Condensed Consolidated Statements of Operations (Unaudited)


In millions, except per share amounts	Three months ended June 30				Six months ended June 30
	2022		2021		2022		2021
Product revenue	$	614	$	551	$	1,130	$	1,033
Service revenue	1,383		1,126		2,733		2,188
Total revenue	1,997		1,677		3,863		3,221
Cost of products	544		453		1,036		861
Cost of services	982		768		1,945		1,490
Selling, general and administrative expenses	309		303		622		541
Research and development expenses	59		69		124		135

Total operating expenses	1,894		1,593		3,727		3,027
Income (loss) from operations	103		84		136		194


Interest expense	(67)		(61)		(130)		(106)
Other income (expense), net	1		(1)		10		(18)
Income (loss) from continuing operations before income taxes	37		22		16		70
Income tax expense (benefit)	—		31		13		48
Income (loss) from continuing operations	37		(9)		3		22
Income (loss) from discontinued operations, net of tax	6		—		5		—
Net income (loss)	43		(9)		8		22
Net income (loss) attributable to noncontrolling interests	2		—		1		1
Net income (loss) attributable to NCR	$	41	$	(9)	$	7	$	21
Amounts attributable to NCR common stockholders:
Income (loss) from continuing operations	$	35	$	(9)	$	2	$	21
Series A convertible preferred stock dividends	(4)		(4)		(8)		(8)
Income (loss) from continuing operations attributable to NCR common stockholders	31		(13)		(6)		13
Income (loss) from discontinued operations, net of tax	6		—		5		—
Net income (loss) attributable to NCR common stockholders	$	37	$	(13)	$	(1)	$	13
Income (loss) per share attributable to NCR common stockholders:
Income (loss) per common share from continuing operations
Basic	$	0.23	$	(0.10)	$	(0.04)	$	0.10
Diluted	$	0.22	$	(0.10)	$	(0.04)	$	0.10
Net income (loss) per common share
Basic	$	0.27	$	(0.10)	$	(0.01)	$	0.10
Diluted	$	0.26	$	(0.10)	$	(0.01)	$	0.10
Weighted average common shares outstanding
Basic	136.6		131.0		136.2		130.5
Diluted	140.8		131.0		136.2		136.1

See Notes to Condensed Consolidated Financial Statements.

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NCR Corporation

Condensed Consolidated Statements of Comprehensive Income (Unaudited)


In millions	Three months ended June 30				Six months ended June 30
	2022		2021		2022		2021
Net income (loss)	$	43	$	(9)	$	8	$	22
Other comprehensive income (loss):
Currency translation adjustments
Currency translation gains (loss)	(53)		8		(79)		1
Derivatives
Unrealized gains (loss) on derivatives	21		—		78		—
Loss (gains) on derivatives recognized during the period	5		—		6		—
Less income tax	(6)		—		(19)		—
Employee benefit plans
Amortization of prior service cost (benefit)	—		—		(1)		(1)


Less income tax	—		—		—		—
Other comprehensive income (loss)	(33)		8		(15)		—
Total comprehensive income (loss)	10		(1)		(7)		22
Less comprehensive income (loss) attributable to noncontrolling interests:
Net income (loss)	2		—		1		1
Currency translation losses	(1)		—		(1)		—
Amounts attributable to noncontrolling interests	1		—		—		1
Comprehensive income (loss) attributable to NCR	$	9	$	(1)	$	(7)	$	21

See Notes to Condensed Consolidated Financial Statements.

