Please stand by, we are about to begin. Good day. And welcome to the NCR Corporation Fourth Quarter Fiscal Year 2021 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, Vice President of Investor Relations. Please go ahead, sir.

Good afternoon. And thank you for joining our full year and fourth quarter 2021 earnings call. Joining me on the call today are Mike Hayford, CEO; Owen Sullivan, President and 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 are 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, in our periodic filings with the SEC, including our annual report. On today’s call, we will 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 February 8, 2022, 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 fourth quarter and full year 2021 earnings call. I will begin with some of my views on the business, including an update on our move to NCR becoming a software-lead-as-a-service company with a higher shift to recurring revenue streams. I will also provide commentary on the strategic review process we noted in our earnings release, and will then review our financial performance and an outlook into 2022. And then Owen, Tim and I will take your questions. Let’s begin on slide four with some highlights from this past year. We entered the fourth quarter with momentum across our business and finished a very strong year. Keep in mind, we entered 2021 hoping that the COVID pandemic was mostly behind us, but we continue to experience COVID-related flare ups throughout the year and then added challenges brought on by the supply chain issues in the second half of 2021. Throughout the year, our team continued to execute and delivered a very strong year for our shareholders. I want to specifically call out our 15,000 customer engineers who have continued to work to support our clients in stores, restaurants and banks during the past two years of the pandemic. I am also proud of the continued execution our teams have done to improve our products and services, as we have been making our way back to the office with a flexible hybrid work environment. During this time, we have had a keen focus on taking care of our customers, with the belief that customer -- happy customers will buy more from NCR. We also successfully completed one of the largest acquisitions in NCR’s history. We completed the Cardtronics acquisition midyear and are well on our way with integrating the two…

Thanks, Mike, and thanks to all of you for joining us today. As Mike described, our solid fourth quarter kept a very strong 2021. We simultaneously generated substantial improvements in nearly every financial metric and accelerated our strategic progress. Just as a reminder and similar to last quarter, the legacy Cardtronics results are included in our Banking segment. So, beginning with our Q1 2022 earnings release, we will report our results relative to the new segmentation described in our December Investor Day. Let’s begin on slide six with a top level overview of our fourth quarter financial performance. Starting in the top left, revenue was $2 billion, up $43 million or 25% versus the 2020 fourth quarter, driven by strong growth in all three of our segments. Normalizing for the inclusion of Cardtronics in the prior year, pro forma revenue was up 8% year-over-year. The addition of Cardtronics revenue, which is predominantly recurring, helped push our aggregate result up to 35% and our proportion of recurring revenue up to 58% in the quarter. On a pro forma basis, recurring revenue was up 5% year-over-year. In the top right, adjusted EBITDA increased $95 million or 37% year-over-year to $353 million. Adjusted EBITDA margin rate expanded by 160 basis points to 17.4%. I will provide additional detail and the discussion of the segments, but in summary, the higher value revenue mix from both the acquisition and sale shift, cost productivity and pricing initiatives, all together continue to counterbalance premium costs associated with a very difficult supply chain and an accelerating shift to recurring revenue in our Retail business. In the bottom left, non-GAAP EPS was $0.76, up $0.17 or 30% from the prior year fourth quarter. The integration of Cardtronics is going very well and we remain on track for the transaction…

Thanks, Tim. In closing I am on slide 15. We have made significant strategic progress in 2021 and we did what we said we would do, delivering consistent, strong financial and operating performance. Throughout the year we have had a keen focus on taking care of our customers with the belief that happy customers will buy more. Our focus is paying off with our net promoter score increasing by 33% in 2021 and 2020. Improved customer satisfaction helps NCR garner a higher share wallet and was a key contributor to revenue growth and margin expansion across all of our industries. We entered 2022 with momentum and a clear strategic vision as we accelerate our transformation to a software-led as-a-service company. Looking forward, our key priorities are clear. First, we expect to accelerate growth as we leverage our software and payments platform to increase share of wallet. As we discussed at our Investor Day, we have established a new five-year targets, which we call 80/15/1. We strive to generate 80% of our revenue to be recurring, we expect to deliver 15% annual non-GAAP diluted EPS growth each year and we aspire to generate $1 billion of free cash flow in 2026. Second, we are eager to capitalize on the opportunities that Cardtronics and LibertyX brings us. We closed the LibertyX transaction at beginning of January and we are very excited about this opportunity. This acquisition continues our strategy to digitally engage with consumers and provide retailers and banks additional solutions for the customers to pay, transact and remit. Third, we will continue to improve execution to drive solid returns for our shareholders, while we transform the business to drive a rerate of our valuation. And finally, we will explore strategic actions to accelerate shareholder value creation as we believe our stock price has not reflected the improved performance demonstrated over the past three years. This concludes our prepared remarks for today. With that, we will open the call for questions. Thank you for your time. Operator, please open the line.

