UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 25, 2022
(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 ) 445-1936
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
Explanatory Note
On October 25, 2022, NCR Corporation (the “Company”) filed a Current Report on Form 8-K (the “Original Report”) with the Securities and Exchange Commission. This Amendment No. 1 to Current Report on Form 8-K/A amends Items 2.02, 7.01 and 9.01 of the Original Report to correct the classification of certain costs between Cost of services, Selling, general and administrative expenses, and Research and development for the three and nine months ended September 30, 2022. The impact to Income from operations and Net Income is zero.
The changes resulted from a correction to the allocation of overhead expenses to the correct financial statement line items within the Consolidated Statement of Operations.
Item 2.02. Results of Operations and Financial Condition.
On October 25, 2022, the Company issued a press release setting forth its third quarter 2022 financial results and certain other financial information. A copy of the press release, as corrected, is attached hereto as Exhibit 99.1 and hereby incorporated by reference.
Item 7.01. Regulation FD Disclosure.
On October 25, 2022, the Company held its previously announced conference call to discuss its third quarter financial results. A copy of supplementary materials referred to in the conference call, and which were posted to the Company’s website, as corrected, is attached hereto as Exhibit 99.2.
The information in this report (including Exhibits 99.1 and 99.2, as corrected) is being furnished pursuant to Item 2.02 and Item 7.01 and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act.
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
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
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/ Timothy C. Oliver | |||||||
| Timothy C. Oliver | ||||||||
| Senior Executive Vice President and Chief Financial Officer | ||||||||
Date: October 26, 2022
 | NEWS RELEASE | |||||||
October 25, 2022 (as revised October 26, 2022)*
NCR Announces Third Quarter 2022 Results
Revenue Up 4% and Up 8% Constant Currency
ATLANTA - NCR Corporation (NYSE: NCR) reported financial results today for the three months ended September 30, 2022. Third quarter and other recent highlights include:
•Revenue of $1.97 billion, up 4%; up 8% on a constant currency basis
•GAAP diluted EPS from continuing operations of $0.46, up 667%
◦Non-GAAP diluted EPS of $0.80, up 16% and up 40% on a constant currency basis
•Net income from continuing operations attributable to NCR of $69 million, up 475%
◦Adjusted EBITDA of $380 million, up 8% and up 15% on a constant currency basis
•Strong execution across strategic growth initiatives
•Company continues to move forward with previously announced plan to separate into two companies
“We are pleased with our third quarter results, which represent strong execution with solid revenue growth and significant margin expansion, despite ongoing macroeconomic and geopolitical volatility,” said Michael Hayford, Chief Executive Officer. “Our third quarter results demonstrate the power of our strategy that is transforming NCR into a software-led as-a-service company with a higher mix of recurring revenue streams.”
Hayford continued, “We are working towards separating NCR into two public companies, which is the right next step in NCR’s transformation. We believe the separation will unlock significant value for stockholders.”
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,” “Adjusted EBITDA,” 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.
* This earnings release has been revised as described in the "Explanatory Note" to the Form 8-K/A of NCR Corporation furnished to the Securities and Exchange Commission on October 26, 2022.
Third Quarter 2022 Operating Results
Effective January 1, 2022, the Company realigned its reportable segments to correspond with changes to its operating model, management structure and organizational responsibilities. Prior periods have been reclassified in order to conform to current period presentation.
Revenue
Third quarter revenue of $1,972 million increased 4% year over year. Foreign currency fluctuations had an unfavorable impact on the revenue comparison of 4%. The following table shows revenue for the third quarter:
| $ in millions | Q3 2022 | Q3 2021 | % Increase (Decrease) | % Increase (Decrease) Constant Currency | ||||||||||||||||||||||
| Retail | $ | 575 | $ | 541 | 6 | % | 12 | % | ||||||||||||||||||
| Hospitality | 238 | 224 | 6 | % | 8 | % | ||||||||||||||||||||
| Digital Banking | 137 | 128 | 7 | % | 7 | % | ||||||||||||||||||||
| Payments & Network | 336 | 304 | 11 | % | 14 | % | ||||||||||||||||||||
| Self-Service Banking | 640 | 637 | — | % | 6 | % | ||||||||||||||||||||
| Other | 58 | 75 | (23) | % | (18) | % | ||||||||||||||||||||
Eliminations (1) | (12) | (8) | 50 | % | 50 | % | ||||||||||||||||||||
| Total revenue | $ | 1,972 | $ | 1,901 | 4 | % | 8 | % | ||||||||||||||||||
| Recurring revenue | $ | 1,222 | $ | 1,181 | 3 | % | 7 | % | ||||||||||||||||||
| Recurring revenue % | 62 | % | 62 | % | ||||||||||||||||||||||
(1) Eliminations include revenues from contracts with customers and the related costs that are reported in the Payments & Network segment as well as in the Retail or Hospitality segments, including merchant acquiring services that are monetized via payments.
•Third quarter gross margin of $491 million decreased from $520 million in the prior year period. Gross margin rate was 24.9%, compared to 27.4% in the prior period. Third quarter gross margin (non-GAAP) of $526 million decreased from $546 million in the prior year period. Gross margin rate (non-GAAP) was 26.7%, compared to 28.7% in the prior period.
•Third quarter income from operations of $187 million increased from $157 million in the prior year period. Third quarter operating income (non-GAAP) of $249 million increased from $215 million in the prior year period.
•Third quarter net income from continuing operations attributable to NCR of $69 million increased from net income from continuing operations attributable to NCR of $12 million in the prior year period.
•Third quarter Adjusted EBITDA of $380 million increased from $352 million in the prior year period. Foreign currency fluctuations had an unfavorable impact on the Adjusted EBITDA comparison of 7%. Adjusted EBITDA margin rate was 19.3%, compared to 18.5% in the prior year period.
•Third quarter cash provided by operating activities of $127 million decreased from cash provided by operating activities of $497 million in the prior year period. Third quarter free cash outflow was $28 million, compared to free cash flow of $125 million in the prior year period.
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Strategic Review
On September 15, 2022, the Company announced a plan to separate into two independent, publicly traded companies – one focused on digital commerce, the other on ATMs. The separation is intended to be structured in a tax-free manner and is targeted for the end of 2023. The separation transaction will follow the satisfaction of customary conditions, including effectiveness of appropriate filings with the U.S. Securities and Exchange Commission, and the completion of audited financials.
2022 Third Quarter Earnings Conference Call
A conference call is scheduled for today at 4:30 p.m. Eastern Time to discuss the third quarter 2022 results. 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 1883509.
