NCR - Earnings call transcript Q3 2018

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Operator

Good day and welcome to the NCR Corporation Third Quarter Fiscal Year 2018 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Michael Nelson, Vice President of Investor Relations. Please go ahead, sir.

Michael G. Nelson

you our thank earnings quarter and call. afternoon for third joining XXXX Good

the Mike Officer; three today Chief me ago Fernandez, call Joining on two NCR are Martire, Chief Officer; Owen months Executive who who joined as Chief Executive Sullivan, Hayford, Frank joined ago NCR Financial months as Operating Andre and Officer; and President Chairman.

the beliefs, will of website. include our get that On With to including and risks Annual described that be our to expectations. discussion materially later materials and that, Investor today's are and and measures the will our uncertainties be SEC, you website, current to let will non-GAAP now to reflect call presentation described from and statements on in presentation remind forward-looking I today earnings they're our release me started, periodic discussing turn These of reconciled non-GAAP and Before These could our Mike. with available we results on financial over statements. like Report. ncr.com. the subject our cause those but expectations to in risks and uncertainties These actual differ we our the also A page call, replay measures. this are call their would counterparts GAAP certain Relations filings

Michael Dale Hayford

take financial performance. my brief Andre, X with over during an will of Frank, finance today third overview begin it quarter on our a Owen, who'll slide some the provide for And and on XXXX before of thank us your improvements, I Thanks, update joining and call. will our for Owen, We'll Michael, then begin performance everyone, Andre our you, the operating our to questions. earnings operational on and turning and views I will business with quarter. review

we've line execution. largely noted and areas of with quarter our improving emphasis operational we strategic cloud third our and revenue recurring Two focus revenues to in on results driving expectations are were expanding Our continue growth.

which XX our areas X% of to XX% up remain to quarter, a X%. while services MX last needs reached Also, revenues year. of order During services cloud the consistent expansion compared implementation quarter, initiative basis were profile is total where in number we we in NCR critical margin revenue, points to priority. XX.X% represent margin about gross margin Improving of offer the key a improve customers. will our our as the spoke increased recurring value quarter, elevate up driving in Last further in revenues the

we are work those We've update at been a execution We and network hard redesigning alleviating supply chain minutes. in manufacturing and addressing constraints. challenges of our a also will provide few an progress

the Our ATM increase during success to has on meaningful production a quarter. pace in deliver date to us fourth

capital referenced JetPay. via announced we our allocation strategy. achieve sales a last the the call, program initiatives announced more million In in will savings addition cost targeted to expected products On of and services need additional we $XXX on pending on use sales savings that identified remain and Andre execute plan, least M&A our his our to acquisition adding MX we week, our network our previously opportunities section. To Last our cover are existing strategy. in in to increase focused payments markets. entry at this, manufacturing have result XXXX. to detail this restructuring our to to in We of shared we to distribution that into

acquisitions I'll services few our and disciplined recurring discuss a capital take allocation more recent to in that M&A targeted and continue mix approach shift to to seek will minutes. our revenue. a We accelerate software,

care and quarter call. financial, across that sector. of and includes we our retail, large, shared with First, NCR taking names built base on customers. X strategic top all the the let's slide second review blue-chip hospitality has customer move on our established priorities begins a to global It

We on introductions partner in our providing products bringing are to key a critical including timely the business focus innovate several challenges priority, drivers a continue to and the quality product and These new areas, the execution highest and solutions solutions key to faster. are execution our high-quality provider customers market second fashion. behind to and market

improve will dedicated We through Team, Accelerated to solutions have swiftly and including Owen more our or ACAT, detail. Customer discuss accelerate moved Activation deployment, in quality which

elevate and This The to and and deployment to of priority organizational drive development that our the market, streamline solutions. is customer time and growth and marketplace, is key fourth silos priority accelerated growth. faster market. voice enable business to eliminate third priority. our to the our advantage is designed processes our competitive provide The Strengthening important ultimately to results should profile be most speed delay and

not a We side manner, on on organizational diligent will but execute on priorities just the cost these in products well. side, as and

to by spend allocating highest opportunities the initiative, see reduction evidenced our as costs while our managing we actively cost are the market. across growth We also

value I are payment monetize processing. expand a will We demonstrated streams NCR's targeted give which will new announced NCR high our on And into recent This through definitive more provider the customers. payment. agreement strengthen will recurring will into accelerating priorities, to that expands accretive program mix through end-to-end our M&A bundled It integrated allow our by revenue platform and the implement to sale is speak with to powerful via payment shifting flow and we recurring to of a week, transactions we to of again, is be services, innovative market, able Last value turnkey, simplicity our profitable of sell XX JetPay integrated provides JetPay's expected products a acquire driving roughly point as the each expansion. us EPS to bundles The provider and JetPay, with and cash our X. months closing. JetPay of price while acquisition within JetPay represents X.X space to payments purchase us our slide offering diversifies to and to our of and times and point specialization, processing, acquisitions the growth and million and use proposition our platform. growth our of expanding the solutions focused end-to-end, revenue entry will payments payment revenue as on be customers, NCR our deliver consistent revenues bring functionality. software also of consistent acquisition, also to payment streams $XXX highly to enhances the strategy. offering. we we driving sale

analytics platform. Zipscene, patterns wealth the enables the During our third we targeted data we data a company. aggregates data from back to This provide quarter, to the of data begin acquisition marketing customers' monetizing enterprise of buying NCR restaurant. Zipscene completed through point-of-sale and also restaurant collect the

about and let enable high-quality mix additions shift over market, believe better their services Zipscene, We with bring to the pass call and are the take expand are of and of success. and consistent the they our software me by strategic JetPay solutions excited recurring With revenues, our that, care to mandate, to helping customers our Owen.

