Welcome and thank you all for standing by. [Operator Instructions] This conference is being recorded. If you have any objections, you may disconnect at this time. And I would now like to turn today's conference over to Mr. Gavin Bell. Thank you. Sir, you may begin.

Thanks, Victor. Good afternoon and thanks, everyone for joining us for our second quarter 2012 earnings call. Bill Nuti, NCR's Chairman and Chief Executive Officer will lead our conference call this afternoon After Bill's opening remarks, Peter Leav, Executive Vice President of our Industry Solutions Group and Head of Global Sales, will update you with respect to progress in certain key initiatives. Bob Fishman, NCR's Chief Financial Officer, will then provide comments on NCR's total company financial results. Our discussion today includes forecasts and other information that are considered forward-looking statements. While these statements reflect our current outlook. They are subject to a number of risks and uncertainties that could cause actual results to vary materially. These risk factors are described in NCR's periodic filings with the SEC and in our annual report to stockholders. On today's call, 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 non-GAAP financial results to our reported and forecasted GAAP results and other information concerning such measures are included in our earnings press release and are also available on the Investor page of NCR's website. A replay of this conference call will be available later today on NCR's website, ncr.com. For those listening to the replay of this call, please keep in mind that the information discussed is as of July 19, 2012, and NCR assumes no obligation to update or revise the information included in this conference call, whether as a result of new information or future results. I'll now turn the call over to Bill Nuti.

Thank you, Gavin. Good afternoon and thank you all for joining us. Our second quarter results keep us on track to achieve our full year objectives and demonstrate the consistent execution and innovation that we are leveraging across all of our lines of business. Consolidated as-reported revenues increased 11% in the second quarter of 2012 compared to the same period last year. Revenues increased 15% on a constant currency basis and gross margin and NPOI margin once again reached record levels in Q2. We continue to execute our strategy to become a solutions company, where hardware, software and services are integrated to deliver more value to our customers. This strategy and our solid execution is resulting in NCR generating profitable growth. In addition to our strong revenue, gross margin and NPOI results, orders surged in the second quarter, growing 19% over the prior year period. Order growth was bolstered by a significant order in Brazil. We finished the quarter with backlog of $1.29 billion, a record high, and our 11th consecutive quarter of year-over-year backlog growth. As a reminder, this order and backlog growth does not include our hospitality line of business, which also expanded its business pipeline during Q2. In addition, it does not include our consumables line of business. Our focus on growing our core verticals, Financial Services, Retail and Hospitality, and solid execution across our product groups and our global services business are combining to drive strong financial performance and a robust business pipeline. Outside of the core, we continue to leverage NCR's strengths in attractive Emerging Industries like Travel, as well as Telecom and Technology. Consistent with this strategy, we completed the previously announced sale of our Entertainment business to Redbox in the second quarter, consistent with the pricing and terms we announced at the time…

In Financial Services, we're building upon our global leadership by delivering a robust enterprise platform and market-leading multichannel banking capability that enable financial institutions to enhance their branch operations reduce cost and better connect with their clients. This innovative and service-backed enterprise platform is driving market share and gains across the globe, yielding strong financial performance and high praise for our customers. Financial Services revenue grew 7% in the second quarter and segment operating income growth was 10%. In addition to strong financial performance, we also continue to see solid order trends with global orders up 24% in Q2, mainly due to growth in Brazil and EMEA. It's worth noting that our business overall in Europe remains healthy despite the economic issues facing the region as evidenced by FX neutral revenue growth of 13% and FX neutral order growth of 3% in the second quarter. We continue to expect relatively flat performance for the year in European geographic region overall.