More information on NCR’s third quarter 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 leader in transforming, connecting and running technology platforms for self-directed banking, stores and restaurants. NCR is headquartered in Atlanta, Georgia, with 38,000 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
scott.sykes@ncr.com
Investor Contact
Michael Nelson
NCR Corporation
678.808.6995
michael.nelson@ncr.com
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Cautionary Statements
This release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (the “Act”). Forward-looking statements use words such as “expect,” “anticipate,” “outlook,” “intend,” “plan,” “confident,” “believe,” “will,” “should,” “would,” “potential,” “positioning,” “proposed,” “planned,” “objective,” “likely,” “could,” “may,” and words of similar meaning, as well as other words or expressions referencing future events, conditions or circumstances. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Act. 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. Examples of forward-looking statements in this release include, without limitation, statements regarding: our expectations of demand for our solutions and execution, and the impact thereof on our financial results in 2022; NCR’s focus on advancing our strategic growth initiatives and transforming NCR into a software-led as-a-service company with a higher mix of recurring revenue streams; our expectations of NCR's ability to deliver increased value to customers and stockholders; statements regarding the planned separation of NCR into two separate companies, including, but not limited to, statements regarding the anticipated timing and structure of such planned transaction, the future commercial or financial performance of the digital commerce company or the ATM company following such planned transaction, value creation and ability to innovate and drive growth generally as a result of such transaction, and the expected capital structure of the companies at the time of and following the transaction. 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:
•Strategy and Technology: transforming our business model; development and introduction of new solutions; competition in the technology industry; integration of acquisitions and management of alliance activities; our multinational operations;
•Business Operations: domestic and global economic and credit conditions; risks and uncertainties from the payments-related business and industry; disruptions in our data center hosting and public cloud facilities; retention and attraction of key employees; defects, errors, installation difficulties or development delays; failure of third-party suppliers; the impact of the coronavirus (COVID-19) pandemic and geopolitical and macroeconomic challenges; environmental exposures from historical and ongoing manufacturing activities; and climate change
•Data Privacy & Security: impact of data protection, cybersecurity and data privacy including any related issues
•Finance and Accounting: our level of indebtedness; the terms governing our indebtedness; incurrence of additional debt or similar liabilities or obligations; access or renewal of financing sources; our cash flow sufficiency to service our indebtedness; interest rate risks; the terms governing our trade receivables facility; the impact of certain changes in control relating to acceleration of our indebtedness, our obligations under other financing arrangements, or required repurchase of our senior unsecured notes; and any lowering or withdrawal of the ratings assigned to our debt securities by rating agencies; our pension liabilities; and write down of the value of certain significant assets
•Law and Compliance: protection of our intellectual property; changes to our tax rates and additional income tax liabilities; uncertainties regarding regulations, lawsuits and other related matters; and changes to cryptocurrency regulations
•Governance: impact of the terms of our Series A Convertible Preferred (“Series A”) Stock relating to voting power, share dilution and market price of our common stock; rights, preferences and privileges of Series A stockholders compared to the rights of our common stockholders; and actions or proposals from stockholders that do not align with our business strategies or the interests of our other stockholders
•Planned Separation: an unexpected failure to complete, or unexpected delays in completing, the necessary actions for the planned separation, or to obtain the necessary approvals to complete these actions; that the potential strategic benefits, synergies or opportunities expected from the separation may not be realized or may take longer to realize than expected; costs of implementation of the separation and any changes to the configuration of businesses included in the separation if implemented; the potential inability to access or reduced access to the capital markets or increased cost of borrowings, including as a result of a credit rating downgrade; the potential adverse reactions to the planned separation by customers, suppliers, strategic partners or key personnel and potential difficulties in maintaining relationships with such persons and risks associated with third party contracts containing consent and/or other provisions that may be triggered by the planned separation; the risk that any newly formed entity to house the digital commerce or ATM business would have no credit rating and may not have access to the capital markets on acceptable terms; unforeseen tax liabilities or changes in tax law; requests or requirements of governmental authorities related to certain existing liabilities; and the ability to obtain or consummate financing or refinancing related to the transaction upon acceptable terms or at all.
Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those set forth in the forward-looking statements. There can be no guarantee that the planned separation will be completed in the expected form or within the expected time frame or at all. Nor can there be any guarantee that the digital commerce business and ATM business after a separation will be able to realize any of the potential strategic benefits, synergies or opportunities as a result of these actions. Neither can there be any guarantee that shareholders will achieve any particular level of shareholder returns. Nor can there be any guarantee that the planned separation will enhance value for shareholders, or that NCR or any of its divisions, or separate digital commerce and ATM business, will be commercially successful in the future, or achieve
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any particular credit rating or financial results. 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, except as required by law.
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 Income (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 income (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, as well as other special items, including amortization of acquisition related intangibles and transformation and restructuring activities, 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 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 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 stock-based compensation expense; 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 and restructuring charges, among others. NCR uses Adjusted EBITDA to manage and measure the performance of its business segments. NCR also uses Adjusted EBITDA to manage and determine the effectiveness of its business managers and as a basis for incentive compensation. NCR believes that Adjusted EBITDA 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.
Adjusted EBITDA margin is calculated based on Adjusted EBITDA as a percentage of total revenue. Adjusted EBITDA margin by segment is calculated based on segment Adjusted EBITDA divided by the related component of revenue.
Special Item Related to Russia 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 September 30, 2022, we have ceased operations in Russia and are in process of dissolving our only subsidiary in Russia. As a result, for the three and nine months ending September 30, 2022, our non-GAAP presentation of the measures described above exclude the immaterial impact of our operating results in Russia, as well as the impact of impairments taken to write down the carrying value of assets and liabilities, severance charges, and the assessment of collectability on revenue recognition. We consider this to be a non-recurring special item and management has reviewed the results of its business segments excluding these impacts. We have not adjusted the presentation of the prior year periods due to the immaterial impact of Russia to revenue and income from continuing operations for the three and nine months ended September 30, 2021.
Free Cash Flow. NCR defines free cash flow as net cash provided by (used in) operating activities less capital expenditures for property, plant and equipment, less additions to capitalized software, plus/minus restricted cash settlement activity, plus acquisition-related items, less the impact from the initial sale of trade accounts receivables under the agreement entered into during the 3rd quarter of 2021, and plus 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.
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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 may contribute to an understanding 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.
Use of Certain Terms
Recurring revenue includes all revenue streams from contracts where there is a predictable revenue pattern that will occur at regular intervals with a relatively high degree of certainty. This includes hardware and software maintenance revenue, cloud revenue, payment processing revenue, interchange and network revenue, cryptocurrency-related revenue, and certain professional services arrangements, as well as term-based software license arrangements that include customer termination rights.