Owen J. Sullivan

Thank you, Mike.

update to and arrival, our our as and take continue Columbus, Budapest. software- an a on to efforts we we had facilities in manufacturing related Mexico my network accelerate distribution slide our company. actions services-led on to our execute X, network visit manufacturing to Moving strategy necessary on Since Nashville, to transformation I've and to our the redesign to our opportunity

with third-party on Jabil, business. and of side the those the During part I partners, new distribution visits, on met our manufacturing our CEVA

has the been Our out team across significant confident to progress am network To-date, set has benefits we will accomplish. milestones. I key we delivered the and achieve the on

improved facilitate flow. First, third-party to we supply and logistics and our recently a opened with help chain distribution new CEVA optimize warehouse logistics

hardware structure, fixed P&L to are we be USI to mitigating received increased is cycles. these Guadalajara. manufacturing structure thus have and with Jabil the with fourth partners to variable have benefit to their from our a production to track largely demand significant of ramp Both deliver Second, production these a cost third-party quarter demands. begun to Chihuahua The on ability shift in our meet and more a in our partners exposure

related year-end, two the largely resolved. will plant XX facilities by deliver additional rates. the our improvement we constraints well of Series global have overall With our chain been closing to in utilization The supply Beijing as ATM as

demand Overall, the are working initiatives. steady XX We through to made backlog. meet hardware ramping and Series we've are our generated increased our has stronger-than-anticipated significantly progress transformation production on our

heighten needs we on now beginning fourth focus quarter. as to initiatives the execute Our in these

in We the for are years making position progress production overall competitive and position and to global strengthen best cost ahead. our flow improved cash profitability and structure, NCR

quarter fourth which a clear picture increase slide on the progress will in in production the X, expected shows as a get ramp of making well as quarter. we the are ATM You significant third in the

drive quickly slide the quarter. moved engage the demand to contract chain and as and increased of our for backlog partners, manufacturing the as additional achieved to manufacturing shows our ramp XX strong during ATM the we global eliminate we This fourth the assets. we Series, increase and from well production utilization QX expect QX in supply constraints, identify significant Given

chain is finish production improve logistics supported operations. This the supply distribution expect to operations to heightened by year manufacturing plan and improved levels Our our we and progressing, our strong. level production be will

orders needed quarter fourth year-over-year. XX% targets. ATM exited were to and production September We our quarter, third the levels achieve XX% third During roughly in was up up the with quarter backlog

discussed and Customer teams NCR bring to part that better market. introductions. efforts Activation Checkout of execute to that resources over to needs time convenience our to self-ordering, exceeded of on Teams to to customer we created market. Each the the consumer These London formed we we benefit team opportunity our focused fuel spend five around X, as organize a offering that, solution; well. around With faster teams successes has of product our as slide are our mainly on Release has and references implemented cross-functional serve Teller, pass five Atlanta, forward. aligning strategic Andre. goal the and customers offering at elsewhere. our bringing let how excited include next-generation call OPTIC offerings going Interactive addressed. had with these common to update we and The These the Dundee, X. are has clients of bring or key met and retailers; at and look to or me our ACAT. solutions software us focused are I Turning their better for will serve more teams solutions market improving Accelerated each delivery Self critical served site, team to satisfaction timeframe continue its markets we successfully the The the and a teams aggressively has quarter, to with commitment, new Emerald, client ensure were and retail well client our in provide execution The on SWAT Last solutions an our multiple

Andre J. Fernandez

Owen. you, business. the Day X, be for out it's look as personal to Thank upcoming well as November at in many we to direction the On NCR, coming you both here I at of and forward lay our strategic great Investor a note, as months meeting and weeks our on

Moving days XX role, I slide X. in have a spend. first team cost first significant management and amount our my and and time In the business spent our to analyzing number structure our optimizing of

our Services initiative know, already has in business that performance you margin in As top-line resulted our solid in segment. and MX

business we redesign operations, network efficient in in also improved result adversely operation, are while as and progress, profitability initiatives will Owen The Hardware more hardware is manufacturing XXXX, taking XXXX. our making in impacting a in discussed. Our our significant

in we recognize discretionary these in areas addition we spending percentage as operating our increased overall response, as opportunities our company. as in In a have nonstrategic revenue. efforts, have both sharply additional corporate reduction In cost our of well that expenses SG&A and curtailing to the across functions identified

finalizing in we here in generate savings a paid expect XXXX in XXXX the of be the quarter. we that these with annualized the will $XX are million While XXXX. some costs range, be least still On fourth impact, which to $XXX will actions million cash we basis, of to and $XXX savings in both at the expect beginning million

we've later, part earnings due flow seen expected the XXXX association and again these in cash in to estimate our you've cash full actions. with year I'll our free the As usage lowered in release discuss for

been year. have in having previously Now, there restructurings, announced of first number quarter including earnings reviewed that this of prior calls, know I the a

of and clearly savings these such margin, our the in positive to actions gross and While along we've and impact believe were more targeted services overall SG&A actions value. to ongoing in actions cost recent fourth clear. as not subsequent with more had the years of to as is both focused our segment driven company, We improving and in positioned creep operating in is you business, of In the has revenue which the services, been hardware with on some largely that quarter, these this to update the organization address impact impact on margin earnings expansion which a at create beginning action, I'll in calls result sure cost will margin. the be as we've hardware drive total the gross our seen well better shareholder latest margin long-term and

in the segment. to course able positive Turning last our by this FX more discuss we revenue over rate XX. would have headwind fourth where $X.XX down Hardware backlog resolved basis. the our our for due and $XX quarter was to slide when to convert U.S. we X% dollar manufacturing the or a had thoroughly a particularly the were I basis. developing a markets to driven the now for a The meaningful constant that segment at relative quarter the been improved constant other in quarter Hardware slightly given we and stronger to year, billion same capacity currencies, Revenue million But our will on supply earlier the was quarter. constraints constraints decline operations. currency currency have of move quarter as on was this