Revenues from the U.S. regional and midsize banking sector increased 58% during Q2 and for the first half of the year are tracking 119% as of last year as financial institutions in this sector continue to unlock capital spending. Going forward, NCR will face very tough compares in this segment, and our share gains continued, and the overall growth of this business over the last 18 months has been significant. In Retail Solutions, Q2 revenues decreased 9%. On an apples-to-apples basis, excluding the effect of moving our specialty retail accounts from our Hospitality segment to Retail Solutions, revenues decreased 6%. Despite the decrease in revenues, segment operating income in Q2 was $28 million compared to $19 million in Q2 of last year. Retail orders were up 2% on an apples-to-apples basis in the second quarter. Like Financial Services, our retail vertical strategy is built upon understanding our customer's needs and enabling them to secure productivity gains and deliver a converged experience that meets and exceeds the expectations of a rapidly changing consumer. And nowhere is this value proposition more evident than with the successful launch of NCR Silver this week, our latest SaaS-based Retail Solution which will make it easier for small business owners to run their business, connect with customers and sell from anywhere. As we outlined on our recent Investor Day, NCR Silver is more than just a point of sale. Rather, it is a total solution that provides a full suite of applications to customers, including point of sale, secure payments, customer loyalty, business reporting and mobile access. We are very excited about the positive acceptance we've received from small businesses, media and our partners. This week, we launched a media blitz that reached well over 30 million people through broadcast television, radio and print in more…

Thank you, Bill. In Financial Services, we saw a strong order momentum in Q2. Order growth was 24% for the quarter, driven by ongoing strength in emerging markets, particularly Brazil. U.S. regional and midsized banks increasingly view NCR as the most logical partner for the deployment of advanced ATM solutions to improve the consumer experience, deliver increased productivity and customer satisfaction gains and provide an integrated banking experience across multiple channels. One notable win in this market was Central Bank, which serves Provo, Utah and surrounding communities. Central Bank will be deploying NCR SelfServ ATMs as part of its efforts to revamp its ATM network and provide customers with faster and more convenient service levels. The SelfServ ATMs that Central is deploying contain our Scalable Deposit Module or SDM technology, which allows consumers to deposit both cash and checks together simultaneously through a single slot. We continue to win with SDM as evidenced by the announcement this morning that NCR has been selected by SunTrust Bank to deploy SDM technology as sole provider of their ATM deposit automation network. SunTrust is making self-service banking faster and easier for its customers in more than 1,600 locations by deploying NCR SDM technology. SunTrust has already installed more than 1,200 NCR SDM SelfServ ATMs. Advanced technologies such as SDM distinguish NCR's portfolio from the competition, and we continuously work to further differentiate our offerings by investing in the next generation of technology to enable branch productivity gains. A great example of this is our new NCR Mobile Cash Withdrawal application, which gives consumers the ability to initiate cash withdrawals from their mobile devices and then complete the transaction at an ATM by simply scanning a 2D bar code. Early tests of the technology show that it can reduce ATM transaction time to 10…

Okay. Thanks, Peter. One preliminary note. As Bill mentioned, we completed the sale of our Entertainment business on June 22, 2012. So consistent with Q1, the results of that business are classified as discontinued operations and are excluded for the periods and the guidance that we are discussing on this call. NCR's total revenue in the second quarter was $1.41 billion, up 11% versus Q2 2011, and up 15% on a constant currency basis. We reported GAAP income from continuing operations of $67 million or $0.41 per diluted share. This compares to GAAP income from continuing operations of $45 million or $0.28 per diluted share in Q2 2011. NCR's results from continuing operations include special items in both periods. Income from continuing operations in the second quarter of 2012 included $39 million or $0.17 per share of pension expense, $10 million or $0.04 per share of acquisition-related amortization of intangible assets, $4 million or $0.02 per share of acquisition-related integration costs and $4 million or $0.01 per share impairment charge related to an investment. Income from continuing operations in the second quarter of 2011 included $53 million or $0.23 per share of pension expense and $1 million or $0.01 per share of acquisition-related transaction cost. Excluding these items, non-GAAP diluted income per share was $0.65 per share in Q2 2012 versus $0.52 in Q2 2011. To analyze NCR's operational performance without the effect of special items and pension expense, please see the supplemental financial schedule included in our earnings press release that reconciles our GAAP to non-GAAP results. Excluding the impact of special items and pension expense, our Q2 2012 gross margin was 27.3%, up 290 basis points from 24.4% in the prior year period, resulting from higher product and services sales, favorable customer and product mix, including significantly more…