Reconciliation of Gross Margin (GAAP) to Gross Margin (Non-GAAP)
| $ in millions | Q3 2022 | Q3 2021 | |||||||||
| Gross Margin (GAAP) | $ | 491 | $ | 520 | |||||||
| Transformation and restructuring costs | 8 | 3 | |||||||||
| Acquisition-related amortization of intangibles | 27 | 23 | |||||||||
| Gross Margin (Non-GAAP) | $ | 526 | $ | 546 | |||||||
Reconciliation of Gross Margin Rate (GAAP) to Gross Margin Rate (Non-GAAP)
| Q3 2022 | Q3 2021 | ||||||||||
| Gross Margin Rate (GAAP) | 24.9 | % | 27.4 | % | |||||||
| Transformation and restructuring costs | 0.4 | % | 0.1 | % | |||||||
| Acquisition-related amortization of intangibles | 1.4 | % | 1.2 | % | |||||||
| Gross Margin Rate (Non-GAAP) | 26.7 | % | 28.7 | % | |||||||
Reconciliation of Income from Operations (GAAP) to Operating Income (Non-GAAP)
| $ in millions | Q3 2022 | Q3 2021 | |||||||||
| Income (Loss) from Operations (GAAP) | $ | 187 | $ | 157 | |||||||
| Transformation and restructuring costs | 17 | 5 | |||||||||
| Acquisition-related amortization of intangibles | 44 | 45 | |||||||||
| Acquisition-related costs | 1 | 8 | |||||||||
| Operating Income (Non-GAAP) | $ | 249 | $ | 215 | |||||||
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Reconciliation of Net Income from Continuing Operations Attributable to NCR (GAAP) to Earnings Before Interest, Depreciation, Taxes and Amortization (Adjusted EBITDA)
| $ in millions | Q3 2022 | Q3 2021 | |||||||||
| Net Income (Loss) from Continuing Operations Attributable to NCR (GAAP) | $ | 69 | $ | 12 | |||||||
| Transformation and restructuring costs | 17 | 5 | |||||||||
| Acquisition-related amortization of intangibles | 44 | 45 | |||||||||
| Acquisition-related costs | 1 | 9 | |||||||||
| Depreciation and amortization (excluding acquisition-related amortization of intangibles) | 107 | 104 | |||||||||
| Loss on Debt Extinguishment | — | 42 | |||||||||
| Interest expense | 74 | 68 | |||||||||
| Interest income | (3) | — | |||||||||
| Income tax expense (benefit) | 43 | 29 | |||||||||
| Stock-based compensation expense | 28 | 38 | |||||||||
| Adjusted EBITDA (Non-GAAP) | $ | 380 | $ | 352 | |||||||
Reconciliation of Diluted Earnings Per Share from Continuing Operations (GAAP) to
Non-GAAP Diluted Earnings Per Share from Continuing Operations (Non-GAAP)
| Q3 2022 | Q3 2021 | ||||||||||
Diluted Earnings Per Share from Continuing Operations (GAAP) (1) | $ | 0.46 | $ | 0.06 | |||||||
| Transformation and restructuring costs | 0.11 | 0.03 | |||||||||
| Acquisition-related amortization of intangibles | 0.23 | 0.24 | |||||||||
| Acquisition-related costs | 0.01 | 0.05 | |||||||||
| Debt extinguishment | — | 0.28 | |||||||||
| Debt refinancing | — | 0.01 | |||||||||
Diluted Earnings Per Share from Continuing Operations (Non-GAAP) (1) | $ | 0.80 | $ | 0.69 | |||||||
(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 | Q3 2022 | Q3 2021 | |||||||||
| Net cash provided by (used in) operating activities | $ | 127 | $ | 497 | |||||||
| Total capital expenditures | (115) | (102) | |||||||||
| Restricted cash settlement activity | (43) | — | |||||||||
| Initial sale of Trade Accounts Receivable | — | (274) | |||||||||
| Pension contributions | 3 | 4 | |||||||||
| Free cash flow | $ | (28) | $ | 125 | |||||||
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Reconciliation of As Reported Growth % (GAAP) to Growth Constant Currency % (Non-GAAP)
Three months ended September 30, 2022 | Nine months ended September 30, 2022 | |||||||||||||||||||||||||||||||||||||
| $ in millions | As Reported Growth % | Favorable (Unfavorable) FX Impact | Growth % Constant Currency (non-GAAP) | As Reported Growth % | Favorable (Unfavorable) FX Impact | Growth % Constant Currency (non-GAAP) | ||||||||||||||||||||||||||||||||
| Revenue by segment | ||||||||||||||||||||||||||||||||||||||
| Retail | 6 | % | (6) | % | 12 | % | 4 | % | (4) | % | 8 | % | ||||||||||||||||||||||||||
| Hospitality | 6 | % | (2) | % | 8 | % | 11 | % | (1) | % | 12 | % | ||||||||||||||||||||||||||
| Digital Banking | 7 | % | — | % | 7 | % | 6 | % | — | % | 6 | % | ||||||||||||||||||||||||||
| Payments & Network | 11 | % | (3) | % | 14 | % | 154 | % | (8) | % | 162 | % | ||||||||||||||||||||||||||
| Self-Service Banking | — | % | (6) | % | 6 | % | 1 | % | (4) | % | 5 | % | ||||||||||||||||||||||||||
| Other | (23) | % | (5) | % | (18) | % | (18) | % | (3) | % | (15) | % | ||||||||||||||||||||||||||
| Eliminations | 50 | % | — | % | 50 | % | 78 | % | — | % | 78 | % | ||||||||||||||||||||||||||
| Total segment revenue | 4 | % | (4) | % | 8 | % | 14 | % | (3) | % | 17 | % | ||||||||||||||||||||||||||
| Total revenue | 4 | % | (4) | % | 8 | % | 14 | % | (4) | % | 18 | % | ||||||||||||||||||||||||||
| Recurring Revenue | 3 | % | (4) | % | 7 | % | 21 | % | (4) | % | 25 | % | ||||||||||||||||||||||||||
| Adjusted EBITDA | 8 | % | (7 | %) | 15 | % | 11 | % | (5 | %) | 16 | % | ||||||||||||||||||||||||||
| Non-GAAP Diluted EPS | 16 | % | (24 | %) | 40 | % | 1 | % | (11 | %) | 12 | % | ||||||||||||||||||||||||||
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| NCR CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in millions, except per share amounts) | Schedule A | ||||||
| For the Periods Ended September 30 | |||||||||||||||||||||||
| Three Months | Nine Months | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Revenue | |||||||||||||||||||||||
| Product | $ | 590 | $ | 520 | $ | 1,720 | $ | 1,553 | |||||||||||||||
| Service | 1,382 | 1,381 | 4,115 | 3,569 | |||||||||||||||||||
| Total Revenue | 1,972 | 1,901 | 5,835 | 5,122 | |||||||||||||||||||
| Cost of products | 524 | 429 | 1,560 | 1,290 | |||||||||||||||||||
| Cost of services | 957 | 952 | 2,902 | 2,442 | |||||||||||||||||||
| Total gross margin | 491 | 520 | 1,373 | 1,390 | |||||||||||||||||||
| % of Revenue | 24.9 | % | 27.4 | % | 23.5 | % | 27.1 | % | |||||||||||||||
| Selling, general and administrative expenses | 264 | 294 | 886 | 835 | |||||||||||||||||||
| Research and development expenses | 40 | 69 | 164 | 204 | |||||||||||||||||||
| Income (loss) from operations | 187 | 157 | 323 | 351 | |||||||||||||||||||
| % of Revenue | 9.5 | % | 8.3 | % | 5.5 | % | 6.9 | % | |||||||||||||||
| Loss on extinguishment of debt | — | (42) | — | (42) | |||||||||||||||||||
| Interest expense | (74) | (68) | (204) | (174) | |||||||||||||||||||
| Other income (expense), net | (1) | (5) | 9 | (23) | |||||||||||||||||||
| Total interest and other expense, net | (75) | (115) | (195) | (239) | |||||||||||||||||||
| Income (loss) from continuing operations before income taxes | 112 | 42 | 128 | 112 | |||||||||||||||||||
| % of Revenue | 5.7 | % | 2.2 | % | 2.2 | % | 2.2 | % | |||||||||||||||
| Income tax expense (benefit) | 43 | 29 | 56 | 77 | |||||||||||||||||||
| Income (loss) from continuing operations | 69 | 13 | 72 | 35 | |||||||||||||||||||
| Income (loss) from discontinued operations, net of tax | — | — | 5 | — | |||||||||||||||||||
| Net income (loss) | 69 | 13 | 77 | 35 | |||||||||||||||||||
| Net income (loss) attributable to noncontrolling interests | — | 1 | 1 | 2 | |||||||||||||||||||
| Net income (loss) attributable to NCR | $ | 69 | $ | 12 | $ | 76 | $ | 33 | |||||||||||||||
| Amounts attributable to NCR common stockholders: | |||||||||||||||||||||||
| Income (loss) from continuing operations | $ | 69 | $ | 12 | $ | 71 | $ | 33 | |||||||||||||||
| Dividends on convertible preferred stock | (4) | (4) | (12) | (12) | |||||||||||||||||||
| Income (loss) from continuing operations attributable to NCR common stockholders | 65 | 8 | 59 | 21 | |||||||||||||||||||
| Income (loss) from discontinued operations, net of tax | — | — | 5 | — | |||||||||||||||||||
| Net income (loss) attributable to NCR common stockholders | $ | 65 | $ | 8 | $ | 64 | $ | 21 | |||||||||||||||
| Income (loss) per share attributable to NCR common stockholders: | |||||||||||||||||||||||
| Income (loss) per common share from continuing operations | |||||||||||||||||||||||
| Basic | $ | 0.47 | $ | 0.06 | $ | 0.43 | $ | 0.16 | |||||||||||||||
Diluted (1) | $ | 0.46 | $ | 0.06 | $ | 0.42 | $ | 0.15 | |||||||||||||||
| Net income (loss) per common share | |||||||||||||||||||||||
| Basic | $ | 0.47 | $ | 0.06 | $ | 0.47 | $ | 0.16 | |||||||||||||||
Diluted (1) | $ | 0.46 | $ | 0.06 | $ | 0.45 | $ | 0.15 | |||||||||||||||
| Weighted average common shares outstanding | |||||||||||||||||||||||
| Basic | 137.0 | 131.5 | 136.4 | 130.8 | |||||||||||||||||||
Diluted (1) | 140.3 | 137.8 | 140.9 | 137.1 | |||||||||||||||||||
(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.
