Good day, and welcome to the NCR Corporation Second Quarter Fiscal Year 2014 Earnings Conference Call. Today's conference is being recorded. And at this time, I'd like to turn the call over to Ms. Tracy Krumme, Vice President of Investor Relations. Please go ahead.

Good afternoon, and thank you for joining our second quarter 2014 earnings call. Joining me on the call today are Bill Nuti, Chairman and Chief Executive Officer; John Bruno, Executive Vice President; Bob Fishman, Chief Financial Officer; and Andy Heyman, Senior Vice President and President of Financial Services, who will be available for the Q&A session. Our presentations and discussions today includes forecasts and other information that are considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. While these statements reflect our current outlook, expectations and beliefs, they are subject to a number of risks and uncertainties that could cause actual results to vary materially. These risks and uncertainties are described in our earnings release and in our periodic filings with the SEC, including our annual report to stockholders. On today's call, we will be referring to presentation materials posted on our website. We will also be discussing certain non-GAAP financial information, such as free cash flow and results excluding the impact of pension and other items. Reconciliations of these non-GAAP financial measures to our reported and forecasted GAAP results and other information concerning such measures are included in the presentation materials and our earnings release, and they're also available on the Investors section of NCR's website. A replay of this conference call will be available later today on our website, ncr.com. For those listening to the replay, please keep in mind that the information discussed is as of July 29, 2014, and NCR assumes no obligation to update or revise the information included in this call, whether as a result of new information or future events. With that, I would now like to turn the call over to Bill.

Thank you, Tracy, and thanks, everyone, for joining us today. From my perspective, our second quarter results are as I expected and continue to demonstrate the potential of the new NCR. We're at the halfway point of the year, and we feel good about the steady progress we have made transforming our revenue streams and building on our global leadership in the emerging consumer transaction technologies segment. We had a solid quarter overall, which you can see in our financial highlights. Let's begin by taking a look at those on Slide #3. Second quarter revenue was up 8% year-on-year and up 9% on a constant currency basis. Our revenue growth included expansion of our software and SaaS revenues and a 21% increase in our recurring revenues, which now makes up 42% of total revenues. As a quick reminder, we define recurring revenue as hardware maintenance, software maintenance and SaaS. Increasing our recurring revenue has been an area of strategic focus at NCR, and I'm pleased with what we have accomplished so far in 2014. We have spent the last several years executing a transformation to a hardware-enabled, software-driven business model that delivers innovation to our customers and provides a life cycle services capability to be a leading global services organization. This ongoing reinvention of our company places NCR in a far more strategic vendor position with our customers, while continuing to enhance our margins. Operational gross margin finished at 30%, up 110 basis points year-on-year. I want to note that our second quarter margin performance marks a historic milestone for NCR, as it is the first time we have achieved 30% operational gross margin. It took a lot of hard work by the entire NCR team to get here. And while we are proud of the accomplishment, we are focused…

Thank you very much, Bill. And it's been an honor to serve this great company, its customers, partners, employees and shareholders. It has also been a privilege to work so closely with and learn from such an accomplished Chairman and CEO, such as you, Bill. These past 6 years with NCR have been nothing short of an exceptional professional experience for me, and one of personal growth that I could not have imagined when I started. I have a great sense of pride having worked with this leadership team and all that we've accomplished together. We've executed thoughtful, balanced growth strategy to reinvent an iconic corporation, and I have great confidence in the strategy, technology and the team. I also have no doubt the momentum will continue into the future and only increase in speed and industry impact, as NCR now is the global leader in consumer transaction technology and is a very unique and uniquely positioned hardware-enabled, software-driven business. With that, let me turn your attention to Slide 8, so I can give you a sense of how we executed by line of business in Q2. So I'll begin with a review of Financial Services. We were pleased with the strong results in the quarter. Revenue was up 15% year-on-year with margin improvement of 310 basis points. This was driven primarily by a favorable revenue mix, including a higher percentage of software-related revenue, up 106% year-on-year. The core business delivered solid performance as well. Excluding Digital Insight, total revenues were up 4%, software-related revenues were up 28% and operating margin improved 140 basis points. We had strong global core order growth, up 14%, which was driven by North America and Europe, small- and medium-sized banks and software and branch transformation. Backlog was up 17% entering Q3 due to significant…