Thank you, Bob and thank you, Peter. NCR performed solidly in the second quarter and the significant growth in order volumes strengthens our conviction in the goals we have set for 2012. Despite signs of renewed economic difficulties in a number of markets and geographies, our business trends continue to look healthy. We are delivering innovation and productivity to customers in an area that is critical to them, the front lines where consumers meet them to transact business. At NCR, we want to take full advantage of the opportunity this presents to us by growing revenues in our core verticals, by expanding our business into adjacent verticals and emerging areas like travel and by enhancing our profitability. And we're achieving the latter not just through cost savings, though cost reduction is critically important. We're doing it by transforming NCR into a software-driven business, an initiative that enhances the solutions we deliver to customers while also enhancing our margin profile. In short, I believe the company is executing well on all of these strategic fronts. And that is demonstrated in the results we are delivering. We aim to continue the momentum. That concludes our prepared remarks. In addition to Bob and Peter, I've asked John Bruno to join us for Q&A on the call. Operator?

[Operator Instructions] And our first question comes from Gil Luria with Wedbush Securities.

The U.S. regional is doing very well right now, but I think you said something about comps getting harder. Is that revenue comparable than the second half of the year next year? Is that order comparable? Are we going to look at flat revenue next year? I know it's a little early to think about that, but -- or are we really peaking in terms of activity in the U.S. and should expect declines going forward?

Gil, I think we'll continue to see healthy revenue growth in nationals the next few quarters for sure. The backlog for that business remains healthy. There's no question we're facing tougher compares because, of course, our success in that space has been quite significant over the course of the last 18 months, for sure, if not 2 years. With the ADA process behind us, and in front of us, deposit automation, I remain encouraged. And of course, we haven't yet talked about what we're doing in branch automation and store automation, which is something that we'll talk more about in Q3 and Q4, which we think will have a significant impact on revenues in that space in 2012. That being said, it's a tough -- the compares are just getting tougher because the numbers are getting bigger.

Got it. And then my follow up is about a couple of the expense items that you mentioned for the second half of the year. Could you give us more detail about what that $10 million in customer service is? And then how much spending on advertising and specifically spending on Silver is impacting second half numbers?

We're spending an incremental $10 million in the back half mostly, Gil, on headcount for new customer engineers, new territory managers to manage those customer engineers and just making sure that we have the right capacity in place given the significant increase in the number of units we're now servicing. So that's mainly where that $10 million is going. It's also to some extent going into parts and the ability to just upgrade our parts inventory. We have baked in to this outlook, as well, an incremental $11 million of investment in Silver, and that's on the year and that $11 million was already in our outlook last quarter. So we didn't need to call it out today, but it's about $11 million and more than that if you look all-in on the full year for Silver.

Our next question comes from Ian Zaffino with Oppenheimer Capital. Ian A. Zaffino - Oppenheimer & Co. Inc., Research Division: Can you give us an idea -- and I know you always breakout the revenue from an FX standpoint, but would you be able to give us the earnings hit this quarter kind of what you're assuming in guidance going forward, I guess, it's becoming more and more pertinent.

FX, just to give you some perspective, of course, we have the euro going against us, but we have other currencies going with us around the world. The Indian rupee is a good example of that. When you look at the full year, year-on-year revenues right now assuming nothing changes given what we know, will be down about $131 million on a year-on-year basis. That's apples to apples, if you will, year-on-year. The impact on profit given our hedging strategies, given that we have some FX going with us, some going against us, is in the neighborhood of like $10 million year-on-year. Ian A. Zaffino - Oppenheimer & Co. Inc., Research Division: Okay. So I guess $0.01 or $0.02 per quarter? Because I'm trying to look at guidance, and it looks like guidance should probably be maybe $0.05 higher, $0.06 higher, but I guess you're assuming kind of the euro stays around this $1.22 level or so.