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NCR Corporation

Condensed Consolidated Balance Sheets (Unaudited)


In millions, except per share amounts	June 30, 2022		December 31, 2021
Assets
Current assets
Cash and cash equivalents	$	398	$	447
Accounts receivable, net of allowances of $26 and $24 as of June 30, 2022 and December 31, 2021, respectively	1,085		959
Inventories	858		754
Restricted cash	255		295
Other current assets	458		421
Total current assets	3,054		2,876
Property, plant and equipment, net	640		703
Goodwill	4,575		4,519
Intangibles, net	1,250		1,316
Operating lease assets	399		419
Prepaid pension cost	283		300
Deferred income taxes	734		732
Other assets	821		776
Total assets	$	11,756	$	11,641
Liabilities and stockholders’ equity
Current liabilities
Short-term borrowings	$	108	$	57
Accounts payable	949		826
Payroll and benefits liabilities	273		389
Contract liabilities	556		516
Settlement liabilities	242		263
Other current liabilities	705		757
Total current liabilities	2,833		2,808
Long-term debt	5,497		5,505
Pension and indemnity plan liabilities	753		789
Postretirement and postemployment benefits liabilities	119		119
Income tax accruals	108		116
Operating lease liabilities	378		388
Other liabilities	420		383
Total liabilities	10,108		10,108
Commitments and Contingencies (Note 10)

Series A convertible preferred stock: par value $0.01 per share, 3.0 shares authorized, 0.3 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively; redemption amount and liquidation preference of $276 as of June 30, 2022 and December 31, 2021, respectively	275		274
Stockholders’ equity
NCR stockholders’ equity
Preferred stock: par value $0.01 per share, 100.0 shares authorized, no shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively	—		—
Common stock: par value $0.01 per share, 500.0 shares authorized, 136.7 and 132.2 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively	1		1
Paid-in capital	644		515
Retained earnings	1,030		1,031
Accumulated other comprehensive loss	(305)		(291)
Total NCR stockholders’ equity	1,370		1,256
Noncontrolling interests in subsidiaries	3		3
Total stockholders’ equity	1,373		1,259
Total liabilities and stockholders’ equity	$	11,756	$	11,641

See Notes to Condensed Consolidated Financial Statements.

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NCR Corporation

Condensed Consolidated Statements of Cash Flows (Unaudited)


In millions	Six months ended June 30
	2022		2021
Operating activities
Net income (loss)	$	8	$	22
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Loss (income) from discontinued operations	(5)		—

Depreciation and amortization	299		212
Stock-based compensation expense	69		81
Deferred income taxes	6		26

Loss (gain) on disposal of property, plant and equipment and other assets	2		—
Changes in assets and liabilities, net of effects of business acquired:
Receivables	(209)		(78)
Inventories	(202)		(81)
Current payables and accrued expenses	58		134
Contract liabilities	34		43
Employee benefit plans	6		(21)
Other assets and liabilities	52		(28)
Net cash provided by operating activities	$	118	$	310
Investing activities
Expenditures for property, plant and equipment	$	(32)	$	(30)
Proceeds from sale of property, plant and equipment and other assets	3		—
Additions to capitalized software	(142)		(110)
Business acquisitions, net of cash acquired	(1)		(2,464)
Purchases of short-term investments	—		(13)
Proceeds from sales of short-term investments	—		14
Other investing activities, net	(5)		(6)
Net cash used in investing activities	$	(177)	$	(2,609)
Financing activities
Short term borrowings, net	$	2	$	—
Payments on term credit facilities	(4)		(105)
Payments on revolving credit facilities	(599)		(685)

Borrowings on term credit facilities	—		1,505
Borrowings on revolving credit facilities	637		809
Proceeds from issuance of senior unsecured notes	—		1,200
Debt issuance costs and bridge commitment fees	—		(51)

Cash dividend paid for Series A preferred shares dividends	(8)		(8)

Proceeds from employee stock plans	14		18
Tax withholding payments on behalf of employees	(36)		(25)
Net change in client funds obligations	(3)		(8)
Principal payments for finance lease obligations	(8)		(8)
Other financing activities	(2)		(1)
Net cash provided by (used in) financing activities	$	(7)	$	2,641
Cash flows from discontinued operations
Net cash provided by (used in) operating activities of discontinued operations	—		(47)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(19)		(4)
Increase (decrease) in cash, cash equivalents, and restricted cash	(85)		291
Cash, cash equivalents and restricted cash at beginning of period	749		406
Cash, cash equivalents and restricted cash at end of period	$	664	$	697

Supplemental disclosures of noncash investing and financing activities During the six months ended June 30, 2022, we issued shares of the Company's common stock and assumed unvested outstanding option awards in the acquisition of Moon Inc., dba LibertyX, for total non-cash consideration of $68 million. In connection with the acquisition, we also assumed debt of $2 million million. Refer to Note 2, “Business Combinations”, for additional information on the LibertyX acquisition.