9
| NCR CORPORATION REVENUE AND ADJUSTED EBITDA SUMMARY (Unaudited) (in millions) | Schedule B | ||||||
| For the Periods Ended September 30 | |||||||||||||||||||||||||||||||||||||||||||||||
| Three Months | Nine Months | ||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | % Change | % Change Constant Currency | 2022 | 2021 | % Change | % Change Constant Currency | ||||||||||||||||||||||||||||||||||||||||
| Revenue by segment | |||||||||||||||||||||||||||||||||||||||||||||||
| Retail | $ | 575 | $ | 541 | 6% | 12% | $ | 1,683 | $ | 1,623 | 4% | 8% | |||||||||||||||||||||||||||||||||||
| Hospitality | 238 | 224 | 6% | 8% | 687 | 618 | 11% | 12% | |||||||||||||||||||||||||||||||||||||||
| Digital Banking | 137 | 128 | 7% | 7% | 404 | 380 | 6% | 6% | |||||||||||||||||||||||||||||||||||||||
| Payments & Network | 336 | 304 | 11% | 14% | 967 | 380 | 154% | 162% | |||||||||||||||||||||||||||||||||||||||
| Self-Service Banking | 640 | 637 | —% | 6% | 1,930 | 1,910 | 1% | 5% | |||||||||||||||||||||||||||||||||||||||
| Other | 58 | 75 | (23)% | (18)% | 187 | 229 | (18)% | (15)% | |||||||||||||||||||||||||||||||||||||||
| Eliminations | (12) | (8) | 50% | 50% | (32) | (18) | 78% | 78% | |||||||||||||||||||||||||||||||||||||||
| Total segment revenue | $ | 1,972 | $ | 1,901 | 4% | 8% | $ | 5,826 | $ | 5,122 | 14% | 17% | |||||||||||||||||||||||||||||||||||
Other adjustment (1) | — | — | 9 | — | |||||||||||||||||||||||||||||||||||||||||||
| Total revenue | $ | 1,972 | $ | 1,901 | 4% | 8% | $ | 5,835 | $ | 5,122 | 14% | 18% | |||||||||||||||||||||||||||||||||||
| Adjusted EBITDA by segment | |||||||||||||||||||||||||||||||||||||||||||||||
| Retail | $ | 128 | $ | 104 | 23% | $ | 299 | $ | 323 | (7)% | |||||||||||||||||||||||||||||||||||||
| Retail Adjusted EBITDA margin % | 22.3% | 19.2% | 17.8% | 19.9% | |||||||||||||||||||||||||||||||||||||||||||
| Hospitality | 51 | 44 | 16% | 138 | 119 | 16% | |||||||||||||||||||||||||||||||||||||||||
| Hospitality Adjusted EBITDA margin % | 21.4% | 19.6% | 20.1% | 19.3% | |||||||||||||||||||||||||||||||||||||||||||
| Digital Banking | 60 | 52 | 15% | 172 | 161 | 7% | |||||||||||||||||||||||||||||||||||||||||
| Digital Banking Adjusted EBITDA margin % | 43.8% | 40.6% | 42.6% | 42.4% | |||||||||||||||||||||||||||||||||||||||||||
| Payments & Network | 114 | 111 | 3% | 309 | 133 | 132% | |||||||||||||||||||||||||||||||||||||||||
| Payments & Network Adjusted EBITDA margin % | 33.9% | 36.5% | 32.0% | 35.0% | |||||||||||||||||||||||||||||||||||||||||||
| Self-Service Banking | 150 | 155 | (3)% | 404 | 432 | (6)% | |||||||||||||||||||||||||||||||||||||||||
| Self-Service Banking Adjusted EBITDA margin % | 23.4% | 24.3% | 20.9% | 22.6% | |||||||||||||||||||||||||||||||||||||||||||
Corporate and Other (2) | (112) | (109) | 3% | (307) | (265) | 16% | |||||||||||||||||||||||||||||||||||||||||
| Eliminations | (11) | (5) | 120% | (25) | (12) | 108% | |||||||||||||||||||||||||||||||||||||||||
| Total Adjusted EBITDA | $ | 380 | $ | 352 | 8% | 15% | $ | 990 | $ | 891 | 11% | 16% | |||||||||||||||||||||||||||||||||||
| Total Adjusted EBITDA margin % | 19.3% | 18.5% | 17.0% | 17.4% | |||||||||||||||||||||||||||||||||||||||||||
(1) Other adjustment reflects the revenue attributable to the Company's operations in Russia for the three and nine months ending September 30, 2022 that were excluded from management's measure of revenue due to our announcement to suspend sales to Russia and anticipated orderly wind down of our operations in Russia. The revenue attributable to the Russian operations for the three and nine months ending September 30, 2021 of $14 million and $33 million, respectively, is included in the respective segments. Refer to the section entitled "Non-GAAP Financial Measures" for additional information.
(2) Corporate and Other includes income and expenses related to corporate functions that are not specifically attributable to an individual reportable segment along with any immaterial operating segment(s).