Thank you. [Operator Instructions] We will take our first question from Dan Perlin with RBC Capital Markets. Please go ahead.

Thanks, and good evening, everyone. I wanted to just start, Mike, with the strategic review. I know you probably don’t want to go into details on it. But the question, I guess, I have is, as we look across the business and the incremental segmentation that you guys have provided, which I think provide a lot more clarity. The question is, when you think about the opportunities, I mean, can all these businesses at this stage truly stand on their own? Do you see dissynergies to the extent that you would look at some of the options, and I think, it’s a lengthy list that you mentioned in the press release? So I am just trying to get some sense as to what you are thinking there. Thank you.

Yeah. Thanks, Dan. Yeah. I mean, so we gave transparency around five business segments, predominantly, because they -- as you look at NCR, those five business segments, we felt gave better visibility into comps in the marketplace and the ability to understand NCR. But when it comes to what we look at strategic alternatives, we kind of outlined some in the press release. We are going to keep our minds open. I would assume that that’s an outcome as you look at the five segments that was the intent of why we gave transparency in five segments. But as we look at what we could do to unlock value, and again, we really look at this and say, listen, we have executed for three years. We have hit every quarter for three years. We have improved our product. We have improved our strategy. We have delivered our products to the market. We have a customer set. We have grown our business and we are pretty excited about where we are going in the future. But yeah, we look at where we trade and we are very disappointed with the value, and we have said, in the last couple of years, if the market doesn’t catch up and value us appropriately, we would take a long hard look at what we might do. So if you think about the laundry list of things that we might be evaluating, clearly, looking at some of those components that you identified from the five business segments, whether some of those might have more value or more access to capital as a standalone, I think, that would be fair to say we would look at that. I think you could look at the company, and say, the question we always get, how much synergy between…

That’s great. Thank you for all the detail. Just a quick follow-up for Tim, when you think about the guidance and you gave a lot of details here about kind of some of the toggle points. But are you more, as you sit here today, are you more concerned about the cost aspect of the business to get you to kind of the high low kind of range or are you more concerned about the demand environment across the spectrum of what you can at least see from visibility at this point? Thank you.

Yeah. So demand is fine. Demand is actually relatively good, nearly everywhere, with the exception of transaction volumes at Cardtronics. When the Crown countries start to open up more and we -- the U.S. opens up more. I think those will recover as we get kind of put the Omicron variants in our rearview mirror. So demand will not be a problem. I feel good about our demand. From a cost perspective, those things we can control, which is our cost -- our controllable cost, we will manage that. We do every year. We have productivity initiatives underway. Adrian and his team look at our manufacturing base and try to make sure that we get sufficient productivity in a typical year to offset inflation. As you know, we came into this year with a significant headwind from inflation that we experienced in the latter half of last year and while the supply chain is getting better, it’s not great. And so, my biggest concern would be, can our price increases keep pace with the cost that we have seen thus far? That would be, in my mind, how that plays out will determine what end of the range we end up in.

Got it. Thank you.

Thank you. We will take the next question from Matt Summerville with D.A. Davidson.

Thanks. A couple of questions, first, if you look at your guidance, Tim, the 12% to 15% revenue growth, how much of that would you say would be pro forma legacy NCR, similar to how you talked about the reporting periods here in the call?

I am not sure. I will have Michael get you that data. We are going to give you pro forma data going back eight quarters for all of the segments that will be inclusive of Cardtronics. So I actually didn’t do that math for you…

Okay.

Hey. Matt, this is Mike. I would -- it gets increasingly hard going forward to try to break that out and I will give you an example. We talked about three ATM-as-a-Service deals that we executed in the fourth quarter. I think, we talked on the last call, we are very optimistic about that business as we see entities, both small and Bank of Baroda, which is a very large entity in India. Who look at our ability. Our ability is NCR/Cardtronics, not only to deliver the components, the service, but also to operate and that’s a combined offering of NCR/Cardtronics. So it’s really hard to say what -- where is that coming from? We expect more of that in through about 2022. So I don’t think you are going to see us try to break out what is coming from each side of the businesses from a legacy perspective.