See Notes to Condensed Consolidated Financial Statements.

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NCR Corporation

Condensed Consolidated Statements of Changes in Stockholder's Equity (Unaudited)


	NCR Stockholders
	Common Stock							Accumulated Other Comprehensive (Loss) Income		Non-Redeemable Noncontrolling Interests in Subsidiaries
In millions	Shares	Amount		Paid-in Capital		Retained Earnings						Total







December 31, 2021	132	$	1	$	515	$	1,031	$	(291)	$	3	$	1,259
Comprehensive income:
Net income (loss)	—	—		—		(34)		—		(1)		(35)
Other comprehensive income (loss)	—	—		—		—		18		—		18
Total comprehensive income (loss)	—	—		—		(34)		18		(1)		(17)
Employee stock purchase and stock compensation plans	3	—		19		—		—		—		19
Stock issued in acquisition of LibertyX	1	—		68		—		—		—		68
Series A convertible preferred stock dividends	—	—		—		(4)		—		—		(4)
March 31, 2022	136	$	1	$	602	$	993	$	(273)	$	2	$	1,325
Comprehensive income:
Net income (loss)	—	—		—		41		—		2		43
Other comprehensive income (loss)	—	—		—		—		(32)		(1)		(33)
Total comprehensive income (loss)	—	—		—		41		(32)		1		10
Employee stock purchase and stock compensation plans	1	—		42		—		—		—		42

Series A convertible preferred stock dividends	—	—		—		(4)		—		—		(4)
June 30, 2022	137	$	1	$	644	$	1,030	$	(305)	$	3	$	1,373

See Notes to Condensed Consolidated Financial Statements.

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NCR Corporation

Condensed Consolidated Statements of Changes in Stockholder's Equity (Unaudited) - (Continued)


	NCR Stockholders
	Common Stock							Accumulated Other Comprehensive (Loss) Income		Non-Redeemable Noncontrolling Interests in Subsidiaries
In millions	Shares	Amount		Paid-in Capital		Retained Earnings						Total
December 31, 2020	129	$	1	$	368	$	950	$	(271)	$	3	$	1,051
Comprehensive income:
Net income (loss)	—	—		—		30		—		1		31
Other comprehensive income (loss)	—	—		—		—		(8)		—		(8)
Total comprehensive income (loss)	—	—		—		30		(8)		1		23

Employee stock purchase and stock compensation plans	2	—		30		—		—		—		30
Series A convertible preferred stock dividends	—	—		—		(4)		—		—		(4)

March 31, 2021	131	$	1	$	398	$	976	$	(279)	$	4	$	1,100
Comprehensive income:
Net income (loss)	—	—		—		(9)		—		—		(9)
Other comprehensive income (loss)	—	—		—		—		8		—		8
Total comprehensive income (loss)	—	—		—		(9)		8		—		(1)
Employee stock purchase and stock compensation plans	—	—		44		—		—		—		44
Fair value of converted Cardtronics awards attributable to pre-combination services	—	—		19		—		—		—		19
Series A convertible preferred stock dividends	—	—		—		(4)		—		—		(4)
June 30, 2021	131	$	1	$	461	$	963	$	(271)	$	4	$	1,158

See Notes to Condensed Consolidated Financial Statements.

