NCR Corporation (NCR) Q4 2022 Earnings Conference Call February 7, 2023 4:30 PM ET Company Participants Michael Nelson - Treasurer and Investor Relations Mike Hayford - Chief Executive Officer Owen Sullivan - President and Chief Operating Officer Tim Oliver - Chief Financial Officer Conference Call Participants Paul Chung - JPMorgan Matt Summerville - D.A. Davidson Charles Nabhan - Stephens Erik Woodring - Morgan Stanley Operator Good day and welcome to the NCR Corporation Fourth Quarter Fiscal Year 2022 Ea ...

Financial Performance - Full Year 2022 - NCR's revenue increased by 10% year-over-year (Y/Y) as reported, and 13% on a constant currency (CC) basis[12, 7] - Recurring revenue grew by 16% Y/Y as reported, and 20% on a CC basis[12, 7] - Adjusted EBITDA increased by 10% Y/Y as reported, and 16% on a CC basis[12, 7] - Non-GAAP diluted EPS increased by 2% Y/Y as reported, and 12% on a CC basis, with a foreign exchange (FX) impact of $(022)[12] - Free cash flow was $164 million, impacted by near-term investments in working capital[12] Financial Performance - Q4 2022 - Revenue decreased by 1% Y/Y as reported but increased by 2% on a CC basis[10] - Recurring revenue increased by 3% Y/Y as reported and 7% on a CC basis[10] - Adjusted EBITDA increased by 8% Y/Y as reported and 14% on a CC basis[10] - Non-GAAP diluted EPS increased by 4% Y/Y as reported and 8% on a CC basis, with an FX impact of $(003)[10] Strategic Initiatives and Outlook - NCR plans to separate into two public companies[9] - The company provides FY 2023 revenue guidance of $78 billion - $80 billion and adjusted EBITDA guidance of $145 billion - $155 billion[21]

NCR Corporation (NCR) Q3 2022 Earnings Conference Call October 25, 2022 4:30 PM ET Company Participants Michael Nelson - Treasurer and VP of IR Michael Hayford - CEO Owen Sullivan - President and COO Tim Oliver - CFO Conference Call Participants Matt Summerville - D.A. Davidson Paul Chung - JPMorgan Kartik Mehta - Northcoast Research Ian Zaffino - Oppenheimer Erik Woodring - Morgan Stanley Matthew Roswell - RBC Operator Good day, and welcome to the NCR Corporation Third Quarter Fiscal Year 2022 Earnings Con ...

[Part I. Financial Information](index=3&type=section&id=PART%20I.%20Financial%20Information) This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis for the reporting period [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for NCR Corporation for the three and six months ended June 30, 2022, and 2021. It includes the statements of operations, comprehensive income, balance sheets, cash flows, and changes in stockholder's equity, along with detailed notes explaining the basis of presentation, business combinations, segment information, debt, and other significant accounting policies and events [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the second quarter of 2022, NCR reported total revenue of $1,997 million, a 19% increase year-over-year, driven by a 23% rise in service revenue. Net income attributable to NCR was $41 million, a significant turnaround from a net loss of $9 million in the same period of 2021. For the six-month period, revenue grew 20% to $3,863 million, while net income attributable to NCR decreased to $7 million from $21 million year-over-year | In millions, except per share amounts | Three months ended June 30, 2022 | Three months ended June 30, 2021 | Six months ended June 30, 2022 | Six months ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | **Total revenue** | **$1,997** | **$1,677** | **$3,863** | **$3,221** | | Income (loss) from operations | $103 | $84 | $136 | $194 | | **Net income (loss) attributable to NCR** | **$41** | **$(9)** | **$7** | **$21** | | Diluted net income (loss) per common share | $0.26 | $(0.10) | $(0.01) | $0.10 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2022, NCR's total assets were $11,756 million, a slight increase from $11,641 million at year-end 2021. Key changes include an increase in inventories to $858 million and accounts receivable to $1,085 million. Total liabilities remained stable at $10,108 million, with long-term debt at $5,497 million. Total stockholders' equity increased to $1,373 million from $1,259 million | In millions | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $398 | $447 | | Inventories | $858 | $754 | | Goodwill | $4,575 | $4,519 | | **Total assets** | **$11,756** | **$11,641** | | Long-term debt | $5,497 | $5,505 | | **Total liabilities** | **$10,108** | **$10,108** | | **Total stockholders' equity** | **$1,373** | **$1,259** | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2022, net cash provided by operating activities was $118 million, a decrease from $310 million in the prior-year period, primarily due to changes in working capital. Net cash used in investing activities was $177 million, mainly for capitalized software. Net cash used in financing activities was $7 million. The company's cash, cash equivalents, and restricted cash decreased by $85 million during the period | In millions | Six months ended June 30, 2022 | Six months ended June 30, 2021 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | **$118** | **$310** | | Net cash used in investing activities | $(177) | $(2,609) | | Net cash provided by (used in) financing activities | $(7) | $2,641 | | Increase (decrease) in cash, cash equivalents, and restricted cash | $(85) | $291 | | Cash, cash equivalents and restricted cash at end of period | $664 | $697 | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail significant accounting policies and events. Key disclosures include a change in reportable segments effective January 1, 2022, the financial impact of winding down Russian operations, the acquisition of cryptocurrency software provider LibertyX, finalization of the Cardtronics acquisition purchase price allocation, segment performance details, debt obligations, and updates on major environmental contingencies - Effective January 1, 2022, the company realigned its reportable segments to: Payments & Network, Digital Banking, Self-Service Banking, Retail, and Hospitality. Prior period disclosures were reclassified to conform to this new structure[26](index=26&type=chunk) - The company commenced an orderly wind-down of its Russian operations in Q1 2022 due to the war in Eastern Europe, resulting in a pre-tax net loss of **$22 million** for the six months ended June 30, 2022[27](index=27&type=chunk)[28](index=28&type=chunk) - On January 5, 2022, NCR completed the acquisition of LibertyX, a cryptocurrency software provider, for a total purchase consideration of approximately **$69 million**, including cash and stock. The acquisition is intended to provide a complete digital currency solution[45](index=45&type=chunk) - As of June 30, 2022, the aggregate amount of remaining performance obligations was approximately **$3.8 billion**, with about **three-quarters** expected to be recognized as revenue over the next **12 months**[37](index=37&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial results for the second quarter and first half of 2022, highlighting a 19% revenue increase in Q2 driven by the Cardtronics acquisition and growth in service revenue. The discussion addresses the impact of macroeconomic factors like rising interest rates, supply-chain challenges, and the strong U.S. dollar, which have pressured gross margins. The report details performance by the newly realigned business segments, liquidity position, and strategic initiatives, including a comprehensive strategic