Exactly. Ian A. Zaffino - Oppenheimer & Co. Inc., Research Division: Okay. Second question would be on the pension, I guess there's kind of 2 parts. The first one would be, help us understand what the new service transport bill does to your position, does to your thinking and as well as your approach. And then number two, and this might show my naïveté to the whole situation, but why not give us an update now? What are you doing for the next couple of weeks that, that would delay any type of announcement?

Well, I'll answer the latter, and I'll let Bob answer the first part of your question in terms of the impact that the latest pension reform has on us. We're still analyzing all of the pension alternatives that we have. We, of course, need to review all of this with our Board of Directors as well, and that's -- our board continues to remain very involved in all of our strategic efforts, and this being one of them. So we still have some work to do, frankly, Ian, and we do expect to be able to talk to you all about this in the next several weeks.

In terms of answering the first question, I would say the reform certainly helps push out some of our U.S. contributions a couple of years. But the underfunded position really stays the same from a GAAP perspective. So that piece doesn't change, and we'll talk about that a little bit more fully when we have our pension announcement. Ian A. Zaffino - Oppenheimer & Co. Inc., Research Division: Okay. And as far as the last thing you said, from what the rating agencies look at, would that change? Because I know they oftentimes treat the underfunded pension as debt, I'm wondering if now that amount is reduced and therefore, the rating agencies are looking at you as a much less levered company?

Well, I think the rating agencies, at least S&P, have tended to look at our underfunded position net of tax, and that really doesn't change too significantly based on pension reform.

Our next question comes from Dan Perlin with RBC.

Just a couple of quick ones. When we think about -- kind of going forward the next couple of quarters for order growth and you've already called out more challenging comps in regionals, but -- and you obviously had a very big order in Brazil, and I'm just trying to think about how we should break down this growth expectation between those 2 areas, emerging and then what we've had over the past, as you said, several years benefit from regionals. Is that just shifting over towards more of the emerging market and then there's some opportunity that we can think about domestically? And then also on that same vein, if you're seeing a mix shift more towards emerging, can you just remind us the margin differential?

Sure. The first thing I'd say is that in terms of order growth looking out, we just had a tremendous quarter in orders. And again, Brazil featured prominently in that quarter. But you'll continue to see the developed markets and even the national bank segment grow for us. Over that time period, we'll have tough comps. Growth will come down, and we'll see where that lands, but I do think the deposit automation cycle is alive and well in that space. And again we have other technologies we'll be selling into that space going into next year. That doesn't mean that it will be robust in the back half of the year. I'm not -- we're not expecting that in our outlook frankly. In terms of emerging markets, yes, we continue to see great growth in the emerging markets driven by Brazil this past quarter. We'll continue to see growth in India. We'll continue to see growth in other markets that are smaller in nature, but emerging around the world. I think the way you need to think about growth going forward in the core is that it will moderate somewhat in the next few quarters, but that our other businesses not included in our growth forecast for orders, like Radiant or Hospitality will continue to be good solid growth businesses for us, and that's a great tailwind for NCR. So remember, when we talk about orders, we're talking about our core business that does not include our Hospitality line of business. Does that help you?

Yes, that's good. Well, I just had a quick question on the cash flows. One of the items in your working capital went -- it looks like negative $33 million, your other assets and liabilities. I'm just wondering, is there anything to call out of that? A pretty big swing relative to last year's? Does it have something to do with Silver? Does it have something to do with -- your putting out equipment that's under a services deal as opposed to just a hardware deal?

No. This is pretty typical for us. Working capital is a usage of funds in Q2 and Q3 as we ramp for a big Q4. So typically, we see our inventories increase, as well as our receivables. So nothing unusual and all built into our free cash flow forecast for the year.

I wasn't really talking about receivables or inventory, I was talking about the other asset and liability line, negative $33 million versus $20 million positive in the year ago.