10
| NCR CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) (in millions, except per share amounts) | Schedule C | ||||||
| September 30, 2022 | December 31, 2021 | ||||||||||
| Assets | |||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ | 434 | $ | 447 | |||||||
Accounts receivable, net of allowances of $29 and $24 as of September 30, 2022 and December 31, 2021, respectively | 1,116 | 959 | |||||||||
| Inventories | 827 | 754 | |||||||||
| Restricted cash | 302 | 295 | |||||||||
| Other current assets | 512 | 421 | |||||||||
| Total current assets | 3,191 | 2,876 | |||||||||
| Property, plant and equipment, net | 620 | 703 | |||||||||
| Goodwill | 4,572 | 4,519 | |||||||||
| Intangibles, net | 1,184 | 1,316 | |||||||||
| Operating lease assets | 377 | 419 | |||||||||
| Prepaid pension cost | 263 | 300 | |||||||||
| Deferred income taxes | 678 | 732 | |||||||||
| Other assets | 898 | 776 | |||||||||
| Total assets | $ | 11,783 | $ | 11,641 | |||||||
| Liabilities and stockholders’ equity | |||||||||||
| Current liabilities | |||||||||||
| Short-term borrowings | $ | 106 | $ | 57 | |||||||
| Accounts payable | 876 | 826 | |||||||||
| Payroll and benefits liabilities | 319 | 389 | |||||||||
| Contract liabilities | 507 | 516 | |||||||||
| Settlement liabilities | 271 | 263 | |||||||||
| Other current liabilities | 691 | 757 | |||||||||
| Total current liabilities | 2,770 | 2,808 | |||||||||
| Long-term debt | 5,611 | 5,505 | |||||||||
| Pension and indemnity plan liabilities | 723 | 789 | |||||||||
| Postretirement and postemployment benefits liabilities | 121 | 119 | |||||||||
| Income tax accruals | 108 | 116 | |||||||||
| Operating lease liabilities | 358 | 388 | |||||||||
| Other liabilities | 371 | 383 | |||||||||
| Total liabilities | 10,062 | 10,108 | |||||||||
Series A convertible preferred stock: par value $0.01 per share, 3.0 shares authorized, 0.3 issued and outstanding as of September 30, 2022 and December 31, 2021, respectively; redemption amount and liquidation preference of $276 as of September 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 September 30, 2022 and December 31, 2021, respectively | — | — | |||||||||
Common stock: par value $0.01 per share, 500.0 shares authorized, 137.0 and 132.2 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively | 1 | 1 | |||||||||
| Paid-in capital | 675 | 515 | |||||||||
| Retained earnings | 1,095 | 1,031 | |||||||||
| Accumulated other comprehensive loss | (326) | (291) | |||||||||
| Total NCR stockholders' equity | 1,445 | 1,256 | |||||||||
| Noncontrolling interests in subsidiaries | 1 | 3 | |||||||||
| Total stockholders' equity | 1,446 | 1,259 | |||||||||
| Total liabilities and stockholders' equity | $ | 11,783 | $ | 11,641 | |||||||
11
| NCR CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in millions) | Schedule D | ||||||
| For the Periods Ended September 30 | |||||||||||||||||||||||
| Three Months | Nine Months | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Operating activities | |||||||||||||||||||||||
| Net income (loss) | $ | 69 | $ | 13 | $ | 77 | $ | 35 | |||||||||||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||||||||||||||
| Income from discontinued operations | — | — | (5) | — | |||||||||||||||||||
| Loss on debt extinguishment | — | 42 | — | 42 | |||||||||||||||||||
| Depreciation and amortization | 152 | 152 | 451 | 364 | |||||||||||||||||||
| Stock-based compensation expense | 28 | 38 | 97 | 119 | |||||||||||||||||||
| Deferred income taxes | 18 | 4 | 24 | 30 | |||||||||||||||||||
| Loss (gain) on disposal of property, plant and equipment and other assets | 2 | — | 4 | — | |||||||||||||||||||
| Changes in assets and liabilities: | |||||||||||||||||||||||
| Receivables | (65) | 318 | (274) | 240 | |||||||||||||||||||
| Inventories | (18) | (84) | (220) | (165) | |||||||||||||||||||
| Current payables and accrued expenses | 55 | 76 | 113 | 210 | |||||||||||||||||||
| Contract liabilities | (58) | (38) | (24) | 5 | |||||||||||||||||||
| Employee benefit plans | (9) | (9) | (3) | (30) | |||||||||||||||||||
| Other assets and liabilities | (47) | (15) | 5 | (43) | |||||||||||||||||||
| Net cash provided by operating activities | $ | 127 | $ | 497 | $ | 245 | $ | 807 | |||||||||||||||
| Investing activities | |||||||||||||||||||||||
| Expenditures for property, plant and equipment | $ | (40) | $ | (38) | $ | (72) | $ | (68) | |||||||||||||||
| Proceeds from sale of property, plant and equipment and other assets | 5 | 1 | 8 | 1 | |||||||||||||||||||
| Additions to capitalized software | (75) | (64) | (217) | (174) | |||||||||||||||||||
| Business acquisitions, net of cash acquired | (11) | (2) | (12) | (2,466) | |||||||||||||||||||
| 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 | $ | (121) | $ | (103) | $ | (298) | $ | (2,712) | |||||||||||||||
| Financing activities | |||||||||||||||||||||||
| Short term borrowings, net | $ | (2) | $ | — | $ | — | $ | — | |||||||||||||||
| Payments of senior unsecured notes | — | (400) | — | (400) | |||||||||||||||||||
| Payments on term credit facilities | (27) | (1) | (31) | (106) | |||||||||||||||||||
| Payments on revolving credit facilities | (247) | (746) | (846) | (1,431) | |||||||||||||||||||
| Borrowings on term credit facilities | — | — | — | 1,505 | |||||||||||||||||||
| Borrowings on revolving credit facilities | 384 | 732 | 1,021 | 1,541 | |||||||||||||||||||
| Proceeds from issuance of senior unsecured notes | — | — | — | 1,200 | |||||||||||||||||||
| Debt issuance costs and bridge commitment fees | — | (1) | — | (52) | |||||||||||||||||||
| Call premium paid on debt extinguishment | — | (37) | — | (37) | |||||||||||||||||||
| Cash dividend paid for Series A preferred shares dividends | (3) | (3) | (11) | (11) | |||||||||||||||||||
| Proceeds from employee stock plans | 5 | 15 | 19 | 33 | |||||||||||||||||||
| Tax withholding payments on behalf of employees | (2) | (3) | (38) | (28) | |||||||||||||||||||
| Net change in client funds obligations | (3) | 5 | (6) | (3) | |||||||||||||||||||
| Principal payments for finance lease obligations | (4) | (5) | (12) | (13) | |||||||||||||||||||
| Other financing activities | (1) | (1) | (3) | (2) | |||||||||||||||||||
| Net cash provided by (used in) financing activities | $ | 100 | $ | (445) | $ | 93 | $ | 2,196 | |||||||||||||||
| Cash flows from discontinued operations | |||||||||||||||||||||||
| Net cash provided by (used in) discontinued operations | (1) | (3) | (1) | (50) | |||||||||||||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (24) | (8) | (43) | (12) | |||||||||||||||||||
| Increase (decrease) in cash, cash equivalents, and restricted cash | $ | 81 | $ | (62) | $ | (4) | $ | 229 | |||||||||||||||
| Cash, cash equivalents and restricted cash at beginning of period | 664 | 697 | 749 | 406 | |||||||||||||||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | 745 | $ | 635 | $ | 745 | $ | 635 | |||||||||||||||
12
1 Q3 2022 EARNINGS CONFERENCE CALL MICHAEL HAYFORD, CEO OWEN SULLIVAN, PRESIDENT & COO TIM OLIVER, CFO October 25, 2022 (as revised October 26, 2022)* * The Supplementary Materials of this presentation have been revised as described in the "Explanatory Note" to the Form 8-K/A of NCR Corporation furnished to the Securities and Exchange Commission on October 26, 2022.