review announced in February 2022 - Q2 2022 revenue grew **19%** to **$1,997 million** (**23%** constant currency), but performance was impacted by external macro factors including rising interest rates, a strong U.S. dollar, and supply-chain challenges[196](index=196&type=chunk) - The company is continuing its transition to a software platform and payments company, with a goal of reaching **80%** annual recurring revenue by 2026. Recurring revenue was **60.9%** of total revenue in Q2 2022, up from **55.4%** in Q2 2021[194](index=194&type=chunk)[208](index=208&type=chunk) - On February 8, 2022, the Board of Directors initiated a comprehensive strategic review to evaluate alternatives for enhancing shareholder value. The process is ongoing with no set timetable[197](index=197&type=chunk) - Gross margin as a percentage of revenue declined from **27.2%** in Q2 2021 to **23.6%** in Q2 2022, primarily due to increased costs for fuel, component parts, and interest rates on vault cash agreements, along with other supply chain challenges[222](index=222&type=chunk)[223](index=223&type=chunk) [Results of Operations](index=44&type=section&id=Results%20of%20Operations) Consolidated revenue for Q2 2022 increased 19% to $1,997 million, with service revenue up 23% and product revenue up 11%. Gross margin percentage fell to 23.6% from 27.2% due to cost pressures. Income from operations rose to $103 million from $84 million. For the first half, revenue increased 20% to $3,863 million, but income from operations declined to $136 million from $194 million, reflecting sustained margin pressure | In millions | Three months ended June 30, 2022 | Three months ended June 30, 2021 | % Change | | :--- | :--- | :--- | :--- | | Total revenue | $1,997 | $1,677 | 19% | | Total gross margin | $471 | $456 | 3% | | *Gross Margin %* | *23.6%* | *27.2%* | *(3.6 pts)* | | Income from operations | $103 | $84 | 23% | | In millions | Six months ended June 30, 2022 | Six months ended June 30, 2021 | % Change | | :--- | :--- | :--- | :--- | | Total revenue | $3,863 | $3,221 | 20% | | Total gross margin | $882 | $870 | 1% | | *Gross Margin %* | *22.8%* | *27.0%* | *(4.2 pts)* | | Income from operations | $136 | $194 | (30)% | [Revenue and Adjusted EBITDA by Segment](index=51&type=section&id=Revenue%20and%20Adjusted%20EBITDA%20by%20Segment) For Q2 2022, Payments & Network revenue surged 515% to $332 million due to the Cardtronics acquisition. Self-Service Banking revenue grew 5% to $679 million, and Hospitality revenue increased 11% to $238 million. Retail revenue was flat at $562 million. Adjusted EBITDA performance was mixed, with Payments & Network growing significantly, while Retail declined 14% due to cost pressures and supply chain issues | Revenue (in millions) | Q2 2022 | Q2 2021 | % Change | | :--- | :--- | :--- | :--- | | Payments & Network | $332 | $54 | 515% | | Digital Banking | $131 | $129 | 2% | | Self-Service Banking | $679 | $645 | 5% | | Retail | $562 | $562 | 0% | | Hospitality | $238 | $215 | 11% | | Adjusted EBITDA (in millions) | Q2 2022 | Q2 2021 | % Change | | :--- | :--- | :--- | :--- | | Payments & Network | $97 | $19 | 411% | | Digital Banking | $56 | $55 | 2% | | Self-Service Banking | $142 | $140 | 1% | | Retail | $104 | $121 | (14)% | | Hospitality | $46 | $39 | 18% | [Financial Condition, Liquidity, and Capital Resources](index=55&type=section&id=Financial%20Condition%2C%20Liquidity%2C%20and%20Capital%20Resources) As of June 30, 2022, NCR had $398 million in cash and cash equivalents and total debt of $5.66 billion. Cash from operations for the first six months was $118 million, down from $310 million in the prior year, due to lower earnings and unfavorable working capital changes. Free cash flow was negative $10 million for the first half of 2022, compared to positive $235 million in 2021. The company believes it has sufficient liquidity to meet its obligations - Cash provided by operating activities decreased to **$118 million** in the first six months of 2022 from **$310 million** in the same period of 2021, driven by lower operating earnings and unfavorable working capital movements[266](index=266&type=chunk) - As of June 30, 2022, total debt was **$5.66 billion**, and borrowing capacity under the Revolving Credit Facility was approximately **$856 million**[279](index=279&type=chunk) | In millions | Six months ended June 30, 2022 | Six months ended June 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $118 | $310 | | Capital Expenditures & Software | $(174) | $(140) | | **Free cash flow (non-GAAP)** | **$(10)** | **$235** | [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=59&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is primarily exposed to market risks from changes in foreign currency exchange rates and interest rates. A substantial portion of operations and revenue is outside the U.S., creating foreign exchange risk, which is partially managed through hedging. Interest rate risk exists due to variable-rate debt and vault cash rental expenses. The company uses interest rate swaps and caps to manage this exposure - A hypothetical **10%** appreciation of the U.S. dollar would decrease the fair value of the company's hedge portfolio by **$8 million** as of June 30, 2022[292](index=292&type=chunk) - A hypothetical **100 basis point** increase in variable interest rates would increase pre-tax interest expense by approximately **$10 million** for the six months ended June 30, 2022[294](index=294&type=chunk) - A hypothetical **100 basis point** increase in variable interest rates would increase vault cash rental expense by approximately **$10 million** for the three months ended June 30, 2022, excluding the impact of interest rate swaps[295](index=295&type=chunk) [Item 4. Controls and Procedures](index=60&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of the end of the second quarter of 2022. There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2022[298](index=298&type=chunk) - No material changes to internal control over financial reporting occurred during the second quarter of 2022[299](index=299&type=chunk) [Part II. Other Information](index=61&type=section&id=PART%20II.%20Other%20Information) This section provides information on legal proceedings, risk factors, equity security sales, and required exhibits [Item 1. Legal Proceedings](index=61&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates by reference the information on legal proceedings detailed in Note 10, "Commitments and Contingencies," of the financial statements. The key legal matters discussed are environmental remediation liabilities related to the Fox River, Kalamazoo River, and a site in Ebina, Japan - Information regarding legal proceedings is detailed in Note 10 of the financial statements, covering significant environmental matters[104](index=104&type=chunk)[302](index=302&type=chunk) [Item 1A. Risk Factors](index=61&type=section&id=Item%201A.%20Risk%20Factors) The company states that there have been no material changes to the risk factors previously disclosed in its 2021 Annual Report on Form 10-K - There have been no material changes to the risk factors previously disclosed in the Company's 2021 Form 10-K[303](index=303&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=61&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company discusses its share repurchase programs. As of June 30, 2022, $153 million was available under the March 2017 program and approximately $782 million was available under the October 2016 dilution offset program. Repurchases are subject to market conditions and restrictions under the company's debt agreements - As of June 30, 2022, the company had two active share repurchase programs with a total availability of approximately **$935 million**[306](index=306&type=chunk) - The company's ability to repurchase shares is restricted by its Senior Secured Credit Facility and senior note indentures[308](index=308&type=chunk) [Item 6. Exhibits](index=62&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO pursuant to the Sarbanes-Oxley Act and iXBRL data files - Exhibits filed include CEO and CFO certifications (31.1, 31.2, 32) and financial data in iXBRL format (101, 104)[312](index=312&type=chunk)