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

Index to Financial Statements and Supplemental Data



Note 1. Basis of Presentation and Summary of Significant Accounting Policies
Note 2. Business Combinations
Note 3. Goodwill and Purchased Intangible Assets
Note 4. Segment Information and Concentrations
Note 5. Debt Obligations
Note 6. Trade Receivables Facility
Note 7. Income Taxes
Note 8. Stock Compensation Plans
Note 9. Employee Benefit Plans
Note 10. Commitments and Contingencies

Note 11. Series A Convertible Preferred Stock
Note 12. Earnings Per Share
Note 13. Derivatives and Hedging Instruments
Note 14. Fair Value of Assets and Liabilities
Note 15. Accumulated Other Comprehensive Income (Loss) (AOCI)
Note 16. Supplemental Financial Information

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying Condensed Consolidated Financial Statements have been prepared by NCR Corporation (“NCR”, the “Company”, “we” or “us”) without audit pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and, in the opinion of management, include all adjustments (consisting of normal, recurring adjustments, unless otherwise disclosed) necessary for a fair statement of the condensed consolidated results of operations, financial position, and cash flows for each period presented. The consolidated results for the interim periods are not necessarily indicative of results to be expected for the full year. The 2021 year-end Condensed Consolidated Balance Sheet was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States (GAAP). These financial statements should be read in conjunction with NCR’s Form 10-K for the year ended December 31, 2021.

Change in reportable segments Effective January 1, 2022, the Company realigned its reportable segments to correspond with changes to its operating model, management structure and organizational responsibilities. The reportable segments effective January 1, 2022 include: Payments & Network, Digital Banking, Self-Service Banking, Retail, and Hospitality. Additionally, effective January 1, 2022, the Company manages Corporate & Other, which includes income and expenses that are not specifically attributable to an individual reportable segment and thus will be reflected only in consolidated results, as well as our Telecommunications & Technology business, an immaterial operating segment. We have reclassified prior period segment disclosures to conform to current period presentation. Refer to Note 4, “Segment Information and Concentrations”, for additional information on our reportable segments.

Conflict in Eastern Europe The war in Eastern Europe and related sanctions imposed on Russia and related actors by the United States and other jurisdictions required us to commence the orderly wind down of our operations in Russia beginning in the first quarter of 2022. As of June 30, 2022, we have substantially ceased operations in Russia and are in the process of dissolving our only subsidiary in Russia. As a result of these actions, the operations of the business in Russia were significantly reduced, and our results for the three and six months ended June 30, 2022 reflect the impact of the impairment and write down of the assets and liabilities of the entity, severance charges, the assessment of collectability on revenue recognition, and the residual operations of the entity. We recognized a pre-tax net loss of $3 million and $22 million for the three and six months

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

ended June 30, 2022, respectively, related to these actions, recognized primarily in Cost of products, Cost of services and Selling, general and administrative expenses on the Condensed Consolidated Statement of Operations.

Use of Estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the period reported.

Although our estimates contemplate current and expected future conditions, as applicable, it is reasonably possible that actual conditions could differ from our expectations, which could materially affect our results of operations and financial position. In particular, a number of estimates have been and will continue to be affected by the ongoing variants of the novel coronavirus (COVID-19) pandemic, macroeconomic pressures and geopolitical challenges. The ultimate impact on our overall financial condition and operating results will depend on the currently unknowable duration and severity of the pandemic, supply chain challenges and cost escalations including materials, interest, labor and freight, and any additional governmental and public actions taken in response. As a result, our accounting estimates and assumptions may change over time as a consequence of the effects of COVID-19 and other external factors. Such changes could result in future impairments of goodwill, intangible assets, long-lived assets, incremental credit losses on accounts receivable and decreases in the carrying amount of our tax assets.

Evaluation of Subsequent Events The Company evaluated subsequent events through the date that our Condensed Consolidated Financial Statements were issued. Other than the items discussed below and within the Notes to Condensed Consolidated Financial Statements, no matters were identified that required adjustment to the Condensed Consolidated Financial Statements or additional disclosure.