Thank you, John. To wrap up on Slide #13, our Q2 results were in line with our expectations. We made strong progress with software and SaaS, both organic and including Digital Insight, which is driving our top line growth and of margin expansion. We also generated strong improvement in free cash flow generation in the quarter. At the line of business level, we had a great performance in Financial Services. As expected, Retail was challenging. We continue to work hard to get that business to perform better, and we expect to see improved results in the second half of the year. Hospitality is making incremental progress towards our goals for that business as well. We are pleased with our acquired businesses and their performance in the quarter, particularly Digital Insight, which continues to impress. We have made further integration progress, and the feedback from customers and DI employees remains very positive. As we move forward, we're also making sure we've aligned organizationally to further drive our transformation. The reallocation initiatives we've outlined today will improve our ability to focus on the highest-growth opportunities we have, while also generating additional cost structure improvements to continue our strong track record of margin expansion. These initiatives strengthen our long-term positioning, but I also continue to feel good about the near term, and that's indicated by our confidence in our 2014 outlook. Now I'll turn the call over to Bob, to give you some more perspective on the financials in the quarter. Bob?

Thank you, Bill. I'll start on Slide 15, which shows our Q2 operational results. Here, you can see the strong revenue growth, up 8% as reported and 9% on a constant currency basis. As Bill mentioned, the operational gross margin rate was 30%, an all-time high for us, driven by more software-related revenue in the mix. Software-related revenue was up 42% and excluding Digital Insight, core software-related revenue was up 15%. Expenses were slightly higher than prior year at 17.4% of revenue. NPOI margin was 12.7%, which is again at a record high for Q2. EPS was flat with prior year at $0.68 due to higher interest expense. The effective tax rate in the quarter was 27%, slightly higher than the prior year of 25%. We were very pleased with the Q2 results, as we faced several significant headwinds relative to the prior year results, which included a vendor rebate, a large software transaction and a significant rollout in our self-checkout business. The next slide shows our Q2 GAAP results. As we mentioned in Q1, we've included new pages in the backup section beginning on Slide 30 that does a nice job of bridging the GAAP to non-GAAP results with more details on the adjustments to non-GAAP. On Slide 17, you can see the revenue split by segment. Financial Services are up 16% constant currency, and excluding Digital Insight, up 5% constant currency. We continue to see orders and backlog grow in Financial, especially in North America and branch transformation. Retail down 2% constant currency was as expected given the difficult compare with the prior year. Hospitality and Emerging Industries continued with strong growth. Overall, total revenue was up 9% constant currency and the core business, excluding Digital Insight, was up 3%. On Slide 18, you can see the operating…

[Operator Instructions] We'll take our first question from Dan Perlin with RBC.

I had a question on the restructuring plan. First of all, is this kind of incremental to what you had alluded to in the past? I mean, I think you had said in the past you had probably $30 million in '14 and $30 million in '15 that you were looking to take out in Retail and Hospitality, so that gets you to $60 million. And I think there were some duplicative costs on the back end for DI, which was another $10 million. So that's $70 million between the 2 years. And I'm just wondering are you stretching that out to '16 and getting another $20 million, and that's what we're calling the restructuring plan or is there something more to that?

Yes, let me take the DI question first. I mean, this number does not include the $10 million of duplicate cost at DI. So again, that would be costs incurred this year in '14 that will not be included in '15. When we talked previously about Retail and Hospitality and the numbers you mentioned, Dan, this is all included in this restructuring piece. So think of those numbers as included in this piece.