Financial Performance and Key Metrics Changes - The company reported a total revenue of $2 billion, representing a 23% year-over-year growth on a constant currency basis [27] - Recurring revenue grew by 35% on a constant currency basis [28] - Adjusted EBITDA increased by 26% year-over-year, reaching $339 million [28] - Adjusted EBITDA margin expanded to 17%, a 250 basis point increase from the first quarter of 2022 [9][28] - Non-GAAP EPS was $0.71, up 15% year-over-year, with a negative impact of approximately $0.07 from the strengthening U.S. dollar [29] Business Line Data and Key Metrics Changes Payments & Networks - Revenue increased by $278 million or 515% year-over-year, driven by the acquisition of Cardtronics [32] - Adjusted EBITDA increased by 411% year-over-year, with a margin rate of 29% [33] - Transactions processed remained flat year-over-year but increased by 8% from the first quarter of 2022 [35] Digital Banking - Revenue and EBITDA increased by 2% year-over-year, with an adjusted EBITDA margin of 43% [36] - Registered users decreased by 3% and active users declined by 5% year-over-year [36] Self-Service Banking - Revenue increased by $34 million or 5% year-over-year, with an adjusted EBITDA margin of 21% [39] - ATM as a service units increased by 3% year-over-year, with expectations to triple the number of units by year-end [41] Retail - Revenue was flat year-over-year but up 4% on a constant currency basis [42] - Adjusted EBITDA decreased by 14% year-over-year, but improved sequentially by 620 basis points to a margin rate of 19% [44] Hospitality - Revenue increased by $23 million or 11% year-over-year, with adjusted EBITDA up 18% [49] - Payment attach rate for hospitality reached approximately 90% for new SMB customers [47] Market Data and Key Metrics Changes - The company experienced strong customer demand across all business segments, particularly in integrated payments and digital banking [10][12] - The Allpoint network saw growth in transaction volume and new financial institution partnerships [12] Company Strategy and Development Direction - The company is focused on transforming into a software-led service company with a higher shift to recurring revenue streams [7] - The strategic review process is ongoing, aimed at unlocking value for shareholders [21] - The company is investing in working capital to support growth and mitigate supply chain disruptions [31] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by high inflation, interest rates, and supply chain issues but expressed confidence in the company's execution and strategic initiatives [23][25] - The outlook for the full year remains unchanged, with expectations to hit the lower end of revenue and EBITDA guidance despite foreign exchange headwinds [26][72] Other Important Information - Free cash flow was flat, with significant investments in working capital to insulate customers from supply chain disruptions [31] - The company ended the quarter with $398 million in cash and significant liquidity available under its revolving credit facility [52] Q&A Session Summary Question: Follow-up on outlook and revenue guidance - Management indicated that foreign exchange pressures could reduce revenue by approximately $170 million in the second half, but they believe they can still reach the lower end of the guidance range [56][57] Question: Supply chain improvements - Management noted that while supply chain conditions have not worsened, they have implemented creative solutions to mitigate costs and improve component sourcing [59][60] Question: Pricing and cost headwinds - Management discussed the impact of inflation and interest rates on EBITDA margins, indicating ongoing efforts to manage costs and implement pricing actions [63][66] Question: Backlog and sales activity - Management confirmed that sales activity remains strong across all business lines, with continued growth in hardware and software services [75][77] Question: Free cash flow expectations - Management expressed confidence in converting inventory to cash in the latter half of the year, aiming to achieve the low end of the free cash flow guidance [80][81] Question: Competitive positioning and supply chain management - Management highlighted their ability to manage supply chain challenges as a competitive advantage, ensuring customer commitments were met despite disruptions [89][90] Question: Regional bank demand and ATM services - Management reported no significant changes in buying behavior from regional banks, with a growing interest in ATM as a service offerings [106][110]

Q2 2022 EARNINGS CONFERENCE CALL 1 MICHAEL HAYFORD, CEO OWEN SULLIVAN, PRESIDENT & COO TIM OLIVER, CFO July 27, 2022 NOTES TO INVESTORS Comments made during this conference call and in these materials contain "forwardlooking 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 statem ...

[PART I. Financial Information](index=3&type=section&id=PART%20I.%20Financial%20Information) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements of NCR Corporation for the three months ended March 31, 2022 and 2021, including statements of operations, comprehensive income, balance sheets, cash flows, changes in stockholder's equity, and detailed notes [Condensed Consolidated Statements of Operations (Unaudited)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20(Unaudited)) The company reported a net loss of $35 million for the three months ended March 31, 2022, a significant decline from a net income of $31 million in the prior year period. Total revenue increased by 21% to $1,866 million, driven by growth in both product and service revenues. However, operating income decreased substantially, and interest expense rose Financial Performance (Q1 2022 vs Q1 2021) | Metric | Q1 2022 (Millions) | Q1 2021 (Millions) | | :--------------------------------- | :----------------- | :----------------- | | Product revenue | $516 | $482 | | Service revenue | $1,350 | $1,062 | | Total revenue | $1,866 | $1,544 | | Income (loss) from operations | $33 | $110 | | Interest expense | $(63) | $(45) | | Net income (loss) | $(35) | $31 | | Basic EPS | $(0.28) | $0.20 | | Diluted EPS | $(0.28) | $0.19 | [Condensed Consolidated Statements of Comprehensive Income (Unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Unaudited)) For the three months ended March 31, 2022, NCR reported a total comprehensive loss of $17 million, a decrease from a total comprehensive income of $23 million in the prior year. This shift was primarily influenced by currency translation adjustments and significant unrealized gains on derivatives, partially offset by the net loss Comprehensive Income (Q1 2022 vs Q1 2021) | Metric | Q1 2022 (Millions) | Q1 2021 (Millions) | | :--------------------------------- | :----------------- | :----------------- | | Net