2 FORWARD-LOOKING STATEMENTS. Comments made during this conference call and in these materials contain “forward- looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (the “Act”). Forward-looking statements use words such as “expect,” “anticipate,” “outlook,” “intend,” “plan,” “confident,” “believe,” “will,” “should,” “would,” “potential,” “positioning,” “proposed,” “planned,” “objective,” “likely,” “could,” “may,” and words of similar meaning, as well as other words or expressions referencing future events, conditions or circumstances. We intend these forward-looking statements to be covered by the safe harbor provisions for forward- looking statements contained in the Act. 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. Examples of forward-looking statements in these materials include, without limitation, statements regarding: NCR’s focus on advancing our strategic growth initiatives and transforming NCR into a software-led as-a-service company with a higher mix of recurring revenue streams; our expectations of NCR's ability to deliver increased value to customers and stockholders; various macroeconomic challenges that may impact our financial performance in 2022; our expectations and assumptions regarding NCR's full year 2022 financial performance; an illustrative separation and targeted growth rates; expectations to leverage our software and payments platform to increase share of wallet; our focus on operational excellence; managing supply chain challenges; expectations regarding our evolution to a lean factory model by outsourcing manufacturing; free cash flow generation; and statements regarding the planned separation of NCR into two separate companies, including, but not limited to, statements regarding the anticipated timing and structure of such planned transaction, the future commercial or financial performance of the digital commerce company or the ATM company following such planned transaction, value creation and ability to innovate and drive growth generally as a result of such transaction, and the expected capital structure, net debt and pension obligations of the companies at the time of and following the transaction. 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 listed in Item 1A “Risk Factors” of NCR’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (SEC) on February 25, 2022 and those factors detailed from time to time in NCR’s other SEC reports including quarterly reports on Form 10-Q and current reports on Form 8-K. These materials are dated October 25, 2022, 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, except as required by law. NOTES TO INVESTORS
3 NON-GAAP MEASURES. While NCR reports its results in accordance with generally accepted accounting principles in the United States, or 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; gross margin rate (non-GAAP); diluted earnings per share (non-GAAP); free cash flow; gross margin (non-GAAP); net debt; adjusted EBITDA; adjusted EBITDA growth; adjusted EBITDA margin; 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); net income (non-GAAP); and measurements in constant currency. 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. 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. Prior periods have been reclassified in order to conform to current period presentation. USE OF CERTAIN TERMS. As used in these materials: (i) the term "recurring revenue" includes all revenue streams from contracts where there is a predictable revenue pattern that will occur at regular intervals with a relatively high degree of certainty. This includes hardware and software maintenance revenue, cloud revenue, payment processing revenue, interchange and network revenue, cryptocurrency- related revenue, and certain professional services arrangements, as well as term-based software license arrangements that include customer termination rights. (ii) the term "annual recurring revenue" or "ARR" is recurring revenue, excluding software license sold as a subscription, for the last three months times four, plus the rolling four quarters for term-based software license arrangements that include customer termination rights. (iii) the term "CC" means constant currency. (iv) the term "LTM" means last twelve months. These presentation materials and the associated remarks made during this conference call are integrally related and are intended to be presented and understood together. NOTES TO INVESTORS
4 OVERVIEW Strong execution Revenue up 8% CC Y/Y; Recurring revenue up 7% CC Y/Y Adjusted EBITDA growth of 15% CC Y/Y Adjusted EBITDA margin 19.3%, up 230 bps from Q2 2022
5 BUSINESS UPDATE Plan to separate NCR into two public companies Retail - Gaining traction in NCR EmeraldTM Hospitality - Another strong quarter Digital Banking – Winning in the market Payments - Solid year over year growth Self-Service Banking - Momentum in ATMaaS
6 Adjusted EBITDA up 8% y/y as reported and up 15% CC Non-GAAP diluted EPS up 16% y/y as reported and up 40% CC; FX impact $(0.12) Free Cash Flow challenged by near term investments in working capital and timing of disbursements Total Revenue/Recurring Adjusted EBITDA Non-GAAP Diluted EPS Free Cash Flow Revenue up 4% y/y as reported and up 8% CC; Recurring revenue up 3% y/y as reported and up 7% CC Q3 2022 FINANCIAL RESULTS $ in millions, except for EPS $1,901 $352 $125 $1,997 $339 $0.69 $0.71 $— $(28) $1,972 $380 $0.80 $1,181 $1,217 $1,222
7 $ in millions, except platform lanes RETAIL Revenue Adjusted EBITDA Q3 21 Q4 21 Q1 22 Q2 22 Q3 22 $0 $70 $140 SCO RevenuePlatform Lanes ARR Up 16% y/y Key Metrics Up 2% y/yUp 202% y/y $541 $562 $104 $104 15,032 45,361 $997 $1,021 $277 $242 $575 $128 $1,017 35,700 $281 $271 3,587 $954 35% CC12% CC
8 $ in millions, except site counts HOSPITALITY Revenue Adjusted EBITDA Platform Sites ARR Up 32% y/y Up 8% y/y Key Metrics $224 $238 $44 $46 21,875 28,073 $474 $509 $238 $51 $510 28,852 $40118,629 Payments Sites Up 111% y/y 2,111 3,989 4,458 324 16% CC 8% CC
9 $ in millions DIGITAL BANKING Revenue Adjusted EBITDA $128 Active Users ARR Down 1% y/y Up 3% y/y Key Metrics $131 $56 $52 18.9M 18.8M $462 $477 $137 $60 18.1M $477 17.5M $424 Registered Users Flat y/y 26.5M 26.6M 25.6M 24.3M 15% CC7% CC
10 $ in millions PAYMENTS & NETWORK Revenue Adjusted EBITDA $304 Endpoints (in thousands) Transactions (in millions) ARR Up 25% y/y Up 2% y/y Up 11% y/y Key Metrics $332 18 $97 $111 574 584 $1,207 $1,334 104 129 $336 $114 573 $1,320130 94 $79 14% CC 7% CC
11 $ in millions, except units and percentages SELF-SERVICE BANKING Revenue Adjusted EBITDA $637 Software & Services Revenue Mix ATMaaS Units ARR Flat y/y Up 185% y/y Up 4% y/y Key Metrics $679 66% $142 $155 4,386 4,454 $1,376 $1,411 69% 67% $640 $150 12,491 $1,435 69% 448 $1,300 1% CC 6% CC
12 $ in millions Free Cash Flow Q3 2022 Q3 2021 Cash provided by operating activities $127 $497 Less: Total capital expenditures $(115) $(102) Less: Initial sale of Trade Accounts Receivable $— $(274) Plus: Restricted cash settlement activity ($43) $— Plus: Pension contributions $3 $4 Free Cash Flow $(28) $125 FREE CASH FLOW, NET DEBT & EBITDA Net Debt & EBITDA Q3 2022 Q2 2022 Debt $5,717 $5,605 Cash $(434) $(398) Net Debt $5,283 $5,207 Adjusted EBITDA LTM $1,343 $1,315 Net Debt / Adjusted EBITDA 3.9x 4.0x
13 NCR Separation Plan (1) There can be no guarantee that the planned separation will be completed in the expected form or within the expected time frame or at all. Nor can there be any guarantee that the digital commerce business and ATM business after a separation will be able to realize any of the potential strategic benefits, synergies or opportunities as a result of these actions. Neither can there be any guarantee that shareholders will achieve any particular level of shareholder returns. Nor can there be any guarantee that the planned separation will enhance value for shareholders, or that NCR or any of its divisions, or separate NCR RemainCo and ATM business, will be commercially successful in the future, or achieve any particular credit rating or financial results.
14 NCR Separation Plan (1) There can be no guarantee that the planned separation will be completed in the expected form or within the expected time frame or at all. Nor can there be any guarantee that the digital commerce business and ATM business after a separation will be able to realize any of the potential strategic benefits, synergies or opportunities as a result of these actions. Neither can there be any guarantee that shareholders will achieve any particular level of shareholder returns. Nor can there be any guarantee that the planned separation will enhance value for shareholders, or that NCR or any of its divisions, or separate NCR RemainCo and ATM business, will be commercially successful in the future, or achieve any particular credit rating or financial results. NCR RemainCo ATM SpinCo
15 As of September 30, 2022 LTM WholeCo NCR RemainCo(3) ATM SpinCo(3) Revenue $7,869 $4,047 $3,822 Adjusted EBITDA(1) $1,343 $654 $689 Adjusted EBITDA margin %(1) 17.1% 16.2% 18.0% Capital expenditures ("CAPEX") $395 $267 $128 Targeted growth rates (2) WholeCo NCR RemainCo ATM SpinCo Revenue 6% - 9% At or above high-end of WholeCo range At or below low-end of WholeCo range Adjusted EBITDA 9% - 12% Grows faster than revenue Grows faster than revenue Free Cash Flow Conversion (4) 40% - 45% of Adj. EBITDA At lower conversion than WholeCo At higher conversion than WholeCo Illustrative Separation $ in millions (1) See definition in Supplementary Materials. (2) Illustrative targeted annual growth rates and WholeCo targeted growth rates are based on the 5-year strategic plan provided in NCR Investor Day 2021 presentation dated December 9, 2021. Actual results may differ and such differences may be material. Targeted annual growth rates should not be considered guidance or promises of future performance. (3) Final amounts will likely differ based on future carve-out audits and final structuring. (4) Free Cash Flow Conversion is defined as Adjusted EBITDA less CAPEX divided by Adjusted EBITDA. This definition differs from how NCR defines Free Cash Flow. For more details on the definitions, see the definitions in the Supplementary Materials as well as Notes to Investors.