Okay. So the idea is for $60 million still, and then you've got $30 million now as opposed to $20 million to get you to the out year run rate. So -- also my understanding was -- who's going to replace John? What's the process for that? I know he was a big part at least of how that plan was to going to get layered in, in particular in Retail. And so his departure is clearly something we've got to focus on.

Yes, there's an announcement going out today, Dan. We've hired a new Head of Retail. His name is Michael Bayer. He'll be joining us on August 1, so on Monday. You'll see that press release coming out shortly. We will be hiring a new CTO. That's something that is both going to attract internal and external candidates. John has been essentially our CTO for 5.5 years while he has also played the role of -- on strategy and corporate development for us. He's role on Retail was for the past quarter in helping us to find a right replacement for him as an interim, as well as work on some particular tactical items for that business.

Yes. And Dan, I'm going to be here through August, and I'm going to help Michael with his transition and make sure that we have a smooth pass over on the Retail business overall.

Okay. That's great. And then there's 2 other quick clarifications. I know you don't want to talk specifically about Target, and I fully appreciate that, but the language is kind of vague in that it's reported inaccurately. That could be that they used the wrong headcount number, as an example in that article, which I thought was pretty loose. Are you suggesting that it's really an inaccurate statement?

All I'm telling you is it's an inaccurate statement. Look, see, as you can imagine, we're bound by contractual issues with regard to speaking about customers. And I'd love to comment further, but I can't. But I can tell you clearly, that article is completely inaccurate.

Yes, that's fine. That's what I wanted to find out. And then just lastly, as we think about the third quarter guide and the NPOI number, I kind of would have thought margins would have been up a little bit more on a sequential basis. Is there something else that's kind of eating away at that? Because it seems to imply a pretty significant kind of fourth quarter. I'll jump off.

Yes, in terms of Q3, the growth rate that we're showing from an NPOI perspective is 16% to 22%. The prior year did include in it an asset sale of around $7 million. So excluding that, the growth rates would have been even higher.

We'll move on and take our next question from Paul Coster with JPMorgan. Paul Coster - JP Morgan Chase & Co, Research Division: Lots of good stuff here. But of course, the only issue I can see here really is the back-end ramp. And I guess the question is, what visibility do you have into a very strong fourth quarter from an NPOI perspective? I looked over the last few years, it's not unprecedented to have 25%, 30% sequential growth, but it's still a pretty dramatic ramp. And how much of the risk is there in the Retail segment, in particular, given that there's been some pushouts there, and I imagine another quarter could be pushed out quite easily?

Yes, Paul, our quarter -- really the guidance now for Q3, Q4 has been analyzed in terms of what we believe will convert from what is a record backlog. The backlog we have today is the biggest we've ever had in dollars and one of the biggest in terms of year-on-year growth. The NCR total backlog is up 19% year-on-year, and that's a fairly sizable backlog. A good portion of that is Financial, up 17% year-on-year. The rest is Retail. So what we've done is we've taken a look at what in the backlog will convert in Q3, Q4. Q4 is a bit more of a ramp, but not, to your point, unprecedented. And certainly in the years where we've had significant backlog positions like we have now, more the norm. Paul Coster - JP Morgan Chase & Co, Research Division: Okay. But obviously, the risk there is that the sort of the peak deployments for these large Retail projects will coincide with the holiday season won't they? Is it -- and I'm particularly concerned about the Retail back -- the back-end loadedness -- if there is such a word -- of the Retail segment. Can you just comment upon the 2 big projects in particular and just how much conviction you have around them getting in before the year-end deadline?