income (loss) | $(35) | $31 | | Currency translation gains (loss) | $(26) | $(7) | | Unrealized gains (loss) on derivatives | $57 | $0 | | Total comprehensive income (loss) | $(17) | $23 | [Condensed Consolidated Balance Sheets (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) As of March 31, 2022, total assets increased slightly to $11,715 million from $11,641 million at December 31, 2021. Key changes include an increase in accounts receivable and inventories, while cash and cash equivalents decreased. Total liabilities also saw a minor increase, with long-term debt remaining substantial Balance Sheet Highlights (March 31, 2022 vs December 31, 2021) | Metric | March 31, 2022 (Millions) | December 31, 2021 (Millions) | | :--------------------------------- | :-------------------------- | :-------------------------- | | Cash and cash equivalents | $412 | $447 | | Accounts receivable, net | $1,071 | $959 | | Inventories | $805 | $754 | | Total current assets | $2,976 | $2,876 | | Goodwill | $4,570 | $4,519 | | Total assets | $11,715 | $11,641 | | Total current liabilities | $2,830 | $2,808 | | Long-term debt | $5,516 | $5,505 | | Total liabilities | $10,116 | $10,108 | | Total stockholders' equity | $1,325 | $1,259 | [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) Net cash provided by operating activities significantly decreased to $38 million for the three months ended March 31, 2022, from $155 million in the prior year, primarily due to lower operating earnings and unfavorable working capital movements. Net cash used in investing activities decreased, while financing activities provided a small net cash inflow Cash Flow Summary (Q1 2022 vs Q1 2021) | Activity | Q1 2022 (Millions) | Q1 2021 (Millions) | | :--------------------------------- | :----------------- | :----------------- | | Net cash provided by operating activities | $38 | $155 | | Net cash used in investing activities | $(86) | $(218) | | Net cash provided by financing activities | $1 | $98 | | Cash, cash equivalents and restricted cash at end of period | $692 | $391 | - Issued common stock and assumed unvested option awards in the acquisition of LibertyX for total non-cash consideration of **$68 million**, plus **$2 million** in assumed debt[18](index=18&type=chunk) [Condensed Consolidated Statements of Changes in Stockholder's Equity (Unaudited)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholder%27s%20Equity%20(Unaudited)) Total stockholders' equity attributable to NCR increased to $1,323 million as of March 31, 2022, from $1,256 million at December 31, 2021. This increase was mainly driven by stock issued in the acquisition of LibertyX ($68 million) and employee stock plans ($19 million), partially offset by a net loss and Series A preferred stock dividends Changes in Stockholder's Equity (Q1 2022) | Item | Amount (Millions) | | :--------------------------------- | :---------------- | | Balance as of December 31, 2021 | $1,259 | | Net income (loss) | $(34) | | Other comprehensive income (loss) | $18 | | Employee stock purchase and stock compensation plans | $19 | | Stock issued in acquisition of LibertyX | $68 | | Series A convertible preferred stock dividends | $(4) | | Balance as of March 31, 2022 | $1,325 | [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section provides detailed disclosures and explanations for the condensed consolidated financial statements, covering significant accounting policies, business combinations, goodwill, segment information, debt, income taxes, stock compensation, employee benefits, commitments, contingencies, preferred stock, EPS, derivatives, fair value, and AOCI [Note 1. Basis of Presentation and Summary of Significant Accounting Policies](index=10&type=section&id=Note%201.%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) The financial statements are unaudited and prepared in accordance with SEC rules and GAAP. Effective January 1, 2022, NCR realigned its reportable segments to Payments & Network, Digital Banking, Self-Service Banking, Retail, and Hospitality. The company recognized a $19 million loss in Q1 2022 due to winding down operations in Russia - Effective January 1, 2022, reportable segments were realigned to Payments & Network, Digital Banking, Self-Service Banking, Retail, and Hospitality[27](index=27&type=chunk) - Recognized a **$19 million loss** for the three months ended March 31, 2022, primarily in Cost of products, Cost of services, and Selling, general and administrative expenses, due to winding down operations in Russia[28](index=28&type=chunk) - Recognized **$228 million** in revenue that was included in contract liabilities as of December 31, 2021, during the three months ended March 31, 2022[34](index=34&type=chunk) - Aggregate amount of transaction price allocated to remaining performance obligations was approximately **$4.2 billion** as of March 31, 2022, with three-quarters expected to be recognized over the next 12 months[35](index=35&type=chunk) [Note 2. Business Combinations](index=12&type=section&id=Note%202.%20Business%20Combinations) On January 5, 2022, NCR acquired Moon Inc., dba LibertyX, a cryptocurrency software provider, for approximately $69 million in total purchase consideration, including $1 million cash and 1.4 million shares of common stock. This acquisition aims to enhance NCR's digital currency solutions and was allocated to the Payments & Network segment - On January 5, 2022, NCR acquired Moon Inc., dba LibertyX, a cryptocurrency software provider, to provide a complete digital currency solution[43](index=43&type=chunk) - Total purchase consideration for LibertyX acquisition was approximately **$69 million**, consisting of **$1 million** cash and approximately **1.4 million** shares of common stock[43](index=43&type=chunk)[45](index=45&type=chunk) Preliminary Purchase Price Allocation for LibertyX Acquisition | Item | Fair Value (Millions) | | :--------------------------------- | :-------------------- | | 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 of **$41 million** from LibertyX acquisition was allocated to the Payments & Network segment[46](index=46&type=chunk) [Note 3. Goodwill and Long-Lived Assets](index=14&type=section&id=Note%203.%20Goodwill%20and%20Long-Lived%20Assets) Following segment realignment on January 1, 2022, goodwill was reassigned to new reporting units. Total goodwill increased to $4,570 million as of March 31, 2022, from $4,519 million at December 31, 2021, primarily due to the LibertyX acquisition. Identifiable intangible assets, mainly reseller & customer relationships and intellectual property, totaled $2,387 million gross carrying amount Goodwill by Segment (March 31, 2022) | Segment | Goodwill (Millions) | | :------------------- | :------------------ | | Payments & Network | $1,035 | | Digital Banking | $596 | | Self-Service Banking | $1,538 | | Retail | $980 | | Hospitality | $269 | | Other | $152 | | **Total goodwill** | **$4,570** | - Additions to goodwill during Q1 2022 totaled **$45 million**, including purchase accounting adjustments related to the Cardtronics acquisition and goodwill from the LibertyX transaction[51](index=51&type=chunk) Identifiable Intangible Assets (March 31, 2022) | Asset Type | Gross Carrying Amount (Millions) | Accumulated Amortization (Millions) | | :--------------------------------- | :------------------------------- | :------------------------------- | | Reseller & customer relationships | $1,127 | $(409) | | Intellectual property | $1,041 | $(495) | | Customer contracts | $89 | $(89) | | Tradenames | $130 | $(85) | | **Total identifiable intangible assets** | **$2,387** | **$(1,078)** | - Amortization expense related to identifiable intangible assets was **$41 million** for the three months ended March 31, 2022, compared to **$20 million** in the prior year[56](index=56&type=chunk) [Note 4. Segment Information and Concentrations](index=15&type=section&id=Note%204.