Yes, the other assets and liabilities is made up of many different accounts, from our tax accounts to our different other accounts. So it really is an explanation of those [ph] -- movement in 7 or 8 different accounts. It just tends to be lumpier. That piece, you'll see good guys flow one quarter and bad guys in others. I wouldn't be particularly concerned about the movement you've seen in this quarter.

Our next question comes from Matt Summerville of KeyBanc.

A couple of questions. First, I just want to make sure I understand the order numbers properly. If you kind of back out that Brazil order, Bill, how would the ATM business have looked in terms of order growth year-over-year and then the total company as well if you have that.

I think we've been up low single digits for both the Financial Services business and for the company.

And then how would U.S. ATM orders have looked in the quarter and then how are you thinking about the retail business going forward? Are you seeing point of sale revenue push out? Are you seeing cancellations, deferrals? Is that a concern and maybe you can speak to that in terms of North America versus Europe, rest of the world?

On the retail front, apples to apples, orders were up about 2%, which was encouraging particularly given the fact that we did have some orders pushed out from Q2 to Q3. And I'm optimistic about retail in Q3 in terms of orders. On the ATM front, the U.S. was -- do you have the number?

Slightly up in total.

Slightly up in total. And it was okay for us in the U.S. Again, I think we're also dealing with a tough comp from Q2 last year. We had some big orders in Q2 of last year. So I was pretty pleased with the quarter on the financial side.

Our next question comes from Kartik Mehta with Northcoast Research.

Bill, one of the areas that you pointed to as strength was Europe. And I'm wondering if you just could provide maybe where you're seeing the strength and maybe just your overview on some of the larger markets, what's happening there fundamentally?

Well, I mean, the strength in Europe is coming from Eastern Europe, not Western Europe. Although we had one country in particular in Western Europe that did well this past quarter in orders. But on an overall basis, it's Eastern Europe driven for us and the point that I made in the script was that, I think Europe on a constant currency basis would have been up 3% in orders and 13% in revenue. And we've been calling that flat. And on an as-reported basis was down. So I'm still in the space, Kartik, of this -- again, planning for a flat Europe going forward at least in the middle term. But I am encouraged by our strength in that market despite some of the issues that we are experiencing. Again, our strength in Eastern Europe though is outpacing the headwinds we see in any countries in Western Europe.

Then just a second question, Bill, you mentioned this at the analyst meeting and then again it seems like the market in India is changing quite rapidly and it seems as though NCR has a lot of opportunities there. I'm just wondering if you could talk a little bit about maybe how you see that playing out and what you see that as having an impact on revenue growth going forward?

Well, the market in India is or has changed. We have been participating in a process in India that will have NCR become in essence an ISO player in that market over the course of the next 2 to 3 years. We're excited about the potential of that market. We continue to serve the Indian market, as well as a vendor provider for both public and private banks. So that business model shift that I just described isn't going to fully turn the market up on its head. By the way, we also provided ATMs to companies who won those bids, third parties that we were providing ATMs to. So we're going to participate where we have in the process in becoming an ISO, and we're also providing ATMs to those who've won ISO bids, and we'll continue to work as their vendor partner to those public and private banks that don't move in that direction.

Our next question comes from Julio Quinteros with Goldman Sachs.

I wanted to go back to the EPS, some of the puts and takes there, especially as it relates to currency and the incremental expenses. I don't know, Bob, if you can just kind of walk us back through some of the drags that you expect from currency. It sounded like you said $0.01 to $0.02 per quarter and then an incremental $10 million of expenses for customer service. Can you just make sure that those are the correct numbers?

Yes, we talked about a $10 million investment in the back half of the year. So that obviously has to be factored into the...

That's not per quarter, that's for the whole.

No, that's for the back half of the year.

Okay, got it.