Well, we're actively involved in both, Paul. And it's John Bruno. You're specifically speaking to self-checkout, and I understand your issue with regard to that. We're actively working our backlog. As Bill pointed out, I mean, our backlog is big in Retail as well. So we're converting off of a strong backlog there. And some of the Retail backlog is actually kiosk-related backlog that's not specific to Retail front-end lanes. And the other part, which we don't typically talk about in backlog, is our software growth. And we have a number of programs. And our Retail customers tend to take software in Q4 in preparation for Q1, and then we bring in the license and PS engagements in the quarter in preparation to a fast start [ph]. So I think we've got not only the hardware backlog with self-checkout and some of the kiosks, but I also believe we've got a nice ramp on software as well, assuming we continue to execute. Paul Coster - JP Morgan Chase & Co, Research Division: Okay. My last question is the Hospitality segment has taken a dip in terms of margins. Can you just revisit that for us and explain to us what has happened there and why those margins will eventually turn back north into the teens, if they will?

Yes, they will. It's a combination of things, Paul. One, of course, we discussed on the last call, and I think on prior calls, which is around the significant investment we're making in Hospitality. We're investing at twice the rate of revenue growth in terms of expense to revenue. So that has impacted the margins of that business for the last 2 or 3 quarters. Secondly, we have less software in the mix. Part of that is just tough compares, big contracts we've done in terms of software contracts. But again, that's more lumpy and will come back over time given the front log. And I'd say thirdly, more or less, the NCR legacy accounts that have been bolted on to Radiant are somewhat lower margin and, again, lumpy as well, but also that will balance out within the coming 4 quarters. Paul Coster - JP Morgan Chase & Co, Research Division: If you don't mind, just one follow-up then. The investment that you're making, is it to expand the addressable market? Is it to take it international? Is it to expand the product line? If you can just give us some sense of why there's been this accelerated investment phase? And that's me finished I think.

Yes, the answer is yes, yes, and yes. We're doing all of the above in terms of expanding internationally, in terms of hiring new sales headcount to accomplish that goal, expanding engineering and budgets around engineering.

And mobile, we did enter mobile. A lot around our mobile POS and...

The mobile POS side. And so Paul, it's really all as a balanced investment plan for that business. And that's something that has paid off for us since we've acquired Radiant 3 years ago, and it will pay off for us in the future as well.

We'll move next to Meghna Ladha with Susquehanna.

So Bill, in light of the MICROS-Oracle deal and the potential for them to be more price competitive, how would NCR look to combat lower pricing?

Well, Meghna, first of all, let me say that this is not meant to be a cute statement. We're looking forward to competing in this market against a tough, sizable company, and one we respect a great deal. We've never been shy about competing. But we don't know what exactly is going to occur as a result of this acquisition when it is closed. So it's difficult to point out what their strategy will be in the marketplace, except that we do know that we have a world-class solution, the ability to also price differently with different packages and solutions, both from a cloud point of view as well as enterprise license point of view. And we think we can be quite competitive. We think we have a great set of assets and the ability to be flexible with pricing as well, and business models.

Got it. And then going to the ATM business, primarily the Digital Insight. How should we think about pricing going forward given that the market there is still fragmented with a number of small companies offering an online mobile banking solution?

Andy?

Yes. I think on the -- first of all, it's a wonderful business that we've acquired. And as we think about the drivers of the business, it's really 2 things: One is the number of end users that use the application, and the other one is the average price per user. It's a pretty simple business. And as we've -- since we've acquired the business, if you think about the average price per user, which is your question, there's always a general mix of products that have -- some are increasing in average price, some are decreasing in average price. And so the net of it is, we've had a really good year in terms of average price per user. So as we look forward, the key for us is -- and we don't like to quote the exact number -- but the key for us is, we've been relatively flat this year on pricing, which is a very good metric. It's much better than the old days under prior ownership, which is a situation that had 5% to 10% headwinds on average pricing. So the key for us is to maintain our average pricing and then add new products to add value to our customers, where they can really value where the trends are going in the industry so we can help our customers save more money and drive their revenue growth. So that's how we're thinking about it.

Got it, Andy. And just a quick one for Bob. Just want to check if you're still expecting NPOI and EPS at the low end for the year? I didn't see that specific language in the press release. I just want to clarify there.

Yes, really no full year change from what we said last quarter.

And next we'll move to Katy Huberty with Morgan Stanley.