%20Segment%20Information%20and%20Concentrations) NCR's reportable segments are Payments & Network, Digital Banking, Self-Service Banking, Retail, and Hospitality. Segment performance is evaluated based on revenue and Adjusted EBITDA. Total segment revenue increased 21% to $1,863 million, and total Adjusted EBITDA increased 5% to $271 million for Q1 2022 compared to Q1 2021 Revenue by Segment (Q1 2022 vs Q1 2021) | Segment | Q1 2022 (Millions) | Q1 2021 (Millions) | Change (%) | | :------------------- | :----------------- | :----------------- | :--------- | | Payments & Network | $299 | $22 | 1,259% | | Digital Banking | $136 | $123 | 11% | | Self-Service Banking | $611 | $628 | (3%) | | Retail | $546 | $520 | 5% | | Hospitality | $211 | $179 | 18% | | Other | $68 | $77 | (12%) | | **Total segment revenue** | **$1,863** | **$1,544** | **21%** | Adjusted EBITDA by Segment (Q1 2022 vs Q1 2021) | Segment | Q1 2022 (Millions) | Q1 2021 (Millions) | Change (%) | | :------------------- | :----------------- | :----------------- | :--------- | | Payments & Network | $98 | $3 | 3,167% | | Digital Banking | $56 | $54 | 4% | | Self-Service Banking | $112 | $137 | (18%) | | Retail | $67 | $98 | (32%) | | Hospitality | $41 | $36 | 14% | | Corporate and Other | $(97) | $(67) | 45% | | **Total Adjusted EBITDA** | **$271** | **$258** | **5%** | - Recurring revenue increased **35%** to **$1,179 million** in Q1 2022, representing **63.2%** of total revenue, up from **56.6%** in Q1 2021[64](index=64&type=chunk) [Note 5. Debt Obligations](index=18&type=section&id=Note%205.%20Debt%20Obligations) As of March 31, 2022, NCR's total short-term borrowings were $83 million and long-term debt was $5,516 million. The Senior Secured Credit Facility includes $1.938 billion outstanding under term loan facilities and $415 million under the revolving credit facility, with a borrowing capacity of $861 million. The company also has various senior unsecured notes totaling $3.3 billion Debt Summary (March 31, 2022) | Type of Debt | Amount (Millions) | Weighted-Average Interest Rate | | :--------------------------------- | :---------------- | :----------------------------- | | Short-term borrowings | $83 | 2.31% | | Term loan facility | $1,857 | 2.47% | | Revolving credit facility | $415 | 2.54% | | Senior notes (various maturities) | $3,300 | N/A | | **Total Long-Term Debt** | **$5,516** | N/A | - Borrowing capacity under the Revolving Credit Facility was **$861 million** at March 31, 2022[67](index=67&type=chunk) - The fair value of long-term debt was **$5.54 billion** as of March 31, 2022[73](index=73&type=chunk) [Note 6. Trade Receivables Facility](index=19&type=section&id=Note%206.%20Trade%20Receivables%20Facility) NCR maintains a trade receivables facility with PNC Bank, allowing its bankruptcy-remote subsidiaries to sell trade receivables on a revolving basis. As of March 31, 2022, approximately $300 million of trade receivables had been sold and derecognized, with an additional $326 million owned by the SPEs - Approximately **$300 million** of trade receivables were sold and derecognized as of March 31, 2022 and December 31, 2021[76](index=76&type=chunk) - The SPEs collectively owned **$326 million** of trade receivables as of March 31, 2022, compared to **$228 million** as of December 31, 2021[76](index=76&type=chunk) [Note 7. Income Taxes](index=20&type=section&id=Note%207.%20Income%20Taxes) Income tax expense for Q1 2022 was $13 million, down from $17 million in Q1 2021, primarily due to a pre-tax book loss offset by the removal of tax benefits in certain foreign jurisdictions. The company expects gross unrecognized tax benefits to decrease by $5 million to $13 million in the next 12 months Income Tax Expense (Q1 2022 vs Q1 2021) | Metric | Q1 2022 (Millions) | Q1 2021 (Millions) | | :------------------- | :----------------- | :----------------- | | Income tax expense | $13 | $17 | - Gross unrecognized tax benefits are estimated to decrease by **$5 million** to **$13 million** in the next 12 months[81](index=81&type=chunk) [Note 8. Stock Compensation Plans](index=20&type=section&id=Note%208.%20Stock%20Compensation%20Plans) Stock-based compensation expense for Q1 2022 was $34 million, down from $44 million in Q1 2021. The primary types are restricted stock units and stock options. Unrecognized compensation costs total $228 million for restricted stock and $15 million for stock options, expected to be recognized over weighted average periods of 1.2 and 0.5 years, respectively Stock-based Compensation Expense (Q1 2022 vs Q1 2021) | Type | Q1 2022 (Millions) | Q1 2021 (Millions) | | :--------------------------------- | :----------------- | :----------------- | | Restricted stock units | $26 | $36 | | Stock options | $5 | $6 | | Employee stock purchase plan | $3 | $2 | | **Total Stock-based compensation expense** | **$34** | **$44** | - Total unrecognized compensation cost of **$228 million** related to unvested restricted stock grants is expected to be recognized over approximately **1.2 years**[86](index=86&type=chunk) - Total unrecognized compensation cost of **$15 million** related to unvested stock option grants is expected to be recognized over approximately **0.5 years**[86](index=86&type=chunk) [Note 9. Employee Benefit Plans](index=21&type=section&id=Note%209.%20Employee%20Benefit%20Plans) Net periodic benefit cost for pension plans was an income of $10 million in Q1 2022, compared to an income of $2 million in Q1 2021. Net benefit cost for postemployment plans increased to $13 million from $6 million. NCR anticipates contributing $17 million to international pension plans, $1 million to U.S. postretirement plans, and $30 million to postemployment plans in 2022 Net Periodic Benefit Cost (Income) - Pension Plans (Q1 2022 vs Q1 2021) | Metric | Q1 2022 (Millions) | Q1 2021 (Millions) | | :--------------------------------- | :----------------- | :----------------- | | Net service cost | $1 | $1 | | Interest cost | $13 | $11 | | Expected return on plan assets | $(24) | $(14) | | **Net periodic benefit cost (income)** | **$(10)** | **$(2)** | Net Benefit Cost - Postemployment Plan (Q1 2022 vs Q1 2021) | Metric | Q1 2022 (Millions) | Q1 2021 (Millions) | | :--------------------------------- | :----------------- | :----------------- | | Net service cost | $13 | $6 | | Interest cost | $1 | $1 | | Amortization of prior service benefit | $(1) | $(1) | | **Net benefit cost** | **$13** | **$6** | - Anticipates contributing **$17 million** to international pension plans, **$1 million** to U.S. postretirement plan, and **$30 million** to postemployment plan in 2022[92](index=92&type=chunk)[93](index=93&type=chunk) [Note 10. Commitments and Contingencies](index=22&type=section&id=Note%2010.