So while my wingman was talking, I did some math, it’s about half of that number is pro forma growth. So the 12% to 15% will be about half of that will be our pro forma growth.

Got it. And then, you mentioned several times, Tim, about how pleased you are with some of the backlogs you are seeing in the businesses. I was wondering if you could maybe put some numbers around that, whether it would be as a whole for NCR at the segment level, and then, maybe comment on in a more ideal world supply chain, et cetera wise, how much revenue maybe you would have otherwise been able to deliver in Q4? Thank you.

Okay. Yeah. So the first part of that is, we don’t disclose backlog qualitatively. I feel really good about where we entered this year versus where we entered last year. So to have backlog in ATMs and to have backlog in SCO is a nice thing. In terms of how much revenue pushed forward from one quarter to the next. We have talked about $40 million to $50 million in hardware revenue pushing forward from Q3 into Q4, and now from Q4 into the first half of 2022. So it’s on that magnitude.

Got it. Thank you, guys.

Thank you. We will take our next question from Charles Nabhan with Stephens.

Hi. Good afternoon and thanks for taking my question. I wanted to ask you about LibertyX, specifically the degree to which that impacts -- that impacted the quarter, as well as your guidance for 2022?

So there’s nothing in the quarter to speak of. We didn’t get the deal closed until January. So there was no impact to the fourth. We got it closed mid-Jan. There will be some impact to the first quarter and the full year -- last year’s full year revenue, depending on how you account for it, there’s still some debate as to whether this is gross or net accounting. But depending on how we account for it on a gross basis, it could be $80 million of that guidance.

Okay. Great. And I know you have commented on supply chain, but I wanted to get a little more color specifically around the source of some of those headwinds, whether they are coming from freight, supply or labor, whether you are seeing those areas stabilize and it sounds like you are raising price, you are able to pass that on from a pricing standpoint in the first half of the year. So I just wanted to confirm…

Yeah.

… to the latter my understanding there as well.

So I will do the first part. I will reiterate what we said last time. I won’t give color on what’s really going on in the supply chain, much closer to deny it. But we have talked last quarter about our price increase is lagging our cost increases by about three months to four months’ time and I think that’s still true. And I said, we would catch up within those three months time as soon as price -- as costs stop going up. They haven’t yet stopped going up and so we are still chasing a bit those cost increases with price and that’s why I have some caution in the first half of the year. Owen, maybe you can give some color.

Yeah. That addresses the price increases and where we are. I would say from a -- what we are seeing in the supply chain and it’s evolving pretty fluidly here and actually quickly. As we came out of the fourth quarter, a lot of the issues were around both materials and freight. What we are seeing right now is a bit of let up on the pressure in terms of the semiconductors. As we look at what we have done in terms of recertifying the supply chain and creating some optionality, we are starting to see some of that pressure come off, especially as we look at the end of the first quarter and into the second quarter. What we hope we then see is the freight numbers starting to abate and supply being available to us, and as we look out over the next couple of quarters, we are feeling better about the supply. And then, hopefully, what we will see as supply increases is, obviously, some moderating on cost. So, but as we look at the year, demand is very strong. We are seeing some of the challenges the supply chain starting to abate and we are hoping that we will see a more normalized environment and I use that in airports toward the second half of the year.

Got it. I appreciate the color. Thank you.

Thanks.

Thank you. We will hear next from Erik Woodring with Morgan Stanley.

Thanks, guys. Good afternoon. Just to follow up on one of the earlier questions. For the $40 million to $50 million of hardware revenue that was somewhat pushed from 3Q to 4Q and now to early 2022. Was that specifically because of component availability or was that a situation where customers were impacted by pricing? And then I have a follow up. Thanks.

No. All component availability.

Okay. Super. And then, can you just remind us how to think about the cost savings from the Cardtronics acquisition in 2022? How much of that is, if that has changed at all over the last few months as you have kind of worked through the deal further? Thanks.

Yeah. It’s not changed at all. The assumption is we will still get that $120 million of cost out. It gets increasingly hard to tell when we take cost out, whether it was Cardtronics cost or synergy cost or legacy NCR cost, but we will get out far more than that, cost in aggregate across the organization. And you will recall, we did get somewhat of a head start to. We probably got $30 million worth of value from those synergies, the easy synergies that publicly traded costs out in 2021.