16 WholeCo Current Capital Structure NCR RemainCo Targeted Capital Structure Post Separation (2) $ in millions September 30, 2022 • Retain majority of current debt stack Total Unsecured Debt $3,300 • Minimize debt friction cost 5.750% Senior Notes due 2027 500 • Rework secured debt 5.000% Senior Notes due 2028 650 • Target Net Debt / Adj. EBITDA(1) 3.0x - 3.4x 5.125% Senior Notes due 2029 1,200 6.125% Senior Notes due 2029 500 ATM SpinCo Targeted Capital Structure Post Separation (2) 5.250% Senior Notes due 2030 450 • New Senior Notes Total Secured Debt $2,417 • New secured bank debt Revolving Credit Facility 506 • Currently anticipate pension plan remains with ATM SpinCo Term Loan A 1,183 • Target Net Debt / Adj. EBITDA(1) 3.4x - 3.8x Term Loan B 728 Total Debt $5,717 WholeCo (-) Cash and Cash Equivalents (434) • Seek to generate $500M - $800M Free Cash Flow(1) between now and separation Net Debt (1) $5,283 Adjusted EBITDA LTM (1) $1,343 Net Debt / Adj. EBITDA (1) 3.9x Targeted Capital Structure (1) See definition in Supplementary Materials. Actual results may differ and such differences may be material. Targeted free cash flow should not be considered guidance or promises of future performance. (2) There can be no guarantee that either NCR RemainCo's or ATM SpinCo's capital structure will be as assumed, and such differences could be material. The actual capital structure will depend in part on the timing of the transaction, the state of the credit and financial markets, the ability to consummate the transaction within existing debt covenants or the ability to obtain any needed amendments, waivers or consents from lenders and others, and other economic, financial and geopolitical factors, a number of which are beyond NCR's control.
17 LOOKING FORWARD Strategic transformation to a software-led as-a-service company Allocate capital to highest return on investment opportunities Improve cost structure Drive cash flow generation Continue to execute in a difficult macro environment Plan to separate NCR into two public companies
18 SUPPLEMENTARY MATERIALS
19 Q3 2022 Q3 2021 % Change Revenue $1,972 $1,901 4% Gross Margin 491 520 (6)% Gross Margin Rate 24.9% 27.4% Operating Expenses 304 363 (16)% % of Revenue 15.4% 19.1% Operating Income 187 157 19% % of Revenue 9.5% 8.3% Interest and other expense, net (75) (115) (35)% Income Tax Expense (Benefit) 43 29 Effective Income Tax Rate 38.4% 69.0% Net Income (Loss) from Continuing Operations (attributable to NCR) $69 $12 475% Diluted EPS from Continuing Operations $0.46 $0.06 667% $ in millions, except per share amounts Q3 2022 GAAP RESULTS
20 Q3 2022 Q3 2021 % Change as Reported % Change Adjusted Constant Currency Revenue (non-GAAP) $1,972 $1,901 4% 8% Gross Margin (non-GAAP) 526 546 (4)% 2% Gross Margin Rate (non-GAAP) 26.7% 28.7% Operating Expenses (non-GAAP) 277 331 (16)% (13)% % of Revenue 14.0% 17.4% Operating Income (non-GAAP) 249 215 16% 25% % of Revenue 12.6% 11.3% Interest and other expense (non-GAAP) (75) (71) 6% 6% Income Tax Expense (non-GAAP) 54 41 32% 32% Effective Income Tax Rate (non-GAAP) 31.0% 28.5% Net Income (Loss) From Continuing Operations (attributable to NCR) (non- GAAP) $120 $102 18% 40% Diluted EPS (non-GAAP) $0.80 $0.69 16% 40% $ in millions, except per share amounts Q3 2022 OPERATIONAL RESULTS
21 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. There can be no assurance that either NCR RemainCo or ATM SpinCo will utilize the non-GAAP metrics herein, that they will not use different metrics, or that they will define such metrics differently than as presented herein. 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), Interest and 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), interest and 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, as well as other special items, including amortization of acquisition related intangibles and transformation and restructuring activities, from NCR’s GAAP earnings per share, gross margin, gross margin rate, expenses, income from operations, operating margin rate, interest and 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 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 less capital expenditures for property, plant and equipment, less additions to capitalized software, plus/minus restricted cash settlement activity, plus acquisition related items, less the impact from the initial sale of Trade accounts receivables under the agreement entered into during the 3rd quarter of 2021, and plus 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. NON-GAAP MEASURES
22 Net Debt and Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA). 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 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 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 stock-based compensation expense; 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 and transformation and restructuring charges, among others. NCR uses Adjusted EBITDA to manage and measure the performance of its business segments. NCR also uses Adjusted EBITDA to manage and determine the effectiveness of its business managers and as a basis for incentive compensation. NCR believes that Adjusted EBITDA 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. Adjusted EBITDA margin is calculated based on Adjusted EBITDA as a percentage of total revenue. 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 a measure 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. Special Item Related to Russia 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 September 30, 2022, we have ceased operations in Russia and are in process of dissolving our only subsidiary in Russia. As a result, for the nine months ending September 30, 2022, our non-GAAP presentation of the measures described above exclude the immaterial impact of our operating results in Russia, as well as the impact of impairments taken to write down the carrying value of assets and liabilities, severance charges, and the assessment of collectability on revenue recognition. We consider this to be a non-recurring special item and management has reviewed the results of its business segments excluding these impacts. We have not adjusted the presentation of the prior year period due to the immaterial impact of Russia to revenue and income from continuing operations for the three and nine months ended September 30, 2021. NON-GAAP MEASURES
23 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 may contribute to an understanding 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 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. NON-GAAP MEASURES
24 Q3 2022 Q2 2022 Q3 2021 Net (Loss) Income from Continuing Operations Attributable to NCR (GAAP) $ 69 $ 35 $ 12 Transformation & Restructuring Costs 17 49 5 Acquisition-Related Amortization of Intangibles 44 45 45 Acquisition-Related Costs 1 3 9 Loss on Debt Extinguishment — — 42 Interest Expense 74 67 68 Interest Income (3) (2) — Depreciation and Amortization 107 104 104 Income Taxes 43 — 29 Stock Compensation Expense 28 35 38 Russia — 3 — Adjusted EBITDA (non-GAAP) $ 380 $ 339 $ 352 GAAP TO NON-GAAP RECONCILIATION $ in millions