Last quarter, you talked about some software deal pushouts. Were you able to close most of those deals in the second quarter? And how happy are you with the level of close rates now at the end of June?

I'm incrementally more pleased, Katy, but we have work to do. We did close those transactions that slipped from Q2 to Q -- I'm sorry, Q1 to Q2, and then to Q2 to Q3, but we've also had transactions slip from Q2 to Q3. So as we transition from a go-to-market and sales point of view and learn how to become a more effective, efficient software sales organization, this will be with us for some time. A lot of the work we're doing here, by the way, is education, putting the right policies and governance in place internally, everything from controllership to legal; and talent, bringing on the right talent and team to help move the ball forward. But this transition, this enormous shift in our revenue streams has definitely caused us to be less of an effective sales organization on software deals. But in Q2, we were a lot better than Q1, I can tell you that.

Okay. And then a couple of questions on the restructuring. Completely understand the shift from hardware to software, but you also mentioned some areas of de-emphasis and potentially exiting businesses. Could you give some additional detail there or examples of areas where you're backing off?

Not right now. But I think it's fair to say that we're doing a fairly deep evaluation of all of our assets. We routinely as a board look at strategic alternatives. And as we do, certainly opportunities for divestitures come up, opportunities for shifts in where we spend our capital come up. And it would be fair to say that in the process of doing that -- and this is the time of year we really get into that in great detail in terms of strategic planning -- we're looking at all of the above.

Okay. And then finally, Bob, how should we think about the $90 million of cost savings and how much of that flows through to the bottom line as opposed to reinvested in the business?

Yes, the $90 million will be a run rate that we achieve at the start of 2016. You can think of roughly half of that at this point helping the bottom line, the other half being reinvested back into the business.

And Katy, that will be allocated -- any additional investment will be allocated based on performance of the company and the individual divisions. So something from 0 to $45 million will be reinvested based on performance.

And I just wanted to elaborate a little bit more on Bill's response, Katy. You had also asked about examples around the 4 key initiatives. So when we mentioned that we were end of life-ing older commodity hardware products and also rationalizing hardware and software product lines -- and maybe I'll take a shot at this with John in terms of specific examples. Well certainly, having acquired 3 big businesses over the last couple of years, it's giving us an opportunity in terms of the go-to-market strategy to reduce some of the overlap and the redundancies that exist. And then frankly on the end of life-ing, we have a lot of very old equipment out there that we continue to service. And we service it and with very little profit to NCR. So we just have to make some decisions around the end of life-ing of products and also the overlap that exists within our current portfolio.

That's right. And just to add to Bob's point, we had discussed this on previous calls. This is, I would say, standard course -- current course and speed. When we made the acquisitions, there were a number of platforms specifically in the retail and the hospitality space, then with Retalix, that we've been rationalizing. We've also been doing some things as we've taken some of our manufacturing in-house to get greater absorption in our plants and get higher quality and better efficiency. So as we do that, our hardware engineering teams are consistently looking at ways in which we can consolidate our platforms. We have done a very, very good job of that prior to making the investments we've made in the acquisitions. And then, of course, that exploded once again taking those product lines in. And the last thing we wanted to have was any revenue dis-synergies at the time in which we made the acquisitions to do anything that interfered with our ability to grow. Now that we've had an opportunity to assess and evaluate that, we think we can transition those platforms in a lot more responsible way and not impact the top line. And so that's what we were careful to. So we knew we were carrying some excessive cost after making ourselves more efficient and now are going to take the next run. And this team really I know will do a great job at it because they've done it before.

And we'll move on and take our next question from Ian Zaffino with Oppenheimer. Ian A. Zaffino - Oppenheimer & Co. Inc., Research Division: Just on the DI side, can you just tell us what revenues might have been up, or some of the financial performance year-over-year?

Hey, Ian, I'll throw this over to Andy, but I think you're asking for a year-over-year compare of revenues. I don't think we have that.