%20Commitments%20and%20Contingencies) NCR is involved in various legal proceedings and environmental matters, including the Fox River, Kalamazoo River, and Ebina sites. The company has established reserves for these matters, with the net reserve for Fox River at $26 million and for Kalamazoo River at $96 million as of March 31, 2022. Environmental remediation estimates are subject to uncertainties - As of March 31, 2022, the gross reserve for the Fox River matter was approximately **$4 million**, and the net reserve was approximately **$26 million**[106](index=106&type=chunk) - As of March 31, 2022, the total reserve for the Kalamazoo River matter was **$96 million**, net of expected contributions from co-obligors and indemnitors (expected to range from **$70 million** to **$150 million**)[114](index=114&type=chunk) - The reserve for the Ebina environmental matter in Japan was **$15 million** as of March 31, 2022[118](index=118&type=chunk) Warranty Reserve Liability Activity (Q1 2022) | Item | Amount (Millions) | | :--------------------------------- | :---------------- | | Beginning balance as of January 1 | $19 | | Accruals for warranties issued | $5 | | Settlements (in cash or in kind) | $(7) | | **Ending balance as of March 31** | **$17** | [Note 11. Series A Convertible Preferred Stock](index=27&type=section&id=Note%2011.%20Series%20A%20Convertible%20Preferred%20Stock) Holders of Series A Convertible Preferred Stock are entitled to a cumulative 5.5% annual dividend, payable quarterly in cash or in-kind. $4 million in cash dividends were paid in Q1 2022. The stock is convertible into common stock at $30.00 per share, with a maximum of 9.2 million common shares issuable upon conversion - Holders of Series A Convertible Preferred Stock are entitled to a cumulative dividend at the rate of **5.5%** per annum, payable quarterly in arrears (cash or in-kind)[126](index=126&type=chunk) - Cash dividends of **$4 million** were paid for Series A preferred shares during the three months ended March 31, 2022[126](index=126&type=chunk) - Convertible at the option of holders into common stock at a conversion price of **$30.00 per share**, with a maximum of **9.2 million** common shares issuable[127](index=127&type=chunk) [Note 12. Earnings Per Share](index=28&type=section&id=Note%2012.%20Earnings%20Per%20Share) Basic EPS for Q1 2022 was $(0.28) and diluted EPS was $(0.28), reflecting a net loss attributable to NCR common stockholders of $(38) million. Due to the net loss, potential common shares (preferred stock, restricted stock units, stock options) were excluded from diluted EPS calculation as their effect would have been anti-dilutive Earnings Per Share (Q1 2022 vs Q1 2021) | Metric | Q1 2022 | Q1 2021 | | :--------------------------------- | :-------- | :-------- | | Basic EPS from continuing operations | $(0.27) | $0.20 | | Total Basic EPS | $(0.28) | $0.20 | | Diluted EPS from continuing operations | $(0.27) | $0.19 | | Total Diluted EPS | $(0.28) | $0.19 | - For Q1 2022, **9.2 million** Series A Convertible Preferred Stock shares and **11.2 million** weighted average restricted stock units and stock options were excluded from the diluted share count due to their anti-dilutive effect[133](index=133&type=chunk) [Note 13. Derivatives and Hedging Instruments](index=29&type=section&id=Note%2013.%20Derivatives%20and%20Hedging%20Instruments) NCR uses derivative instruments, including foreign currency forward/option contracts and interest rate swap/cap agreements, to manage foreign currency exchange risk and interest rate risk. In Q1 2022, the company executed a $250 million interest rate swap and terminated $2 billion notional interest rate cap agreements for $64 million proceeds - Manages foreign currency transaction exposure using foreign currency forward and option contracts, hedging a portion of forecasted non-functional currency denominated cash flows for up to **15 months**[136](index=136&type=chunk)[138](index=138&type=chunk) - Utilizes interest rate swap contracts or interest rate cap agreements to add stability to interest cost and manage exposure to interest rate movements[139](index=139&type=chunk) - In January 2022, executed a **$250 million** notional interest rate swap contract (fixed rate **1.43%**) terminating January 1, 2025, designated as a cash flow hedge of floating interest rate cost associated with U.S. Dollar vault cash agreements[141](index=141&type=chunk) - In March 2022, terminated outstanding **$2 billion** notional interest rate cap agreements maturing in 2024 for proceeds of **$64 million**, with gains recognized ratably through July 1, 2024[142](index=142&type=chunk) - As of March 31, 2022, the balance in Accumulated Other Comprehensive Income (AOCI) related to Interest Rate Derivatives was **$53 million**, up from **$8 million** at December 31, 2021[144](index=144&type=chunk) [Note 14. Fair Value of Assets and Liabilities](index=32&type=section&id=Note%2014.%20Fair%20Value%20of%20Assets%20and%20Liabilities) Assets and liabilities measured at fair value on a recurring basis primarily include deposits in money market mutual funds (Level 1), foreign exchange contracts, and interest rate swap/cap agreements (Level 2). As of March 31, 2022, total assets measured at fair value were $41 million, and total liabilities were $16 million Fair Values of Derivative Instruments (March 31, 2022) | Item | Total (Millions) | Level 1 (Millions) | Level 2 (Millions) | | :--------------------------------- | :--------------- | :----------------- | :----------------- | | **Assets:** | | | | | Deposits held in money market mutual funds | $17 | $17 | $0 | | Foreign exchange contracts | $1 | $0 | $1 | | Interest rate swap agreements | $23 | $0 | $23 | | **Total Assets** | **$41** | **$17** | **$24** | | **Liabilities:** | | | | | Interest rate swap agreements | $13 | $0 | $13 | | Foreign exchange contracts | $3 | $0 | $3 | | **Total Liabilities** | **$16** | **$0** | **$16** | [Note 15. Accumulated Other Comprehensive Income (Loss) (AOCI)](index=34&type=section&id=Note%2015.%20Accumulated%20Other%20Comprehensive%20Income%20(Loss)%20(AOCI)) AOCI changed from a loss of $291 million at December 31, 2021, to a loss of $273 million at March 31, 2022. This was primarily due to a $44 million increase in effective cash flow hedges, partially offset by a $26 million decrease from currency translation adjustments Changes in Accumulated Other Comprehensive Income (AOCI) by Component (Q1 2022) | Component | Balance as of Dec 31, 2021 (Millions) | Net Current Period Other Comprehensive (Loss) Income (Millions) | Balance as of Mar 31, 2022 (Millions) | | :--------------------------------- | :------------------------------------ | :------------------------------------------------------------ | :------------------------------------ | | Currency Translation Adjustments | $(275) | $(26) | $(301) | | Employee Benefit Plans | $(24) | $(1) | $(25) | | Effective Cash Flow Hedges | $8 | $45 | $53 | | **Total AOCI** | **$(291)** | **$18** | **$(273)** | [Note 16. Supplemental Financial Information](index=35&type=section&id=Note%2016.