was quarter. seasonally revenue improve fourth primarily offset X%. here had quarter constant solid a FX million, was Gross cash revenue, more and but the Non-GAAP earnings, lower in $X.XX in continue than in and but XX% lower software as in XXX pressure a by ago. hardware is due due points, EPS was recurring previously, of as down expected basis $XX EPS declines Free know, compared $X.XX headwind margin to in to rate year grew to margins. was execution. hardware investment mentioned in total currency Mike quarter quarter, margin the the expand, As to and rates representing improve primarily margin another diluted revenue year-over-year was and Services The on you decline was outflow to continued to quarter. the

with Cloud segments. million. now XX our the to $XX on our Moving segment of ACV Software quarter a X% was in shows revenue up Slide each net results. of

Software declines license lower was X% due higher in hardware. by primarily up software revenue currency, unattached due revenue sales, to to attached constant offset license

ATM cloud. attached partially in expected higher the revenue by in by expect was expansion software the as quarter revenue. down, fourth in to income continued Operating software well We content, offset third-party driven an license increase in related investments ramp in as business, the margin

shows that and margin Services Moving Mission to on initiative as continues productivity currency we continue driven Services slide which service from was now expand customer offerings, to transformation XX, improved our managed segment Revenue One and satisfaction. constant X% channel trends, by is benefit improving results. efficiency. to our up

down XX% supply rate point-of-sale had due and constant XX line line. we ATM the self-checkout mentioned to to newest to of through we XX%. shows which ATM which Also, had the our supply quarter. down to XX, resolving backlog with key XX% product contract part would I progress were was grown slide similar constraints, great the XX constraints, ATMs product was down in previously, our we the as transition in total Series continue unrelated with a the as year, line quarter our towards revenue By ATM our Series work manufacturing. XX%, as end at made have our revenue to the quarter, segment from converted last Now our currency including expectations our shortages to our down transition Hardware results, in revenue

the several were our of customer experience this growth down is the compared which customer lower positive year third The timing margin pricing to costs the quarter. mix, overall ATM is meaningful quarter breakeven in the will up a company. unfavorable consecutive and We some expediting largely Point-of-sale areas network to XX% year. result revenue for would primarily improve were been in with quarter earnings. shows third being Self-checkout ATM should our significantly as have and up our in XX due in XX% a a quarter the to are product after quarter. for profitability revenue, gross strong as in the closer benefited objective which quarter rate initiatives Had demand revenues costs supply to outflows in improving outflow operating lower fourth such to primary Slide operations. revenue rollouts. taking and to and of pressure, These time. the income were was Hardware The year, nonrecurring decline distribution to improve year-over-year view was redesign the we and logistics sign are third increased for We from an continue in of of over second last higher the the year-to-date. the large in converted and growth as orders, at manufacturing Returning to and chain family similar third the warehousing, our ATM due down cash new quarter. also rollouts. Hardware we Hardware free last up profitability due associated and manufacturing quarter the of lower excluding backlog

XX QX. at the is our reminder, also our free of flow debt cash the shows fourth in a annual adjusted the typically end to majority quarter. net As generated of Slide EBITDA

XXXX We full XX which lower Slide times guidance. up from X.X our includes are to is operations. times, due X.X from of QX at as income XXXX year

to execution on in current year benefit the XXXX. continue We focus to improving

For to X% reported minus to of continue guide minus revenue XXXX, we X%.

to revenue grow approximately We will X%. flat X% expect roughly cloud revenue to with software be

digits. revenue that Hardware will revenue low-single services full down high-single believe for up We be the digits mid- be to We expect to year.

is and a Our year flat the supported view orders growth and ATM unchanged for the is roughly at strong revenue for of backlog by year.

EPS continue our $X.XX to guide to to We non-GAAP $X.XX.

our we next into going execution As we year. improvements expect on focus fixing challenges,

We included million a in the rate million. of have and GAAP tax The is XXX supplementary assumed EPS to OIE the of reconciliation approximately $XXX of of schedules. share a XX%, count non-GAAP

We expect cash meet $XXX as as free The working free to production the from due capital previously. to of program decline previously. higher is associated to in optimization the million cash million flow to flow million, announced $XXX million position $XXX backlog to increased $XXX strong be impact cash with our approximately well down spend

increased and expect in near-record in turn the we in the in levels XXXX. to end quarter, require we will QX for will growth it the seasonally production capital higher manufacturing back with significantly This of Although our working closing fourth that, year comments. reach and will higher production With quarter result at year-end still Mike first to backlog. in I

Michael Dale Hayford

Thanks, progress executing Andre. we constraint. our priorities, key addressing making also are chain a clear In on summary, supply while

expand will revenue In acquisitions for recurring services JetPay Zipscene addition, help solutions, and of and mix, NCR improve the markets our revenues. and also and software higher our drive

manufacturing the structure, Series. our fulfilling also the XX working while cost side, demand On strong improve our ATM for outstanding we to are

continue execute to-date. pleased to with cash balanced our M&A. and flow generation emphasize success will made we've We I'm capital targeted allocation the with strategy

will together, much now, And However, your cost The improve our second Thank to solutions you structure. team for and NCR be of and outcomes I entire and your is take questions. customers, none. serve work commitment deploy innovative our Owen, that And Andre, done. passion the Frank, to remains will drive business continue time. we to

Operator

Thank you. of first our Markets. take RBC we'll question Perlin from Capital And Dan

Daniel R. Perlin

evening. Good guys. Hey,

you a particular, say, impacts So, the services, could. around want the The month already starts you of Are three, or maybe seeing if I that one with banks. four, out, maybe to had product managed community ago? rolled I in from a I questions, couple