Okay. Thanks. And then, maybe just one last one if I could slip it in there, and this is for you, Mike. Just, obviously, you went through the strategic review initially here, but just curious why today, why now, why has that -- is there something that you saw over the last few months that has initiated this or has this been in the works, just curious about timing? That’s it for me. Thanks.

Well, we have talked -- again, I’d say in the last couple of years that, we put a strategic plan together late 2018 going into 2019. We laid out some strategic goals. We laid out 80/60/20 goal. We executed quarterly and we have done a -- the team has done a really great job of improving the products competitiveness, product quality. And yet, as we got through the end of 2021, which if you think about it, we didn’t expect COVID to continue to linger throughout 2021, it did around the globe. We got hit with the things we are talking about now with supply chain. But yeah, we delivered really strong 2021 performance. Having said all that, if you are executing on financial performance, you are improving the product quality, you are executing on your strategic goals, but yet, our value and our valuation is actually lower than it was in 2018. So there’s nothing other than the fact that we look at that, and say, for whatever reason the market doesn’t understand our business or is unable to give us a value that we think is there. Again, we have said for two years, if the market doesn’t catch up and understand the value we think is inherent in the business that we have, we would take the steps to unlock that value. So it’s simply -- we are doing that simply based on where we sit today with our stock price.

Thanks, Mike.

Thank you. We will take our next question from Kartik Mehta with Northcoast Research.

Hey. Good afternoon. Mike, one of the things you have talked about in three years as well are price increases on the servicing side for banking and that’s a decent sized business for you. I am wondering how the banks have reacted and if you have been able to push that through and if there are certain characteristics of banks that are willing to accept that?

Yeah. Kartik, this is Owen. Across the Board, not just with the banks, but our entire customer base. They have been more than reasonable. We talked we were probably 30 -- 90 days behind in terms of implementing, so on us. But as we have responded or pushed the increases out, our customers have been pretty reasonable. In fact, if you listen to most of our customers in the retail, the restaurant and the banking sectors, they are all talking about passing costs on to their customers and they have done that readily. So there has been not been any significant pushback from the customer base.

And then, just on ATM-as-a-Service business. I know you mentioned some banks in the U.S. and one, I think, in India. Obviously, the bank in India is very large. But I am wondering in the U.S. what type of banks have you seen that are interested in ATM-as-a-Service? Are there a certain amount of ATMs that they have that you find is kind of the target market or what type of demand you are seeing?

Yeah. I mean, the two we called out Seacoast and EECU in the states are community banks. And they actually -- so in addition to the ability to take over their footprint of ATMs, the ability to join the Allpoint network in the case of Seacoast and have that capability to expand a surcharge-free network for all their clients was really important to them. So we are seeing that, certainly, on the community banks, the regional banks, as I mentioned in last call we did, we have had dialogue with some larger banks, maybe even larger than we would have anticipated. Bank of Baroda, I think, we talked about this on prior calls, the Indian market has already shifted to much more of an ATM-as-a-Service market. So Bank of Baroda, in that market, bank of that size that are fairly scaled like this, have looked to providers. So we knew that was an opportunity in that market. We think there’s more opportunity in the Indian market. Australia has embraced this, parts of Europe have embraced it, we are starting to see it in the state. So, in the state right now community banks, we would expect that to start to move up into a larger FIs going forward.

Thank you. Appreciate it.

Thank you. We will take our next question from Ian Zaffino with Oppenheimer.

Hey, guys. Thank you very much. I just wanted to touch upon the strategic alternatives a little bit. I just kind of wanted to get a sense of what may not be an acceptable resolution for you guys? And I guess, maybe we have a little bit of memories on the last time five years ago, six years ago or so, where we thought we were going to be moving into some type of value creation, and instead, we got something very different with a dilutive short of raise. Is there any type of consideration for that or are we really going for kind of like plain vanilla strategic alternatives where you have either a spin or some type of separation or something along those lines? I know you can’t give so much detail because you are very early on, but any color you could kind of give would be helpful. Thanks.

Yeah. I mean, I don’t -- again, we are going to look at different things. Again, the challenge is as we have had parts of our business start to have more and more success. And if you look at some of the components we have, whether it’s hospitality, whether it’s hospitality SMB, whether it’s digital banking, that’s what we have done at the retail platform, as those businesses have started to compete and win, and people are paying us, but each one as a standalone is really hard to evaluate, because once you start to look at your high value assets, what do you do with the remainco. So we felt it was really important to look at the totality of our company, look at the context, first of all, of our shareholders, but also look at the context of our customers and our employees and make sure that what we do hold together, so we get the greatest value on the organization, but also have an organization or organizations that still function and have a future. Having said, what you pointed out on the transaction that took place I believe about six years ago, we, obviously, worked together, management team wasn’t here. I don’t know that I would see something like that. I mean, that transaction, the cost of funding for that. It didn’t seem to add a lot of value to the organization and I don’t think it unlocked shareholder value. So, I think, you will see us very focused on unlocking shareholder value.

