NCR Corporation

Good day and welcome to the NCR Corporation first quarter fiscal year 2023 earnings conference call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Michael Nelson, Treasurer and Vice President of Investor Relations. Please go ahead.

Good afternoon and thank you for joining our first quarter 2023 earnings call. Joining me on the call today are Mike Hayford, CEO, Owen Sullivan, President and COO, 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 reports. 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 material, the press release dated May 4, 2023, 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. I will begin with some of my views on the business, and I will also provide an update on our previously announced intention to separate NCR into two public companies, including our recent announcement of our leadership team. Tim will then review our financial performance, and then Owen, Tim, and I will take your questions. Let's begin on slide five with some highlights from the first quarter. First, NCR delivered strong performance that included solid top line revenue growth and significant margin expansion, and delivered over $200 million of free cash flow, which puts us on track to deliver prior to the spend. Second, we are on track to separate NCR into two public companies in the fourth quarter of 2023, Following Tim's comment on our financial results, I will provide an update on those separation activities. Third, we delivered 4% year-over-year total revenue growth on a constant currency basis and 7% recurring revenue growth, also on a constant currency basis in the quarter. I think it's important to note that the 4% growth would have been 7% without the impact of shifting to subscriptions. Fourth, adjusted EBITDA increased 19% on a constant currency basis in the first quarter of 2022. Two, adjusted EBITDA margin expanded to 16% this quarter, which represents a 150 basis point increase over the first quarter of 2022. Fifth, NCI generated $209 million in pre-cash flow in the quarter. Over the past two quarters, we have generated over $400 million in pre-cash flow, allowing us to reduce financial leverage ahead of the separation. And finally, I want to provide an update on the cybersecurity incident we experienced. On April 13th, we determined that a single data center outage that impacted some functionality for a subset of our commerce customers was caused by a cyber ransomware incident. At this time, we are well on our way of recovering the majority of the most critical functions impacting our customers. None of our ATM, digital banking, all points, payments, or other retail products were impacted by this incident. And while this was contained to a relatively limited set of our overall customer base, We absolutely understand how difficult this incident has been for those impacted customers. We take their business extremely seriously, and we sincerely apologize for any disruption this has caused. Now moving to the business update on slide six. We have strong momentum across all five of our business segments, with progress against our strategic initiatives along all of our KPIs. In retail, we continue to deliver on a strategy to be the retail platform company of choice, During the first quarter, NCR expanded its relationship with the second biggest retailer in the UK. The customer committed to increasing the number of NCR self-checkout units while also signing a special services agreement to a multi-year subscription model to help transform their in-store solutions. In hospitality, we continue to experience strong demand across our enterprise and SMB customers. In SMB, our payment attachment for new customers remained roughly 90%, driving a 50% increase of payment sites. In enterprise, we expanded our relationship with the world's largest fast food chain to be the sole provider for digital menu boards in the U.S. In digital banking, we continue to have positive momentum in the first quarter. Digital banking sales activity was strong with 12 new customer deals and 12 digital banking renewals. Last week, NCR signed an agreement with North Carolina State Employees Credit Union, SECU, the second largest credit union in the U.S. with over 2.7 million members and more than $50 billion in assets. to transform its members' digital banking experience. This new partnership will help deliver more modernized digital banking capabilities for SECU members and employees. This will deliver a modernized digital technology platform for the credit union and will advance NCR's digital first market position in the large regional financial institution segment. In payments to network, we are making progress against both merchant acquiring and the all-point network. North America 18 withdrawals and cash dispense are at a six-plus-year high. International market expansion continues to accelerate with over 100 merchant contracts signed in Portugal and over 50 merchant contracts signed in Greece. During the first quarter, we added a new payment transaction capability to our Pay360 platform through a partnership with Payfair, which allows gig workers to access cash from their accounts with a simple, secure code via Payfair's digital banking app. In self-service banking, we continued momentum in our ATM as a service solution There has been concern from our investors regarding the potential impact of NCR on the current banking crisis. We had a strong first quarter in self-service banking and do not expect a slowdown given the current macro environment. Interest in our offering is accelerating from both community banks and large FIs globally. In the first quarter, we signed six ATM of the service deals, including First Citizens Bank with over $100 billion in total assets and over 500 ATMs, a full end-to-end management ATM solution. And we partnered with member ATM Alliance, where NCAR is now the exclusive provider of ATM as a service solution for the Alliance's credit union members. With that, let me pass it over to Tim.