Michael Dale Hayford

the terms and their Yeah. On supporting back-office outsourcing in you're of just banks talking about? servicing

Daniel R. Perlin

digital create you solution I were then that a fix put had was or for wondering ATM well, thought for of biting were Yeah. out of community together. a services obviously the – Well, I banks. And part you weeks strategy for you that signs seeing a as you you community the of this, it, I and already of bundle once saw could as introducing back not. managed they kind called was And if banks bundled managed services where kind solution probably issue, (XX:XX) you a that already few guys on release banking,

Michael Dale Hayford

Yeah.

point, banking. along component obviously, the a service think good hardware along We're where for I and with can that's community Dan. the together the software bundling with, we

a that. we've really So, announced of that I don't think when retail bundling but going but start the of same hospitality in in traction. numbers only getting We're in thing And the in I success had up tick to we've area, the obviously to lot side. forward. we think bit not little excited service, banking, the we'll we're plan yet we a start seen do

Daniel R. Perlin

Okay.

the the this in – that but is be acquisition, Aloha to other solution, connect JetPay the to to able parts. idea you're On also the that going

other it generated NCR the I retail. payment be capture So, did, expecting number? I'm thinking but put volume slide, of wondering, was much you And and NCR that where that a in past, good there are about parts predecessors you flows. that And didn't I'm $XXX Silver a still the is to I and think been out, has said in think to Mike, billion able they

Michael Dale Hayford

update the on we'll you number. Well,

use one, I'd that not sure in particular. I'm So,

be the totally. might could bigger I even – number look think the if at you

space software. our Aloha, acquiring a the strategy where again, with the POS of of will the make very market that. big back to fully coupled that and on at restaurant merchant front-end tightly clearly, enterprise JetPay the have the in end with we're have share to that And integrate really be So, sticky we uniqueness the

convenience We'll it the we'll with So, it like space. (XX:XX) with store. do do Aloha, the retail it we'll in do with we'll it products Silver, do in

retailer backend connect plan in settle our penetration have with in the the we'll side. very or the and hospitality, wherever a enterprise payments software strong will be we through think the I on front-end then merchant

payments across speed, We team fully get obviously brought But connected the work with in engaged. We some get our excited get it it pretty some all some we're up is help it. to people have about background platforms. So, that to make happen. integrated, to

Daniel R. Perlin

quick one one Owen. And last for

the smaller. a a chain supply the of XX other ones I the Series way then say supply; three little you wondering been was there Owen, issues issue Have then and a just all I to nuanced resolved? but kind And if referring but terms around been you're two screen Or sounds said, I those know those thought bit issues there resolved. hit it can display like three bigger all the know chain? You of that's of – like, has I'm it, supply numbers, were in completed. were to largely Thanks.

Owen J. Sullivan

Right. didn't It's I that to mean a question. it fair nuance much.

the we think quarter. some as production noise quarter be the issues, with supply in need fourth came third supply earlier the out I the about and issues But was. there'd of the the trajectory chain quarter issues addressed the had we we in chain system on and there for we talked still down fact, settle on the

supply across now good we of is the (XX:XX). that chain to noise the feel the So, all out relative system

Daniel R. Perlin

great. That's Thank you, guys.

Owen J. Sullivan

Yes.

Operator

And from come of our question Kartik Mehta Northcoast next Research. will

Kartik Mehta

the might able look good Andre, Hey, I savings you hoping to was about. you afternoon. at be talked cost

you comprehensive terms anticipating. for announced, CFO. And becoming obviously, number previous As if been number cost you cost just number, in could XXXX cumulative give savings there a have wondering you're to you savings of of the a I'm said, a

Michael Dale Hayford

is Yeah. Kartik, Mike. this

details. more me Andre in start Let kind some just and can fill of then

activities. in top year a XXXX kind prior on announced for actions announcements first and a of the piggyback some of announcement those that quarter were NCR had obviously, So, recurring

so, that, looked as said, let's going just And at forward. we we focus

at as initiatives and to our prior and trying tie year, we've the going let's on rather announcements, in look second seen them our So, forward. outlook quarter, for at quarter, tick numbers obviously, two to and focus back XXXX least just third

you And the center that transformation, So, and it the shift. way only like the you three continue efficiency the fourth is is in initiative importantly, that distribution distinct announced MX going the we're implementation Mexico, we've in the our plants to for to new MX quarter. see the can hardware up on; that, past that work Services benefits the should sat quarter, still expansion. to drag That's numbers to in in the streams spoke about a new at improve continuing the there's margin up each continuing We're execute make more through doing get the manufacturing, Services that customer area. numbers continuing are two progress, to Nashville, for and parties us to we're not We've in underway. manufacturing got a work work but cost also Owen The in continuing third in XXXX. setting been in

that. still work there's to done on be So,

savings will going drive hardware We forward expect in XXXX that some on the platform.

out early should to until our line you But what take give XXXX, So where February. announced then, takeout $XXX should overhead, we're over in we'll was or be. do They've out fourth in on where lay and call I this seemed give back stand plan today, to areas going January, we'll years. SG&A, we we those three expect cost. underway, Andre those guidance. being million-plus talked they additional we with lay prior on about give tick will just we'll you three where plan to $XXX cost, buckets, Hardware, bring – quarter going it on to that that seem you not it. We're end other and we announced to creep don't the Any try back tie million-plus Services, of we stand But last of spending, think to takeout discretionary two for to

efficiency those forward, paths. three Just look going cost

Andre J. Fernandez

is in this first remarks I the too. are mentioned two Andre my marginally Kartik, prepared gross focused. margin

