NCR Corporation

everyone and welcome to the ncr corporation first quarter fiscal year 2021 earnings conference call today's call is being recorded and now at this time I would like to turn the call over to Mr Michael Nelson vice president of investor relations please go ahead good afternoon and thank you for joining our first quarter 2021 earnings call

Joining me on the call today are Mike Hayford, President and CEO, Owen Sullivan, COO, and Tim Oliver, CFO. Before we get started, let me remind you that our presentation and discussions will include forward-looking statements. These statements reflect our current expectations and beliefs, but they're subject to risks and uncertainties that could cause actual results to differ materially from those expectations. These risks and uncertainties are described in our earnings release, and our periodic filings with the SEC, including our annual report. On today's call, we'll also be discussing certain non-GAAP financial measures. These non-GAAP measures are described and reconciled to their GAAP counterparts in the presentation materials, the press release dated April 27, 2021, and on the Investor Relations page of our website. A replay of this call will be available later today on our website, ncr.com. With that, I would now like to turn the call over to Mike.

Thanks, Michael, and thank you, everyone, for joining us today for our first quarter 2021 earnings call. I will begin with some of my views on the business, including an update on our shift to NCR becoming a software and services-focused company with a higher level of recurring revenue. Tim will then review our financial performance and an outlook into the second quarter, and then Owen, Tim, and I will take your questions. Let's begin on slide four with some highlights from the first quarter. NCR delivered solid performance that included accelerated recurring revenue growth, significant margin expansion, and strong cash flow production. Although there remains uncertainty regarding when businesses return to pre-pandemic levels in certain geographies, we are starting to experience green shoots across parts of our business. A year ago, we were facing unprecedented uncertainty over the depth and length of the pandemic. We were focused on taking care of our employees. We asked our team to stay focused on taking care of our customers. I believe that that relentless focus is starting to pay dividends in improved customer satisfaction and brand loyalty. Although we still haven't fully recovered from the crisis, we are in a much stronger position today than we were a year ago. We are building momentum in our NCR as a service strategy and improving execution. First, we expanded adjusted EBITDA margin to 16.7% in the first quarter, which represents an increase of 420 basis points from the first quarter of 2020. Second, we delivered 9% recurring revenue growth in the quarter that brings recurring revenue to 57% of total revenue. We continue to make steady progress, increasing our recurring revenue, which is consistent with our 80-60-20 goals. Third, we delivered strong free cash flow. We generated $98 million of free cash flow in the quarter, which represents the first time in many years that NCR has generated positive free cash flow in the first quarter of the year. And finally, we are very excited about the opportunity combined with Cartronics. The proposed transaction will accelerate the NCR as a service strategy and further shift NCR's revenue mix to software services and recurring revenue. We have successfully completed the financing for the transaction and remain on track to close mid-year 2021, subject, of course, to regulatory and shareholder approval. Now moving to slide five. We have continued to progress executing our strategy and remain focused on our transition to drive NCR as a service, and achieve our 80-60-20 strategic goals. We have made significant progress against these goals, particularly as we accelerate margin expansion towards our 20% adjusted EBITDA margin target. In banking, we continue to have positive momentum in our digital banking platform with 11 new deals signed in the first quarter. We also had cross-sell success with existing clients with new products, including three business banking deals done in the quarter. Banking software continues with strong growth as we continue to shift the business to a recurring model. The first quarter saw strong growth in our end-to-end multi-vendor ATM solutions as well as continued momentum with our digital first strategy, integrating our physical assets into our digital banking solutions. In addition, we are beginning to shift to multi-year professional service engagements that are aligned with our software projects. We are receiving increased interest in our ATM as a Service solution, and in the first quarter signed our Kia, one of the leading retail banks in France, to a 10-year ATM as a Service agreement. In retail, we are gaining traction with our NCR Emerald offering, which is our next-gen cloud-based retail point-of-sale solution. The acceleration in digital transformation is being driven by consumer demand, and retailers will need to respond. We believe this is starting to drive an upgrade cycle for retail POS software. We recently signed a new NCR Emerald deal with Berkshire's Grocer, a Texas-based super regional grocer with more than 180 stores across three states. We are also seeing increased adoption of our self-checkout solutions. We are experiencing demand across customers and geographies as consumer preferences accelerate. InHospitality's momentum of Aloha Essentials, which bundles software, services, hardware, and payments, continued in the first quarter. This model is proving itself in our ability to attract new customers and better service existing customers. During the first quarter, over 90% of all Aloha sites sold through our direct offices were sold as subscription bundles. Payment attach rate is also strong at roughly 85% of sales into new sites. NCR and Steak and Shake recently entered into an agreement for NCR to support Steak and Shake for over 500 restaurants globally with subscription-based point-of-sale software, hardware, and end-to-end IT services in support of their restaurants. As we focus on executing our NCR as a service strategy and drive the transformation of our businesses, we will strive to become an even more efficient steward of our resources. We continue to focus on taking care of our customers, advancing our product capability with investments in our strategic growth platforms, and improving our productivity. With that, let me pass over to Tim.