%20Supplemental%20Financial%20Information) Accounts receivable, net, increased to $1,071 million as of March 31, 2022, from $959 million at December 31, 2021, with an allowance for credit losses of $26 million. Total inventories increased to $805 million, driven by increases in finished goods and service parts Accounts Receivable (March 31, 2022 vs Dec 31, 2021) | Metric | March 31, 2022 (Millions) | December 31, 2021 (Millions) | | :--------------------------------- | :-------------------------- | :-------------------------- | | Accounts receivable, gross | $1,097 | $983 | | Less: allowance for credit losses | $(26) | $(24) | | **Total accounts receivable, net** | **$1,071** | **$959** | Inventories (March 31, 2022 vs Dec 31, 2021) | Type | March 31, 2022 (Millions) | December 31, 2021 (Millions) | | :--------------------------------- | :-------------------------- | :-------------------------- | | Work in process and raw materials | $176 | $184 | | Finished goods | $241 | $185 | | Service parts | $388 | $385 | | **Total inventories** | **$805** | **$754** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=36&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on NCR's financial condition and results of operations for the three months ended March 31, 2022, discussing business overview, strategic initiatives, macroeconomic impacts, consolidated results, segment performance, and liquidity [Overview](index=36&type=section&id=Overview) NCR is a software- and services-led enterprise technology provider for stores, restaurants, and self-directed banking. The company realigned its segments in Q1 2022 and is transitioning to a software platform and payments company, aiming for 80% annual recurring revenue and 15% non-GAAP EPS growth by 2026 - NCR is a software- and services-led enterprise technology provider for stores, restaurants, and self-directed banking, with a focus on digital-first software and services[165](index=165&type=chunk) - Aspirational five-year financial goals for 2026 include **80%** annual recurring revenue, **15%** annual non-GAAP EPS growth, and **$1 billion** annual non-GAAP free cash flow[172](index=172&type=chunk) - The Board of Directors approved a comprehensive strategic review to evaluate a full range of strategic alternatives, including disposition, spin-off, merger, or sale of the company[175](index=175&type=chunk) - The company continues to be exposed to macroeconomic pressures from the COVID-19 pandemic, supply chain challenges, and spikes in commodity and energy prices due to geopolitical challenges, including the war in Eastern Europe[177](index=177&type=chunk)[179](index=179&type=chunk) [Results from Operations](index=39&type=section&id=Results%20from%20Operations) For Q1 2022, total revenue increased 21% to $1,866 million, driven by service revenue growth. However, net income from continuing operations attributable to NCR shifted to a loss of $33 million from a $30 million income in Q1 2021, and Adjusted EBITDA increased modestly by 5% to $271 million. Gross margin percentage declined due to increased costs Key Strategic Financial Metrics (Q1 2022 vs Q1 2021) | Metric | Q1 2022 (Millions) | Q1 2021 (Millions) | % of Total Revenue (2022) | % of Total Revenue (2021) | Change (%) | | :--------------------------------- | :----------------- | :----------------- | :------------------------ | :------------------------ | :--------- | | Recurring revenue | $1,179 | $874 | 63.2% | 56.6% | 35% | | All other products and services | $687 | $670 | 36.8% | 43.4% | 3% | | Total Revenue | $1,866 | $1,544 | 100.0% | 100.0% | 21% | | Net income (loss) from continuing operations attributable to NCR | $(33) | $30 | (1.8%) | 1.9% | (210%) | | Adjusted EBITDA | $271 | $258 | 14.5% | 16.7% | 5% | - The non-GAAP presentation of financial measures for Q1 2022 excludes the impact of operations in Russia, including **$19 million** from impairments, severance charges, and collectability assessment, due to the orderly wind down of operations[190](index=190&type=chunk) [Consolidated Results](index=40&type=section&id=Consolidated%20Results) Total revenue grew 21% YoY, with product revenue up 7% and service revenue up 27%. Total gross margin decreased by 1% to $411 million, and as a percentage of revenue, it declined from 26.8% to 22.0%, primarily due to increased costs (fuel, components, interest rates) and impacts from Russia operations and acquisition-related amortization Revenue Breakdown (Q1 2022 vs Q1 2021) | Metric | Q1 2022 (Millions) | Q1 2021 (Millions) | % of Revenue (2022) | % of Revenue (2021) | Change (%) | | :--------------------------------- | :----------------- | :----------------- | :------------------ | :------------------ | :--------- | | Product revenue | $516 | $482 | 27.7% | 31.2% | 7% | | Service revenue | $1,350 | $1,062 | 72.3% | 68.8% | 27% | | **Total revenue** | **$1,866** | **$1,544** | **100.0%** | **100.0%** | **21%** | Gross Margin (Q1 2022 vs Q1 2021) | Metric | Q1 2022 (Millions) | Q1 2021 (Millions) | % of Revenue (2022) | % of Revenue (2021) | Change (%) | | :--------------------------------- | :----------------- | :----------------- | :------------------ | :------------------ | :--------- | | Product gross margin | $24 | $74 | 4.7% | 15.4% | (68%) | | Service gross margin | $387 | $340 | 28.7% | 32.0% | 14% | | **Total gross margin** | **$411** | **$414** | **22.0%** | **26.8%** | **(1%)** | - Gross margin percentage decreased from **26.8%** to **22.0%** due to increases in fuel costs, component parts, interest rates, and other supply chain challenges, as well as **$14 million** related to Russia operations and **$19 million** of acquisition-related intangible asset amortization[198](index=198&type=chunk) Operating Expenses (Q1 2022 vs Q1 2021) | Expense Type | Q1 2022 (Millions) | Q1 2021 (Millions) | Change (%) | | :--------------------------------- | :----------------- | :----------------- | :--------- | | Selling, general and administrative | $313 | $238 | 32% | | Research and development | $65 | $66 | (2%) | | Interest expense | $63 | $45 | 40% | | Other income (expense), net | $9 | $(17) | N/A | | Income tax expense (benefit) | $13 | $17 | (24%) | - Loss from discontinued operations was **$1 million** in Q1 2022, driven by immaterial updates to environmental remediation matters[211](index=211&type=chunk) [Segment Revenue and Adjusted EBITDA](index=43&type=section&id=Segment%20Revenue%20and%20Adjusted%20EBITDA) Payments & Network revenue and Adjusted EBITDA saw significant increases due to the Cardtronics and LibertyX acquisitions. Digital Banking and Hospitality also showed growth. Self-Service Banking and Retail experienced declines in Adjusted EBITDA, primarily due to supply chain challenges, increased fuel costs, and product mix - Payments & Network revenue increased **1,259%** and Adjusted EBITDA increased **3,167%** due to additional payments processing revenue from the Cardtronics and LibertyX acquisitions[216](index=216&type=chunk)[217](index=217&type=chunk)[222](index=222&type=chunk) - Digital Banking revenue increased **11%** and Adjusted EBITDA increased **4%** due to growth in software license and cloud services[216](index=216&type=chunk)[218](index=218&type=chunk)[223](index=223&type=chunk) - Self-Service Banking revenue decreased **3%** and Adjusted EBITDA declined **18%** due to lower ATM hardware sales (supply chain challenges) and increased costs, partially offset by software and services revenue growth[216](index=216&type=chunk)[219](index=219&type=chunk)[224](index=224&type=chunk) - Retail Adjusted EBITDA declined **32%** primarily due to product cost and mix, increased labor costs, and other supply chain challenges, despite a **5%** increase in revenue[216](index=216&type=chunk)[220](index=220&type=chunk)[225](index=225&type=chunk) - Hospitality revenue increased **18%** and Adjusted EBITDA increased **14%**, driven by point-of-sale solutions, services, and payments processing revenue, partially offset by supply chain challenges and increased fuel costs[216](index=216&type=chunk)[221](index=221&type=chunk)[226](index=226&type=chunk) [Financial Condition, Liquidity, and Capital