25 Q3 2022 LTM Q2 2022 LTM Q3 2021 LTM Net (Loss) Income from Continuing Operations Attributable to NCR (GAAP) $ 135 $ 78 $ (92) Pension Mark-to-Market Adjustments (118) (118) 34 Transformation & Restructuring Costs 139 127 222 Acquisition-Related Amortization of Intangibles 174 175 107 Acquisition-Related Costs 15 23 86 Loss on Debt Extinguishment — 42 42 Interest Expense 268 262 225 Interest Income (10) (7) (7) Depreciation and Amortization 421 418 324 Income Taxes 165 151 57 Stock Compensation Expense 132 142 151 Russia 22 22 — Adjusted EBITDA (non-GAAP) $ 1,343 $ 1,315 $ 1,149 GAAP TO NON-GAAP RECONCILIATION $ in millions
26 Q3 2022 Q2 2022 Q3 2021 Retail $ 128 $ 104 $ 104 Hospitality 51 46 44 Digital Banking 60 56 52 Payments & Network 114 97 111 Self-Service Banking 150 142 155 Corporate and Other (112) (98) (109) Eliminations (11) (8) (5) Adjusted EBITDA $ 380 $ 339 $ 352 ADJUSTED EBITDA BY SEGMENT $ in millions
27 Q3 QTD 2022 GAAP Transform ation Costs Acquisition- related amortization of intangibles Acquisition- related costs Russia Q3 QTD 2022 non-GAAP Product revenue $590 $— $— $— $— $590 Service revenue 1,382 — — — — 1,382 Total revenue 1,972 — — — — 1,972 Cost of products 524 (5) (1) — — 518 Cost of services 957 (3) (26) — — 928 Gross margin 491 8 27 — — 526 Gross margin rate 24.9% 0.4% 1.4% —% —% 26.7% Selling, general and administrative expenses 264 (8) (17) (1) — 238 Research and development expenses 40 (1) — — — 39 Total operating expenses 304 (9) (17) (1) — 277 Total operating expense as a % of revenue 15.4% (0.5)% (0.9)% (0.1)% —% 14.0% Income from operations 187 17 44 1 — 249 Income from operations as a % of revenue 9.5% 0.9% 2.2% 0.1% —% 12.6% Interest and Other (expense) income, net (75) — — — — (75) Income from continuing operations before income taxes 112 17 44 1 — 174 Income tax (benefit) expense 43 1 10 — — 54 Effective income tax rate 38.4% 31.0% Income from continuing operations 69 16 34 1 — 120 Net income (loss) attributable to noncontrolling interests — — — — — — Income from continuing operations (attributable to NCR) $69 $16 $34 $1 $— $120 Diluted earnings per share $0.46 $0.11 $0.23 $0.01 $— $0.80 Diluted shares outstanding 140.3 149.5 GAAP TO NON-GAAP RECONCILIATION Q3 2022 $ in millions, except per share amounts
28 Q3 QTD 2022 GAAP Q3 QTD 2022 non-GAAP Income from continuing operations attributable to NCR common stockholders: Income from continuing operations (attributable to NCR) $69 $120 Dividends on convertible preferred shares $(4) $— Income from continuing operations attributable to NCR common stockholders $65 $120 Weighted average outstanding shares: Weighted average diluted shares outstanding 140.3 140.3 Weighted as-if converted preferred shares — 9.2 Total shares used in diluted earnings per share 140.3 149.5 Diluted earnings per share from continuing operations (1) $0.46 $0.80 (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. GAAP TO NON-GAAP RECONCILIATION Q3 2022 $ in millions, except per share amounts
29 Q3 QTD 2021 GAAP Transformation Costs Acquisition- related amortization of intangibles Acquisition- related costs Debt Refinancing & Extinguishment Q3 QTD 2021 non-GAAP Product revenue $520 $— $— $— $— $520 Service revenue 1,381 — — — — 1,381 Total revenue 1,901 — — — — 1,901 Cost of products 429 — (3) — — 426 Cost of services 952 (3) (20) — — 929 Gross margin 520 3 23 — — 546 Gross margin rate 27.4% 0.1% 1.2% —% —% 28.7% Selling, general and administrative expenses 294 (2) (22) (8) — 262 Research and development expenses 69 — — — — 69 Total expenses 363 (2) (22) (8) — 331 Total expense as a % of revenue 19.1% (0.1)% (1.2)% (0.4)% —% 17.4% Income from operations 157 5 45 8 — 215 Income from operations as a % of revenue 8.3% 0.3% 2.3% 0.4% —% 11.3% Interest and Other (expense) income, net (115) — — 1 43 (71) Income from continuing operations before income taxes 42 5 45 9 43 144 Income tax expense 29 — 10 1 1 41 Effective income tax rate 69.0% 28.5% Income from continuing operations 13 5 35 8 42 103 Net income attributable to noncontrolling interests 1 — — — — 1 Income from continuing operations (attributable to NCR) $12 $5 $35 $8 $42 $102 0 Diluted (loss) earnings per share $0.06 $0.03 $0.24 $0.05 $0.29 $0.69 Diluted shares outstanding 137.8 147.0 GAAP TO NON-GAAP RECONCILIATION Q3 2021 $ in millions, except per share amounts
30 Q3 QTD 2021 GAAP Q3 QTD 2021 non-GAAP Income from continuing operations attributable to NCR common stockholders: Income from continuing operations (attributable to NCR) $12 $102 Dividends on convertible preferred shares (4) — Income from continuing operations attributable to NCR common stockholders $8 $102 Weighted average outstanding shares: Weighted average diluted shares outstanding 137.8 137.8 Weighted as-if converted preferred shares — 9.2 Total shares used in diluted earnings per share 137.8 147.0 Diluted earnings per share from continuing operations (1) $0.06 $0.69 (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. GAAP TO NON-GAAP RECONCILIATION Q3 2021 $ in millions, except per share amounts
31 Q3 2022 Q2 2022 Q3 2021 Cash provided by operating activities $127 $80 $497 Less: Total capital expenditures $(115) $(94) $(102) Less: Sale of Accounts Receivables $— $— $(274) Plus: Pension contributions $3 $5 $4 Plus: Restricted Cash Settlement Activity ($43) $9 $— Free Cash Flow $(28) $— $125 $ in millions GAAP TO NON-GAAP RECONCILIATION
32 Q3 2022 Operational Results % Change as Reported Favorable (Unfavorable) FX Impact % Change Adjusted Constant Currency Revenue (non-GAAP) 4% (4)% 8% Gross Margin (non-GAAP) (4)% (6)% 2% Operating Expenses (non-GAAP) (16)% 3% (13)% Operating Income (non-GAAP) 16% (9)% 25% Interest and other expense (non-GAAP) 6% —% 6% Income Tax Expense (non-GAAP) 32% —% 32% Net Income (Loss) From Continuing Operations (attributable to NCR) (non-GAAP) 18% (22)% 40% Diluted EPS (non-GAAP) 16% (24)% 40% Recurring Revenue 3% (4)% 7% $ in millions, except per share amounts RECONCILIATION OF CONSTANT CURRENCY
33 Revenue Growth % (GAAP) Favorable (Unfavorable) FX Impact Revenue Growth % Constant Currency (non-GAAP) Retail 6 % (6) % 12 % Hospitality 6 % (2) % 8 % Digital Banking 7 % — % 7 % Payments & Network 11 % (3) % 14 % Self-Service Banking — % (6) % 6 % Other (23) % (5) % (18) % Eliminations 50 % — % 50 % Total Revenue 4 % (4) % 8 % RECONCILIATION OF CONSTANT CURRENCY $ in millions
34 Adjusted EBITDA Growth % Favorable (Unfavorable) FX Impact Adjusted EBITDA Growth % Constant Currency (non-GAAP) Retail 23 % (12) % 35 % Hospitality 16 % — % 16 % Digital Banking 15 % — % 15 % Payments & Network 3 % (4) % 7 % Self-Service Banking (3) % (4) % 1 % Corporate and Other (3) % — % (3) % Eliminations (120) % — % (120) % Adjusted EBITDA 8 % (7) % 15 % RECONCILIATION OF CONSTANT CURRENCY $ in millions
35 THANK YOU