SG&A. our board. across the – question, was at that I margin to I close look through came our response in operating you'll to answer think can your took here look one in in you a deteriorating charts as this And see the your webcast, third expenses, is and operating mainly

operating So, an some years. issue, SG&A it's And last over I couple not margin we in of margin think issue it's as well. just a gross the allowed creep, particularly

fact points the largely, targeted margin So, few fallen million, by $XXX at X the least and about is SG&A this last at action, is over the address that to years. just it's probably which has OpEx,

year we we and at are thought and addressing appropriately, also whether you where some of next reinvest talk coming in about us, compensating but next headwinds new do those into it's So was also to when a achieving our a cost I QX XXXX our resources to a number week you're cost we process as of we business perspective. the that call, Investor thought in think for want building about people that and we'd year-end at addressing freeing Also have Day. our be from here reduction, margin the hear is Atlanta, XXXX the up cost going going at like to to

I think the magnitude and announced we action today. also into went of all up those went of So, the that thought sizing into process our

Kartik Mehta

And million talk $XXX $XXX so, million able what to maybe dollar fall about percentage you of to are or to the you amount that bottom expect Andre, that line? of

Andre J. Fernandez

address give when we'd million, that in refine number like No, the like going that. for take you're that come you a out the to for. out you that quarter. I to be further at in fourth position I least that, we'll as But $XXX to we'll think you also XXXX, Obviously, the so to said, net lay lay areas in reinvest and business looking to to we we also the we're

Kartik Mehta

is orders about XX else? the Windows And demand, is ATM the the and something then, geographies this improving. talk this result seeing ATM you could where Mike, or result you're you about of of talked Maybe

Michael Dale Hayford

been of I a had strongest our great America, success. North we deal has think

got us, but I the actually, sell go a out upgrade. Asia been pretty We think, we've team has sales equipped much plan I on Windows out strong and smaller number. think, got our XX, our for to there.

seeing we're call huge course, don't that that out as driver. in. Of that a I'd know come I

I What think and is out really be came success. they we've Series got field, saw them the is year as and they come bankers have great having at seen out in our to we XXXX. say, the orders. made the had another site in we and that in other product wow, XX And like and seems people happening last field bank's

to continued off. that's So, take

ATM marketplace the of around of some us good people help think but we've only good got our a discussions come and dialogue, seen in around not I support. service to bit we've and and sales, from also have competitors little

think supplies, we quarter on do, we've which manufacturing, stand. the Series did feel the about orders to think we and but about work where feel I we I we the in Obviously, So, pretty good the XX good third got backlog. largely

Kartik Mehta

you just business in Because an question, terms you be the lost of last the operating just breakeven? metric was revenue hardware for that to it you'd use one than to quarter, does from And standpoint business, a whatever other greater if Mike. amount The or deteriorated to that revenue year-over-year. year-over-year income have this look like be where was

So, I'm to that you for a to just wondering, get business breakeven. to level need if get to there's

Michael Dale Hayford

quarter's we units ramp-up fairly little large this last in talked a We revenue allocating number quarter. some so knew quarter fourth third that and challenged in obviously second we product based be a cost September, And getting happening second the quarter, volume had quarter. the about we get across fourth drive out success is our know about fixed hope with third quarter so the coming greater the and approach talked close. to into of of number the the breakeven that quarter that we We that compared We fourth said will us to and will – of door. on that that our

breakeven where at transformation or levels us better. restructuring, with clearly the goal Our can project Hardware operate production get we're various we to undertaking at into a Hardware is the position

we're what that's aiming towards. so, And

we'll XXXX come get don't lose get the And awfully we pretty don't products. that then find we'll we quarter. I way quite side, in fourth positive think if a XXXX, think to I into money kind going of I close. lost we Hardware on but have know the close in we'll the

Andre J. Fernandez

Kartik, the if it's the resolving constraints Andre. just would supply said that the of the we and remarks, operation know and my third some same able to were incurred connection backlog I last just too, chain costs have convert some – the additional in at that that exactly. a rate if you Plus, did we breakeven that quarter. year, hardware had we we we in ramp-up, with in prepared

what path We takes. a we see So, it there. know

bit breakeven little we going to to can said, close the negative try in to I as think were this as We get a time Mike fourth as fourth quarter. year quarter. we're at last ongoing, prepared said we can at well, Mike least And I we better. get then not want at as run in to said my hoping and if close. remarks this try We're as to breakeven,

Operator

And we'll of Stanley. Huberty now Morgan hear from Katy

Kathryn Lynn Huberty

of for me you. thank Guys, couple as A questions afternoon. Good well.

end target in growth it XXXX the flat ATM that for in the year on ATM, range revenue XQ. hit requires (XX:XX), of XX% First growth for to

shipments one, to backlog. to believe reasonable. some a want Just that that's fourth as And if you address catch-up just the (XX:XX) did then check quarter I follow-up to the

how rate get what the growth we sustainable at proxy a Should what should look order for we next growth and is year XX% as So, you that into the use as XXXX? think (XX:XX)? about

Michael Dale Hayford

through we're execution have plant the one, worked got that we've that's to the up still Mexico, three and a we're lot the it's that us. accelerated Katy, still the fourth obviously the on Again, Series And compared Yeah. which quarter, first – got of coming in now for orders, we've of the produces ramp-up, backlog, the we ATMs aware an XXs, quarters we've onboard so level Jabil year. the plan.

to we've got think there So, not pretty that there. get good we attainable, it's without feel work get to we of We that work to Again, but can lot number. go. a

of the we about. we'll there's guess, XX, Win year, a and for when number of next about In I XXXX talked more we terms where I stand the outlook our ATM, good things, of we call. exit talk level the pretty think But get we feeling into ongoing about

right a environment competitive we view the think now as tailwind. would I

we the have we're with and think platform. I product feel Hardware in the pretty the the we success market about having good

feel I the on about software pretty stack think good our we ATMs.