Yes, this is Bob. I'll just chime in. The previous owners of the business had a different quarter end. The business changed hands and the business that we acquired looks quite different than what was in place in Q2 of last year. So we've tried to stay away from kind of quarter-on-quarter growth rates. But again, we're pleased with the $87 million and maybe Andy can shed a little bit of color on that.

Well, I spoke earlier about the 2 drivers of the business. One was the average selling price and other one was number of users. The number of users we do track monthly. That's up about 14% year-on-year, so a really good number. If you look back in the history files, the last 3 quarters we've been in the mid-teens growth. In the history of prior owners, I can't find a double-digit number. So really pleased with what the team has done there. Ian A. Zaffino - Oppenheimer & Co. Inc., Research Division: Okay. So if I say 14% increase in users, 0 pricing, and then you've added a bunch of new products and services, so probably that might get you closer to 20% or so? That's what I'm thinking here. The other question would be -- and maybe you'll answer this a little bit differently. How much lead time do you get from your customers as you release these large rollouts or large projects? How much lead time do you have between when they inform you and when you actually have to deliver?

It depends, Ian. Let me break it down for you. In terms of the -- on hardware, it's anywhere from 30 days to 12 months, depending upon the size of the order and the implementation program the customer has in place and so on. Software, 12 to 18 months. They essentially buy software from us. We recognize some of that upfront. And then as they add users and implement the total project, we take on more and more revenue as we hit milestones along the way. And services is not in the backlog, except for installation services, which are tied to hardware. Ian A. Zaffino - Oppenheimer & Co. Inc., Research Division: Okay. Because I'm just trying to have a sense of -- how much of, let's just say, the third quarter do you actually know the ship dates on and what portion of the quarter you really understand is -- I don't want to say in the bag -- but is sort of, you know exactly what dates those are shipping and what portion of that sort of makes up your guidance or maybe the total amount of revenues in that quarter. That's really what I was trying to get at.

It's quite substantial, Ian. I mean, I think in any given quarter of that backlog, we'll convert 40% to 45%, even sometimes as high as 50% in Q4 and above at any one point in time. So it depends. Q1 is usually the conversion low. Q4 is always the conversion high. On the backlog, it usually ranges again from 40% -- by the way, Ian, we've had quarters where 60% of the backlog converts in a quarter. Almost in all cases, that's Q4, but it does ramp throughout the year. But think about the right number being about 40% to 45% of that backlog we know converts to revenue. Then there's some sell and bill in a quarter. A person who buys something and we install it that quarter. That's a percentage of the revenue. We kind of know trends and what to expect there. We have a forecast of that. Of course, we have our recurring revenue, which we kind of know coming in to a quarter as well, services stats and software maintenance. We can do a fairly reasonable build on a quarter before we enter it. Ian A. Zaffino - Oppenheimer & Co. Inc., Research Division: Okay. And then just one final question if I could. I know you're making this transition from hardware to software, and you're doing a lot of this restructuring. I would have thought that maybe CapEx would have come down as well commensurately with sort of the amount of the reduction in capital you might need. Is that the case or should that be the case? And if that should be the case, why isn't that the case?

It should be and is the case. We'll be reducing CapEx this year and next.

Yes, I think what you'll see already, Ian, is we spent more of the full year capital. We've given guidance of $250 million to $260 million. We spent more in Q1 and Q2, and we've done a number of projects there. We invested in mobility in Hospitality. We opened up a new manufacturing plant in India. We've invested in a number of process improvements around quote to cash. So we've ramped Q1 and Q2. You'll start to see CapEx come down in Q3 and Q4 to hit the full year guidance of $250 million to $260 million, and then you'll see a much lower CapEx number next year.

And the only thing I'd add to that, Ian, would be as a percent of total CapEx, software cap will not go down. So we'll spend less on lower-margin commodity programs in CapEx and more on software development.

Next we'll move to the Matt Summerville with KeyBanc.