Resources](index=45&type=section&id=Financial%20Condition%2C%20Liquidity%2C%20and%20Capital%20Resources) Cash provided by operating activities decreased significantly to $38 million in Q1 2022 from $155 million in Q1 2021, resulting in a non-GAAP free cash outflow of $10 million. The company's total debt was $5.66 billion, with $861 million available under its revolving credit facility. NCR believes it has sufficient liquidity to meet its obligations - Net cash provided by operating activities decreased to **$38 million** in Q1 2022 from **$155 million** in Q1 2021, driven by lower operating earnings and unfavorable working capital movements[228](index=228&type=chunk) Free Cash Flow (Non-GAAP) (Q1 2022 vs Q1 2021) | Metric | Q1 2022 (Millions) | Q1 2021 (Millions) | | :--------------------------------- | :----------------- | :----------------- | | Net cash provided by operating activities | $38 | $155 | | Expenditures for property, plant and equipment | $(15) | $(10) | | Additions to capitalized software | $(65) | $(51) | | Restricted cash settlement activity | $28 | $(5) | | Pension contributions | $4 | $4 | | **Free cash flow (non-GAAP)** | **$(10)** | **$93** | - Total debt was **$5.66 billion** as of March 31, 2022 (excluding deferred fees), with **$861 million** borrowing capacity under the revolving credit facility[240](index=240&type=chunk) - Cash and cash equivalents held by foreign subsidiaries totaled **$336 million** as of March 31, 2022[239](index=239&type=chunk) - Management believes the company has sufficient liquidity to meet expected pension, postemployment, postretirement plan contributions, environmental remediation payments, debt servicing, and transformation initiatives[241](index=241&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=49&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) NCR is exposed to market risks from foreign currency exchange rates and interest rates. The company uses derivatives to manage these exposures, hedging foreign currency transaction risk and using interest rate swaps/caps to manage variable-rate debt and vault cash rental obligations - Primary market risks are changes in foreign currency exchange rates and interest rates[249](index=249&type=chunk) - Manages foreign exchange risk by hedging transactional exposures using foreign currency forward and option contracts, with exposure to approximately **50** functional currencies[250](index=250&type=chunk) - Approximately **58%** of borrowings were on a fixed rate basis as of March 31, 2022[254](index=254&type=chunk) - A hypothetical **100 basis point** increase in variable interest rates would increase pre-tax interest expense by approximately **$6 million** and vault cash rental expense by approximately **$11 million** (excluding swaps)[254](index=254&type=chunk)[256](index=256&type=chunk) - Credit risk on accounts receivable and financial instruments is managed through credit approvals, limits, and monitoring procedures[257](index=257&type=chunk) [Item 4. Controls and Procedures](index=50&type=section&id=Item%204.%20Controls%20and%20Procedures) NCR's Chief Executive and Chief Financial Officers concluded that the company's disclosure controls and procedures were effective as of March 31, 2022. There have been no material changes in internal control over financial reporting during the quarter - The Company's Chief Executive and Chief Financial Officers concluded that NCR's disclosure controls and procedures were effective as of March 31, 2022[258](index=258&type=chunk) - There have been no material changes in internal control over financial reporting during the three months ended March 31, 2022[259](index=259&type=chunk) [PART II. Other Information](index=51&type=section&id=PART%20II.%20Other%20Information) [Item 1. Legal Proceedings](index=51&type=section&id=Item%201.%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from Note 10, "Commitments and Contingencies," in the Notes to Condensed Consolidated Financial Statements - Information required by this item is included in Note 10, "Commitments and Contingencies," of the Notes to Condensed Consolidated Financial Statements[262](index=262&type=chunk) [Item 1A. Risk Factors](index=51&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the Company's 2021 Annual Report on Form 10-K. The company acknowledges that additional unknown risks could still materially affect its business - There have been no material changes to the risk factors previously set forth under Part I, Item IA ("Risk Factors") of the Company's 2021 Annual Report on Form 10-K[263](index=263&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=51&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) NCR has two share repurchase programs: one to offset dilution (approx. $768 million available) and another for general repurchases (approx. $153 million available). Repurchases are subject to market conditions and restrictions under debt agreements. In Q1 2022, 0.5 million shares were purchased to cover withholding taxes - Approximately **$768 million** was available for repurchases under the October 2016 dilution offset program as of March 31, 2022[266](index=266&type=chunk) - Approximately **$153 million** was available for repurchases under the March 2017 share repurchase program as of March 31, 2022[266](index=266&type=chunk) - For the three months ended March 31, 2022, **0.5 million** shares were purchased at an average price of **$39.03 per share** to cover withholding taxes[267](index=267&type=chunk) - The Company's ability to repurchase common stock is restricted under its senior secured credit facility and senior unsecured notes indentures[268](index=268&type=chunk) [Item 6. Exhibits](index=52&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including various certifications (Rule 13a-14(a), 18 U.S.C. Section 1350), iXBRL financial statements, and the Cover Page Interactive Data File - Key exhibits include certifications (**31.1**, **31.2**, **32**), iXBRL formatted financial statements (**101**), and the Cover Page Interactive Data File (**104**)[271](index=271&type=chunk) [Signatures](index=53&type=section&id=Signatures) The report is signed on April 29, 2022, by Timothy C. Oliver, Senior Executive Vice President and Chief Financial Officer of NCR Corporation, affirming due authorization - The report was signed by Timothy C. Oliver, Senior Executive Vice President and Chief Financial Officer, on April 29, 2022[275](index=275&type=chunk)

NCR Corporation (NCR) Q1 2022 Earnings Conference Call April 26, 2022 4:30 PM ET Company Participants Michael Nelson - Treasurer and VP of IR Michael Hayford - CEO Owen Sullivan - President and COO Tim Oliver - CFO Conference Call Participants Erik Woodring - Morgan Stanley Matt Summerville - D.A. Davidson Charles Nabhan - Stephens Kartik Mehta - Northcoast Research Paul Chung - JP Morgan Operator Good day, and welcome to the NCR Corporation First Quarter Fiscal Year 2022 Earnings Conference Call. Today's c ...

Q1 2022 EARNINGS CONFERENCE CALL 1 MICHAEL HAYFORD, CEO OWEN SULLIVAN, PRESIDENT & COO TIM OLIVER, CFO April 26, 2022 NOTES TO INVESTORS Comments made during this conference call and in these materials contain "forwardlooking 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 state ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ________________________ FORM 10-K ________________________ (Mark One) ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 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 ________________________ NCR CORPORAT ...