I think ATM. we feel service pretty component on about good our

into future. look of do So, to at into I and try that quarter end and then fourth work out – early the got quantify that January, coming XXXX of and a for share think forward that little next going we'll And some we're foreseeable we've we XXXX February. feeling tailwind going that as

Kathryn Lynn Huberty

just do narrative question been (XX:XX) a around has Second it's with to (XX:XX).

Michael G. Nelson

know I'm you if sorry, don't handset. you. we up hear pick Yeah. Katy, the could I can't

Kathryn Lynn Huberty

Is Sorry. that better?

Michael Dale Hayford

better That's (XX:XX).

Michael G. Nelson

Yeah.

Kathryn Lynn Huberty

Okay.

Sorry.

disconnects this MX come headwinds overall shifting around narrative services relative the through been Services of down. Hardware. a you're And story the and walked have shifts you to the has of chain with in the manufacturing progress to that software of supply in One that with company lots obviously, lot and and margins addressing, certainly

that margins? can which I any you should margins in around have to XXXX Again, color. XXXX – to with begin higher just I gross to Services, but expand guidance, a providing So, you're not shift and start are mesh confident narrative know better high-level and the Software

Michael Dale Hayford

Katy, Yeah. pieces. going I'm two – let to actually question into split that me

than making So, we Software going Service A this of the more – of just sure platform. and transforming an is big to that's manufacturing the on awful gross Hardware be cost incurred margin, piece we obviously, the lot side. the year and

So, that'll help.

Andre backlog of had we even through, would've went third at been As kind number in quarter the better. the rate, converted that much traditional

some we focus profitability, done we have believe And we'll some things a that overall the we've margin, to pickup on need that. XXXX. XXXX in gross get So, of in

It's I be going Services, Software that's one at time. to to On think and going incremental. a step be shift to the

few next-gen cycles retail, out, products that hospitality which reinvesting that's banking we're that platform product have about we ACATs, The and the around think investing Owen and is the other and doing more side in we're a a our on some in. the for to I talked things side product, the Emerald retail coming take of going in couple quarters. the

or products continue be In a us that's buying to with Zipscene, quarter platform. our take – where want period software, M&A to put the results board, we in we to companies what what in that terms JetPay, to quarter like not to what going we're the quarter but side, is going where we're Zipscene or some some towards service the be addition shift But that have had and we're also to some – is of make software, And to toward to – that. across the with time, to saw time. strategy, strategic margin progress each products like mix going the move towards we going It's software I But take did and to products, going towards quarter. just of the to incremental disappointing you don't us this that's take are do on service and do going XXXX out M&A like quarter. just doing services that story going software-driven investment, targeted a take will

Operator

next Kurnos will Company. our And come from of question Benchmark Dan

Daniel L. Kurnos

of little maybe Mike, bit. the landscape afternoon. sort Good a Thanks. on POS Great. just the

software furthermore, I the that of restaurant With guys know some bundle to we're a with delivery hospitality, JetPay, in to But consolidation to more your third-party starting you leading side landscape uptick the the guys tablets defensive, of a are certainly, an value some or space. the more you solution? sure see And is we sort the a see it in with sort on acquisition solution, and further which JetPay, our your to the solution. evolving even not seeing and actual to of first, of you massive first and little of with the if any of in we can seeing point-of-sale chain that if of are was And we're I'm maintain with make bit not how – POS just square wondering checkout need clone or versus consolidation? this the do

Michael Dale Hayford

or I the our the of I we mean, can and in advantage came conversations in board why a I started had with team start tell had year, question literally I late action. payment April, of management early merchant. is I with would our with defensive May end of the initiating of move. on and I'll to one when day through talking directors, the first characterize Yeah. importance conversations your that what strategic I you triggered the taking not aren't terms our this as processing the payment

we literally our the So, transactions have. also our how start, not but that that May gateway products POS, just consolidating. with for we we in looking I the can with we do of agree market's started some monetize

much with enterprise I the acquirers, own with people that with the probably to as as a the software the have the go think who more sticky not merchants, imperative restaurants, defensive the retailers, merchant the are end, have easier to we that POS software on payments. out hard grab because front shift It's move to have and the the it's what play. really we acquiring enterprise in systems

So, good point. we have I think starting a very

the work strategy to still going We back-end part but payment, attach going have to of the have be that's to do – forward.

for digital to I The the they industry, think trying with side. don't we think when a to payment mobile. shifting that's participating your those physical on entrants the it's, how participate your lot the order obviously, transaction, dramatic, in important can initiative fact take or the people going make that can the mobile mobile, can payment pay aspects. brick-and-mortars We're and the be bundle, we with the a are take people – I numbers but yet up. whether take order device sure us all are to pick when of new an in you point-of-sales in and the the that there,

well. where pretty as positioned to about trends retailers. that be they'll of So, we those the chain following we're feel services good again, And providing whole food in

Daniel L. Kurnos

ton around don't with you opportunity where Obviously, understanding to talk quantitative a it. qualitative long-tail bunch remarks of et cetera. how from for whole with sort know prior you that management, aggressive about monetization it? privacy, Zipscene of you opportunity sort you Got or the it. a you hurdles remarks, go But mentioned long, just of I client the remains after go see how to you unfolding that prepared then heard data for in we've And expect after a maintaining can of that guys have and not

Michael Dale Hayford

Yeah.

also our and about It's we access we gather – aspect. we think have POS (XX:XX) restaurant that systems. on fit good to, from data I data systems, point-of-sale the can pretty the that our we where feel always

privacy. aspects So, around there's different

monetize need So, we have we to today, to we opportunities just that data where situation at the we start have. need we to and look have

can got gathering able restaurant, got being product, being and with on create to use to do base, and add. know so we've to back that like to purchase So a we data, some client purchase around the restaurant (XX:XX) to information their that we've where permission sell then Zipscene value we access information able that the it, data, data, take analytics the

continue starting we're forward and for an So we that's same, in, I'll monetize. product, it's whether data, state of the can continue look We'll Again, whether it's with not to plug areas to gathering what we've advantage story. this this where know can infrastructure is data, there. and step kind one talked for benefit, is overnight find a have it. us. of small I it way where to just steps We about take we make our the monetize incremental to to