Just a couple of questions. First, just to get back to this ramp from the third quarter to the fourth quarter. I mean, I went back and looked at the last couple of years. And even from Q2 to 3, your NPOI is typically flat at the midpoint. You're up $10 million. And then from Q3 to Q4, you're typically in the range of, say, plus $30 million to $48 million. And now you're looking for NPOI to be up 50% or over $100 million. I guess I really need help, Bill and Bob, in terms of understanding how you're actually going to be able to do that. And I don't know if it's, hey, there's this x amount of business sitting in our backlog at a range of margin that we think is going to convert. I mean, talk business by business if you can and really sort of dig in a little deeper. That's just a huge, huge ramp.

Yes, Matt, if you go back and you look at NPOI as a percent of our total year in Q4, think about this year being in the low- to mid-30s, in that range. We've been there a lot. In 2007, it was about 39% of revenue, sort of NPOI in the fourth quarter. In 2008, it was 32%. In 2009, 38-plus percent. In '10, about 34%. In '11, about 36%. In '12, 31%. And in '13, 31%. So it's not -- it's right about where we would expect it to be given the backlog position we're in. Remember, going into Q3, Q4 last year, Matt, we had a backlog that was down significantly year-on-year. So you have to correlate your backlog position in any given year to the kind of NPOI escape velocity you have in Q3 and Q4, Bob?

Yes, I'll go ahead and go a little differently, Matt. I really think there's 3 drivers. One is the backlog Bill spoke about. We'll have a good Q3 in orders and really enter Q4 with strong backlog. The gross margin dollars in the backlog right now are up about 35%. So when Bill said they're up 19% overall backlog, well, the gross margin dollars are up 35%. So even when you look at the past, we've never had this much software in the mix. We're going to drive about $1.8 billion of software this year. So those margins have really helped us. And then frankly speaking, the restructuring that I mentioned will also have benefits in Q4 in terms of lowering the expense structure. So those 3 things, the heavy backlog, the margins, more software and the -- taking expenses down in Q4 will help a lot and get us to where we need to be.

I appreciate that color. Just one follow-up. I saw an announcement today that Scopus was announcing that IBM is taking over their service from Bradesco. And I guess I was a little surprised given the breadth and depth of your relationship with Bradesco that it's IBM kind of doing that. Can you comment on that?

Yes, this is Andy. We're very close with Bradesco, among others in Brazil, with our relationship. Our history in Brazil has largely been around the solutions we sell and less around the kind of scale that a financial institution the size of Bradesco would look to for the kind of outsourcing that they have typically done with Scopus. You're talking about thousands of employees sitting in Brazil. They really -- I'm not going to tell you what Bradesco says. You'd have to -- they'd have to comment. But from our perspective, we were well aware of the idea that this was a possibility, and they're not the only one it's a possibility with if you're following the trends in Brazil. And so it was no surprise. The decision that they made is one we're very supportive of. We'll work, we'll continue to help them through this transition and work and make sure that we're providing the proper service, both to IBM and to Bradesco in the transition.

Next, we'll move to Kartik Mehta with Northcoast Research.

Just a big-picture question, first of all. As the company becomes a larger software company, do you think this increases the volatility for the quarter, especially revenue and operating income as we move forward?

Yes and no, Kartik. No from the perspective that the recurring revenue stream of SaaS, software license, maintenance and the like are more predictable for us. And we're working hard to increase the percent of our revenue that is essentially recurring. So that becomes -- provides greater predictability. And that, by the way, as you'll see us continue to work on to drive that percentage up. The yes part of that question is, when you have sell and bill software transactions, it gets back to Katy's question and my answer to her. As we transition the sales force to being more software sales capable, you could see transactions, 1, 2, 3, 5 or so slip on you quarter-to-quarter. Now you work hard incrementally to reduce that volatility, but that volatility is far less than you might expect. You're talking about maybe $10 million to $15 million a quarter in profit that could slip on you. As we get larger, it becomes lesser of an issue. And as we transform and train and build out the sales force, it becomes a nonissue.