All right. Thank you very much.

Thank you. We will take our next question from Paul Chung with JPMorgan.

Hi. Thanks for taking my question. So, just on Digital Banking, nice progression on revenues there, can you expand on kind of the registered user decline? Are there risks of other customers kind of bringing the app in-house, what drove that move there and does that kind of impact any revenue trends later on?

Yeah. So that, I mean, that is -- so that is a factor of the consolidation of the bank market, which you have once in a while, typically you have small ones. This happened to be a larger client, quite frankly, did a merger of equals and they took it in-house to the other platform. Sometimes you win those, sometimes you lose. So this is a little bit of a step down function, which we called out. But as you look at our plan for 2022, we have it all laid out, right? The conversion cycle and the timing of when customers come on, when accounts come on, it’s laid out for the next nine months. So we know what we capture that, we will get the growth in double digits that we have talked about in the past. We -- this is something we had anticipated, this was a combination that took place almost a year ago and the customer just converted on the other platform last quarter.

And Mike, we have often described that metric is imperfect, right? It only describes about two-thirds of the revenue in Digital Banking that’s linked to the number of users and they are out of sync, revenue does not mimic in any one period of time that user base. So when users were growing more quickly than revenue, we had to explain it the other direction, now the shoe is on the other foot. But I think, as the year plays out, you will see overall full year growth in users and revenue to be pretty similar back to the double-digit level.

Got you. And then, switching to retail, self checkout has been pretty steady. How do we think about the trend in 2022 demand trends, backlog, competitive environment, anything there? Thanks.

Yeah. This is Owen. I would say that, the same enthusiasm we came into 2021 with, we come into 2022 for retail and especially self checkout. What we are seeing based on pressure on labor. That is only driving the need and the opportunity for us to bring more self checkout solutions to the table. We are seeing it expand beyond the traditional large box retailer into the specialty areas. We mentioned Bed Bath & Beyond. That’s a great example of moving into the specialty retail. And we are also seeing the self checkout solutions really gain traction in the convenience fuel and retail space. So we think the market is expanding. We think our software and hardware solutions are really well-positioned. And the backlog that Tim talked about earlier is reflected in that for retail as we come into ‘22.

Thank you.

Thank you. That does conclude today’s question-and-answer session. I’d like to turn the conference back over to Mr. Mike Hayford for any additional or closing remarks.

All right. Thank you. So, in closing, just a couple of quick comments. First, we had a great 2021. We did not anticipate the kind of impact that we actually incurred due to COVID. We didn’t anticipate the kind of issues with the supply chain. Our team around the globe did a phenomenal job of working through those things and still delivering an extremely strong 2021. As we head into 2022, we are very optimistic about the future for our company, as we see growth start to accelerate, as we see success in our products in 2022 and beyond. We are excited about the strategic outlook of where we positioned our products and where we are headed with our software platforms. And then, lastly, and as it relates to our strategic process that we are undertaking, we simply don’t believe the value of our company is currently reflected in the price of our stock. If you look at the last three years, we have delivered on our financials every quarter. We laid out some long-term goals three years ago 80/60/20 and we are going to meet those goals ahead of time. At the same time, we have continued to shift our company to a software platform company and deliver platforms of Banking, the CSP and in Digital Banking and then in the Retail and Hospitality side, the NCR commerce platform and we are seeing great success in the marketplace. We have improved our merge perception, of our product quality, of our product delivery, of our service and our strategic plan across all of our businesses. So, in closing, I want to again thank our team, our CEs in the field continue to work every day, supporting our stores, our Restaurants and our banks. Our teams and the plants continue to deliver and build and our teams continue in a very difficult environment, working from their homes, working from the office when they can to deliver for our clients. It is these team members, 35,000 around the globe that put us in this very strong position to be able to look at strategic alternatives to unlock our value and those are the steps we are undertaking starting today. With that, I want to thank everybody for joining us for our call today.

Thank you. This concludes today’s conference. Thank you all for your participation and you may now disconnect.