Daniel L. Kurnos

limitations on if Got that know stock. cash, M&A of strategic shares just a to buyback, can and how one big point, – but sort of of last where the you some from I continuing back they it. you obviously, remain have out with how front. versus, aggressive trading are uses And buy the you the M&A remain on your expected understanding the me, M&A front on just kind parse focal continues to

Michael Dale Hayford

Yeah.

the our to take we've I've out I'll capital do been got – with and M&A shift last to since quarter. the be just did at go JetPay some able do that, been and and shift of them, for this to the here in like Zipscene use six and mix, we've think us I company months deals targeted to we

expanded do five, we'll buy get spend meeting very we'll points. cognizant each then million and flow to we'll a fiscal week ago, balance bit averaging $XXX in about meeting, back deals talk this little our a a year out sheet. a room to marketplace transaction, of capital we'll And the But of little think dilution six last million shares a use bit about So allocation, And million, cash our try a $XXX and on on deals $XXX Investor price board the the deal, year. quarter, next to Day I at last the our board take we We're more. four, enough authorization.

focused whole bit. keep has the driven – I Andre, create actions, to by been if long for and we'll think jump how want kind I think we've at to in to on in moving steps I make market's this So to of down don't add But need value I don't the and if haul we you our know, more can our the monitoring price stage, got that. run. think we be long a to little

Andre J. Fernandez

Dan, the $XXX repurchased stock million of Yeah. the we just million usage, twice million, $XXX that that's take this I dilution. even so take the so so year, you gave you, already about amount million as the if free cash to of think we of $XXX flow range midpoint $XXX the

about So, JetPay. $XXX $XXX We on million. spend we'll announced million

debt $XXX about free cash year. we'll have use this that's that so of So, flow, million, $XXX additional million

probably third charts up then a of So, I at the We to year-end. the is you X.X X.X not think add lot the generate in, about we you probably saw in in ended X.X And in which fourth pension cash so the times times. quarter, you're times. the quarter if X.X that times,

held cash. lower had JetPay of So, that's the factors; obviously, on earnings quarter we was about this conserve where happening, to back restructuring, share and, we want were to had wanted be. we I And repurchase think number given we additional announcing – just we a a

a the flex bit little if figure acquisition. adjust times year we you up again, right pension, around we're found end for and to willing So if the then more X.X

Operator

JPMorgan. of from And our Paul Coster come next question will

Paul Coster

investors industry? do, have a Do a the charge secular across that Yeah. now got the is you a here of it, slow sort you growth of part decline the believe my ATM you some what as opportunity you've actually do for your there's consider while, Mike, or business? Thanks outlook many do sense for in I couple. been a taking for questions. of

Michael Dale Hayford

Yeah.

it's horizon. think I time kind of a

speak, – use infinity, see a ATMs you going cash to in can So, is down. of where day into to some if at look so you you the if point probably look and out the look way out the future, go we

about. two the look a I tailwinds years. We see we in benefit just horizon, that next intensive years to of the – in at three planning getting we of see product three we years, to (XX:XX) the planning, rolled two, three see and probably be foreseeable new use We we talked Win obviously, our we've as of of see, some think in to out. five the XX the future, market we XXXX. little in marketplace the We next actually kind pickup share bit the that seem

at at service of least the and only hardware, the footprint, also benefit years, look it five we software next a as So, terms neutral, slight the to the stack. but in not our from ATM maybe three stack perspective the

and I service of to look component, to the that are clearly, side. ATMs the out years, streams, So recurring continue the going if to grow higher next to XX our But look us on revenue our XX hurt don't margin other at years, strategy five is continue business, invest, to over three years. we think parts software

Paul Coster

it. Got

going proxies and acquisitions then Frank to And you very in making and Okay. your potentially see you and coming are investors company by software this background Mike, fin-tech space. intrigued with as good the service to out

it in very most space, that to companies to makes of expensive you of kind opportunities private software a reasonable price for hypothesis, be of that going your for for versus multiple make lot not though, are your NCR? difficult you. Is a micro-cap that too this at However, there's acquisitions

Michael Dale Hayford

we to We We're and buyer. on kind had We in pay you buy. of the be what in of a generate bank that it cycle And used to to return the had out through of We holding point cash company, to price we kind market, back a the cash done what's we've bank. a go in were cycles. The to part before. this give like we kind of marketplace, clearly be we the businesses of acquired. very focused high

That deals customers we XXXX compete, and this that write need place can't said, be buy buy a to So, can't the marketplace. streams we will simply marketplace there that to and XXXX products. today check. We EBITDA need take in don't being in in we

We unbelievably channel. strong have a distribution

We have customer an strong base. unbelievably

can have can extent be we get quarter – There's question we products think do channel, we balance products mix our that this shift deals going at we a still So going we through to we that customers, services. There's we software, distribute upsell we're room we're forward. we to get and to can to cross-sell in question like sheet. can cash the the to think and out, we diligent. we limited have to that sales did our no that to that But no buyer, create be that we extent go buying the can can

Paul Coster

Got it. Thank you.