And then just, Bill, on the ATM side, any impact on the business from all the geopolitical issues that are going on in Eastern Europe?

Yes, I'll make a comment and then Andy will give you his point of view. The short answer is yes. I think the good news is in the context of Andy's performance here, he has withstood some headwinds with regard to headwinds in Russia, as well as in smaller countries, but equally important to us, like Argentina and the Middle East. But that's been with us a quarter or 2 now. We've absorbed that impact. I do expect at some point those businesses to come back. They are not dead by any means. We're still driving a good business in those markets, but they're not nearly as frosty as they were, Andy?

Well, I would just say a couple of things in addition to that. First of all, we have a wonderfully diversified business from a global perspective. And in some of the -- when you look at what's going on in Eastern Europe right now, the kind of materiality that it has, we have something like that happening almost every year. And you expect that with a business as diversified as NCR's. And we build all of that into our guidance. We build all of that into our plans in terms of contingencies. And when it happens in a region that has such pricing pressures as the area you're talking about, the impact to the NPOI is de minimis.

And next we have Gil Luria with Wedbush Securities.

As you pointed it out, you've done a lot of cost cutting and become a lot more efficient over the last 8, 9 years. And you already have higher than your peers in terms of margin, sometime significantly higher than your peers in terms of margins. Where is the -- you've talked about some of the opportunities, but how hard is it going to be to realize savings beyond that? And where do you start putting your benchmarks since you're higher than your peers on most of those margin metrics?

Yes, we have no shortage of opportunities to become more productive and more efficient, Gil. And we have an internal goal every year of driving about 5% productivity across the board. That, by the way, will never end for my team. And we believe we can definitely achieve that over the long term. The restructuring program is a bit more focused on strategically reallocating resources versus cost cutting around productivity and efficiency. We have that goal. We drive that program, continuing to drive that program as well, but we have still, I'd say relatively speaking, low-hanging fruit for many years to come.

Got it. And then what -- roughly, what proportion of your Europe revenue comes from Central and Eastern Europe?

Roughly, roughly, I would say, Bob's giving me 4%, 3.5%.

Total revenue.

Total revenue. 3% or 4%?

We're getting that right now. Gil was that your last question? We'll get you an answer to that.

Yes, it is.

Okay. We'll get you an answer.

I think I'll be right, Gil.

3.5% to 4% of overall revenue?

Yes, I think -- call it around $200 million to $250 million a year of revenue for Eastern Europe.

We'll take the last question from Jim Schneider with Goldman Sachs.

This is [indiscernible] for Jim Schneider. On 2015 guidance, can you provide any update in light of the weakness in the Retail segment and also the new restructuring plans which you have released?

On the Retail segment for 2015, obviously, the backlog is improving. I had made the comment that for Q3, we should see improved growth. So again, we should go into the year with stronger backlog from a Retail perspective. And what was the second half of the question?

I meant on the full year guidance, for 2015 guidance, given the impacts from the Retail segment and also the restructuring plans, does that change at all?

No change and really what we have said sitting here today, we feel good about 2015. And certainly with the reallocation plan that we mentioned, which we feel good about both the gross margin rate improvement and the expense structure.

Just one additional one from my end. On Digital Insight, you're talking in 30% margins and also you plan to invest more on sales and marketing. What are more sustainable margins for this business?

Yes, this is Andy. I think the margins that we're realizing today feel pretty comfortable for the long haul. I think there's a couple of drivers of improvement over time related to what I would think of as a world-class hosting center, which we're putting in place. And the second one would be, as we drive more innovation, the attach rate will drive better pricing per user, and we should see some good flow-through there. So I would expect that to be able to pick it up. We're not going to pick up 1,000 basis points, but it will be more than 100 basis points as well. So I think it will settle in higher than where you're seeing it today.

Well, let me thank you, all for joining us today. We look forward to speaking to you again in October.

All right, everyone, that does conclude our conference call for today. We do thank you, all, for your participation.