Budapest Manufacturing Facility As a part of its previously announced initiative to evaluate and implement programs to drive sustainable margin improvement in its hardware and services segments through higher productivity, process efficiency, and, using technology as an enabler, NCR announced its intention to streamline its manufacturing operations by transferring the Budapest manufacturing facility to a third party manufacturer. In July 2022, the Company entered into a Manufacturing Services Agreement (Agreement) with Ennoconn Corp (Ennoconn). The Agreement provides for NCR to obtain manufacturing services from Ennoconn for NCR’s automated teller machines, point-of-sale, and self-service checkout solutions. Manufacturing at the Budapest facility was transitioned effective July 25, 2022.

Reclassifications Certain prior-period amounts have been reclassified in the accompanying Condensed Consolidated Financial Statements and Notes thereto in order to conform to the current period presentation. Reclassifications had no effect on prior year net income or shareholders’ equity.

Cash, Cash Equivalents, and Restricted Cash The reconciliation of cash, cash equivalents and restricted cash in the Condensed Consolidated Statements of Cash Flows is as follows:


In millions		June 30
	Balance Sheet Location	2022		2021
Cash and cash equivalents	Cash and cash equivalents	$	398	$	449
Long term restricted cash	Other assets	11		7
Funds held for client	Restricted cash	45		36
Cash included in settlement processing assets	Restricted cash	210		205
Total cash, cash equivalents and restricted cash		$	664	$	697

Contract Assets and Liabilities The following table presents the net contract liability balances as of June 30, 2022 and December 31, 2021.


In millions	Location in the Condensed Consolidated Balance Sheet	June 30, 2022		December 31, 2021
Current portion of contract liabilities	Contract liabilities	$	556	$	516
Non-current portion of contract liabilities	Other liabilities	$	62	$	69

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

During the six months ended June 30, 2022, the Company recognized $309 million in revenue that was included in contract liabilities as of December 31, 2021. During the six months ended June 30, 2021 the Company recognized $323 million in revenue that was included in contract liabilities as of December 31, 2020.

Remaining Performance Obligations Remaining performance obligations represent the transaction price of orders for which products have not been delivered or services have not been performed. As of June 30, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $3.8 billion. The Company expects to recognize revenue on approximately three-quarters of the remaining performance obligations over the next 12 months, with the remainder recognized thereafter. The majority of our professional services are expected to be recognized over the next 12 months but this is contingent upon a number of factors, including customers’ needs and schedules.

The Company has made three elections that affect the value of remaining performance obligations described above. We do not disclose remaining performance obligations for contracts where variable consideration is directly allocated based on usage or when the original expected duration is one year or less. Additionally, we do not disclose remaining performance obligations for contracts where we recognize revenue from the satisfaction of the performance obligation in accordance with the 'right to invoice' practical expedient.

Recent Accounting Pronouncements

Adoption of New Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, with new guidance for convertible preferred stock, which eliminates considerations related to the beneficial conversion feature model. The standard also requires entities to use an average stock price when calculating the denominator for diluted earnings per share for stock units where the settlement of the number of shares is based on the stock price. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021. Early adoption was permitted no earlier than fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. The adoption of this accounting standards update did not have a material effect on the Company's net income, cash flows, earnings per share or financial condition.

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options, with new guidance for freestanding equity-classified written call options. The new guidance requires issuers to account for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after the modification or exchange based on the economic substance of the modification or exchange. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021, with early adoption permitted. The adoption of this accounting standards update did not have a material effect on the Company's net income, cash flows, earnings per share or financial condition.

In March 2022, the SEC staff released Staff Accounting Bulletin No. 121 (“SAB 121”), which expressed the views of the SEC staff regarding the accounting for obligations to safeguard crypto-assets an entity holds for users of its crypto platform. This guidance requires entities that hold crypto-assets on behalf of platform users to recognize a liability to reflect the entity’s obligation to safeguard the crypto-assets held for its platform users. The liability should be measured at initial recognition and each reporting date at the fair value of the crypto-assets that the entity is responsible for holding for its platform users. The entity should also recognize an asset at the same time that it recognizes the safeguarding liability, measured at initial recognition and each reporting date at the fair value of the crypto-assets held for its platform users. SAB 121 also includes guidance on disclosures related to the Company’s safeguarding of crypto-assets. This guidance is effective from the first interim or annual period after June 15, 2022 and should be applied retrospectively to the beginning of the fiscal year to which the interim or annual period relates. The Company adopted this guidance in the interim period ending June 30, 2022; however, as the Company is not currently offering digital asset safeguarding services to its customers, the adoption of this guidance did not have an impact on the Company’s net income, cash flows, earnings per share or financial condition.