Operator

And Matt A. next from D. Davidson. the we'll take with Summerville question

Matt J. Summerville

Thanks. Couple questions. of

incremental and include little self-checkout you're the a line, the actually color businesses on we'll dissect there. in helpful. comparisons; top provide self-inflicted, of market? two, call NCR that seeing of retail, you of versus can First, happening Those the and degradation hospitality, that in can would that, sides the be the it, how in If is; sort execution you much what's one,

Michael Dale Hayford

some all get those a SCO, the Emerald, we is areas enough. the fast is of pilot. were OPTIC little which there's cycles. put a of to, We And about quarter. clearly It getting in on like hurt probably ACATs are going mentioned Yeah. talked having clients. the products to those Those products second early which XXXX. market in is up in referenceable That gas station; the all focused We back retailers. the device in little place of We're self-inflicting about past, didn't We success convenience the us above. have we bit a kind product bit way obviously talked

those some salespeople next year. get to building we'll our here So, into the in momentum start quarter, out fourth

clearly hurt that So, us.

upsell big – positioned product, base. we a to think The with will in into and we in we extend starting process restaurant feel part is the that clearly that. the the out of Aloha the then space, would cross-sell, where challenge opportunity restaurant that is around good they the with a retail hospitality which we we've some great starting work be the some about core hope enterprise a market see which run payments think there and it's and But the to momentum, X on I product, Add the which still market got piece have, Getting our with the I we SCO was share, to that. XXXX pretty build are a market with, really side. of retail that software and JetPay, think cloud-based payment. a products connect Emerald,

opportunity market pretty the good think about XXXX. we I into heading feel still

Matt J. Summerville

the maybe head, you ACV net recollect the – what then have on of amount cloud of seeing a number a going question and little me, that of top the talk in then a as has business. of hospitality? time. of just market on from you I standpoint but side NCR believe, reported the the can you're in also comment And on my portion you in I front lowest comment maybe the broadly more What's what off Silver quite as business more some QX Digital with the Insight? had well was, about numbers Could the don't point I on there

Michael Dale Hayford

products Well, Aloha. three of around yes, it's cloud, those on really it pieces. It's Silver, wrap a

are a be cloud. a Digital gets that then product of Insight. then, side restaurants in that the the can series cloud-based and of Aloha that So, part on obviously, there's wrap installed hospitality And

you're where I into think banking puts have place of on in – the to fair there's every cycle, go consolidation taking the still banks year you particularly customers. where side, some the and we going amount a banks takes, lose

it We're always new the new we've all to see as accounts. business a of hospitality, this some we well. to three there team across bringing But So, really we think that. brought a leader be quarter And third got on and, focus second to better And we've in I little lines. in got new clients in on more obviously, leadership than put brought quarter sign board. a banking. the some those we're industry on did putting And is some in up an and for experienced hospitality veteran We run Internet success. side. to building Insight we'll And focus on Digital mobile

teams. the business talked We realigning units rebuilt focus. business a around we've about So, last we so have quarter unit

– investment, growth, top-line ownership have driving going for out driving new the driving adding and takes who and We customers. for for somebody

wanted We've deal quarter, heading great into of quarter. fourth into got third we on that, where heading be focus not a So, to XXXX.

Operator

next our Wildhack Rob And of question come from Research. will Autonomous

Robert Wildhack

Hey, guys.

then drivers unattached of going What forward? of that? Just the want what this to And to the with the XX% start growth here kind do quarter. were sustainable growth license flip is line profile you think

Owen J. Sullivan

Yes.

Michael Dale Hayford

Yeah.

always careful. product to So, goes up a go license license on big be sell timing. – so little got you down a we fee, Unattached and based are out the and and sometimes a and book

(X:XX:XX) about won't accounting our an side, report overly going great – I in focus banking does again, product we in don't it those the well. the that be excited quarter, and get – long-term year don't in what numbers. consistency quarter, we've contracts any particular But just selling just might value. happened growth past over. management because I is had We So, think growth product got and I last

So, that's down. our down, more go is frankly. a And of when they up same, answer be quite and the to going

Andre J. Fernandez

third-party bundles some Yeah. We Andre. with This increased content. is sold

us then again, So, margin, but overall in quarter. that lower the to that's higher drove cost revenue higher the got and a

Robert Wildhack

in change understand guidance the the And longer-term of programs, down any cash the flow cetera, that. long-term this strategy I then cash et the shifts, is view your profile generation With there to mean business? Okay. all I year, restructuring is

Michael Dale Hayford

to seen XX%, are rate be going No. conversion I we've expect we'd forward historically. in that that XX% that to see the still mean, going

actually finished hit pretty year, got which years. good quarter, levels cash just the long This by taking we're it going to raw earning, that look the some generating think inventory we the I are fourth you efficiency to we at I couple us of got brought doing last But cash should we're to cost that flow. goods why some should think related to the job We've elevated of in shift. actions hit we're generating and say, clearly and We're materials down. at a convert fourth on term, going extent in cash have that spend quarter. that is to

Operator

turn session. that additional this And for the or remarks. the conclude Hayford any to Mike I'll does question-and-answer Mr. back time, over At closing conference

Michael Dale Hayford

couple by points. To to us our make start third earnings just everyone for Let on call. I close, quarter of me want a joining today thanking

some to to positioning great progress we've execution NCR challenges made our and growth. First, addressing return

there However, done. recognize we to is do more work be

to solutions acquisitions are distribution existing be confident of and software targeted Zipscene feel we I drive for with the are NCR. our along existing growth M&A strategy, and progress and track for more some will into of the we Investor services that heading JetPay our of on with portfolio, our to positioned revenue. that our team, NCR rest look getting you opportunities our I, They on and November can you today. Second, leverage acquire next operations, to detail your I product our and And providing Day thank lastly, time X. exciting forward on Again, with updates want and XXXX. for during strategy our back the indicative Wednesday sales

Operator

And for your all conclude teleconference. today's participation. Thank you that does

You may now disconnect.

NCR Voyix (VYX) 31 Oct 182018 Q3 Earnings call transcript