Although there are several other new accounting pronouncements issued by the FASB and adopted by or effective for the Company, the Company does not believe any of these accounting pronouncements had a material impact on its consolidated financial statements.

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

Accounting Pronouncements Issued But Not Yet Adopted

In October 2021, the FASB issued accounting standards update (“ASU”) 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, with new guidance for contract assets and contract liabilities acquired in a business combination. The new guidance requires contract assets and contract liabilities, such as deferred revenue, acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with Accounting Standard Codification (“ASC”) 606, Revenue from Contracts with Customers. Prior to the issuance of this guidance, contract assets and contract liabilities were recognized by the acquirer at fair value on the acquisition date. The accounting standards update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted and should be applied prospectively to acquisitions occurring on or after the effective date. The Company does not expect to early adopt the new accounting standards update. The adoption of this accounting standards update is not expected to have a material effect on the Company's net income, cash flows, earnings per share or financial condition.

Although there are several other new accounting pronouncements issued by the FASB and not yet adopted by or effective for the Company, the Company does not believe any of these accounting pronouncements will have a material impact on its consolidated financial statements.

2. BUSINESS COMBINATIONS

Acquisition of LibertyX

On January 5, 2022, NCR completed its acquisition of Moon Inc., dba LibertyX, a leading cryptocurrency software provider, with the goal of enabling NCR to provide a complete digital currency solution, including the ability to buy and sell cryptocurrency, conduct cross-border remittance, and accept digital currency payments across digital and physical channels. We purchased all outstanding shares of LibertyX for $1 million cash consideration and approximately 1.4 million shares of the Company's common stock at a price of $42.13 per share. The Company also converted approximately 0.2 million outstanding unvested LibertyX option awards into NCR awards pursuant to an exchange ratio as defined in the acquisition agreement. LibertyX stock option awards were converted into NCR stock option awards with an exercise price per share for option awards equal to the exercise price per share of such stock option award immediately prior to the completion of the acquisition divided by the exchange ratio, and vested immediately. The value of the option awards was deemed attributable to services already rendered and was included as a portion of the purchase price. Total purchase consideration for the LibertyX acquisition was approximately $69 million. As a result of the acquisition, LibertyX became a wholly-owned subsidiary of NCR.

Recording of Assets Acquired and Liabilities Assumed The fair value of consideration transferred was allocated to the identifiable assets acquired and liabilities assumed based upon their estimated fair values as of the date of the acquisition as set forth below. The provisional amounts for intangible assets are based on third-party valuations performed. The allocation of the purchase price is provisional as of June 30, 2022 and may be subject to future adjustments, within the measurement period, as the Company obtains additional information to finalize the accounting for the business combination, including additional refinement to finalize valuations, among other items. The preliminary allocation of the purchase price is as follows:


In millions	Fair Value
Cash acquired	$	2
Tangible assets acquired	3
Acquired intangible assets other than goodwill	38
Acquired goodwill	41
Deferred tax liabilities	(11)
Liabilities assumed	(4)
Total purchase consideration	$	69

Goodwill represents the future economic benefits arising from other assets acquired that could not be individually separately recognized. The goodwill arising from the acquisition consists of revenue and cost synergies expected from combining the operations of NCR and LibertyX and is not deductible for tax purposes. The goodwill arising from the LibertyX acquisition has

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

been allocated to our Payments & Network segment. Refer to Note 3, “Goodwill and Purchased Intangible Assets”, for the carrying amounts of goodwill by segment.

The following table sets forth the components of the intangible assets acquired as of the acquisition date:


	Fair Value		Weighted Average Amortization Period (1)
	(In millions)		(In years)
Direct customer relationships	$	5	10
Technology - Software	30		13
Non-compete	1		1
Tradenames	2		2
Total acquired intangible assets	$	38

(1) Determination of the weighted average period of the individual categories of intangible assets was based on the nature of applicable intangible asset and the expected future cash flows to be derived from the intangible asset. Amortization of intangible assets with definite lives is recognized over the period of time the assets are expected to contribute to future cash flows.

The operating results of LibertyX have been included within NCR's results since the closing date of the acquisition. Supplemental pro forma information and actual revenue and earnings since the acquisition date have not been provided as the acquisition did not have a material impact on the Company's Condensed Consolidated Statements of Operations.

Acquisition of Cardtronics plc (2021)

On June 21, 2021, NCR acquired all outstanding shares of Cardtronics plc (“Cardtronics”) for $39.00 per share (the “Cardtronics Transaction”). The fair value of consideration transferred to acquire Cardtronics was allocated to the identifiable assets acquired and liabilities assumed based upon their estimated fair values as of the date of the acquisition. The allocation of the purchase price was finalized in June 2022. There have been no material adjustments to the allocation of purchase price since December 31, 2021.

Unaudited Pro forma Information The following unaudited pro forma information presents the consolidated results of NCR and Cardtronics for the three and six months ended June 30, 2021. The unaudited pro forma information is presented for illustrative purposes only. It is not necessarily indicative of the results of operations of future periods, or the results of operations that actually would have been realized had the entities been a single company during the periods presented or the results that the combined company will experience after the acquisition. The unaudited pro forma information does not give effect to the potential impact of current financial conditions, regulatory matters or any anticipated synergies, operating efficiencies or cost savings that may be associated with the acquisition. The unaudited pro forma information also does not include any integration costs or remaining future transaction costs that the companies may incur related to the acquisition as part of combining the operations of the companies.

The unaudited pro forma consolidated results of operations, assuming the acquisition had occurred on January 1, 2020, are as follows:


In millions	Three months ended June 30		Six months ended June 30
	2021		2021
Revenue	$	1,919	$	3,703
Net Income attributable to NCR	$	42	$	72

The unaudited pro forma results for the three months ended June 30, 2021 include:

•$24 million in eliminated intercompany revenue and cost between NCR and Cardtronics;

•$15 million, net of tax, in additional amortization expense for acquired intangible assets;

•$71 million, net of tax, in eliminated transaction costs as if those costs were incurred in the prior year period; and

•$18 million, net of tax, in additional interest expense from the incremental borrowings under the Senior Secured Credit Facility as well as the 5.125% senior notes.

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

The unaudited pro forma results for the six months ended June 30, 2021 include:

•$53 million in eliminated intercompany revenue and cost between NCR and Cardtronics;

•$25 million, net of tax, in additional amortization expense for acquired intangible assets;

•$87 million, net of tax, in eliminated transaction costs as if those costs were incurred in the prior year period; and

•$35 million, net of tax, in additional interest expense from the incremental borrowings under the Senior Secured Credit Facility as well as the 5.125% senior notes.

3. GOODWILL AND PURCHASED INTANGIBLE ASSETS

Goodwill by Segment As described in Note 1, “Basis of Presentation and Summary of Significant Accounting Policies”, effective January 1, 2022, the Company realigned its reportable segments to correspond with changes to its operating model, management structure and organizational responsibilities. In connection with the change in reportable segments, during the first quarter of 2022, the Company determined its reporting units and then assigned goodwill to the new reporting units based on the relative fair value allocation approach. We have reclassified prior period goodwill disclosures to conform to the current period presentation.

The carrying amounts of goodwill by segment as of June 30, 2022 and December 31, 2021 are included in the table below. Foreign currency fluctuations are included within other adjustments.

December 31, 2021

June 30, 2022

In millions

Goodwill

Accumulated Impairment

Total

Additions

Impairment

Other