And then on the FX, the point Bill was making is, for the full year compared to last year, the revenue impact is around 3% in total. And then the bottom line impact because we hedge, because we have offsetting exposures is less than $10 million. Now the way the currencies move, it's not necessarily a flat divide by 4 and $2.5 million. So we actually saw in Q2 favorable FX impact to the bottom line and in Q3 and Q4, we're seeing a little bit more headwind to the operating income. But overall for the full year, it's around $10 million.

Got it. Okay. Great. And then if we just go back to the margin profile of the businesses, the performance in the services was way, way ahead of where we were in terms of gross margin expansion modeling. Is this new level that we're seeing now, this 26% or so level, we've had 2 quarters of it now, kind of the sustainable run rate? Or how do we think about that as you go forward from here? Is there some seasonality to think of? I was just trying to get my arms around how that piece looks for the rest of this year here?

Well, the way I think of it and then Bill can add his comments, is services is really a mix of businesses. It's a mix of our installation services, on hardware and software maintenance, our professional services consulting business, as well as our SaaS business. And so as we get more SaaS into the mix, it's going to help drive that gross margin higher. We also have a number of continuous improvement initiatives within the overall maintenance business, which helps improve margins. So really it's 4 or 5 different types of services all impacting that margin.

And our next question comes from Gil Luria with Wedbush Securities.

A quick follow up. Bob, you've paid down the debt, looks like to right around $700 million. You just got a check for $100 million. You're going to generate cash flow in the back half of the year. Is the cash going to go to paying down debt more or maybe buying back some stock?

Well, again, Gil, we look at all alternatives. I think it's important to think through a few of the things that I had talked about as part of the Investor Day back in May. We certainly talked about buying back shares when it makes sense. We talked about smaller strategic M&A, and then we also talked about our focus on pension. And I think, Bill had alluded to the fact that we would be having our pension announcement in the next couple of weeks, and I think that will help clarify how we are thinking about using our cash.

Yes, Gil, I'd say a few things. First of all, we're orchestrating an interesting strategy for the company, right, where on one hand we're headstrong with regard to eliminating some legacy issues the company has had so that we can continue to focus on our growth strategy as a company, and we're doing that. And we're always going to use our balance sheet effectively to accomplish that goal. If I had to tell you today what I think the next year looks like though, it would be a combination of using the balance sheet to affect a change in our pension underfunded status, and where it makes sense, some acquisitions for growth. Perhaps not to the magnitude, of course, of a Radiant, but in line with our strategy to continue to improve our gross margin mix, and they would be very software-oriented acquisitions to, if you will, bolt on to what is a very big and fast-growing software company here at NCR.

Our next question comes from Dan Dolev with Morgan Stanley.

Just a quick question, like a bit more general. So you had a great quarter, great EPS, above expectations, and you're still keeping the guidance for the year. What is it, if at all, that keeps you, I mean, maybe it's just that extra expense, but what is it that keeps you sort of more conservative for the year? Is there one thing or multiple things that keep you?

Well, I think it's a combination of things, Dan. I think, first of all, we are making a number of significant investments in the business. Bob talked about the investment in services and the silver lining of that investment is that we had substantially higher growth, and the unit [ph] count that we're supporting in the field is substantially higher than we expected, and we don't want to lose traction relative to customer satisfaction. So we're going to make those investments and continue to build a strong services business. Secondly, I did reference Silver. We're investing about $11 million in Silver. And most of that investment, by the way, is in the back half of the year, not the front half of the year. So that is another piece of the puzzle. By the way, we are making investments in other businesses. So let me be clear, we're investing in sales headcount. We're investing in retail technologies. So R&D continues to be an area of investment. Additionally, for those of you who know us, I think you know us to be pragmatic and practical with regard to outlooking our business. And the increased volatility and uncertainty in the world I think has to be recognized right now in terms of how one thinks about their outlooks. And we've been very successful here in meeting or exceeding our guidance, and we want to continue to do that. In the world in which we live today, I think it's prudent as well given all the investments we are making just to be cautious.

Our final question comes from Matt Summerville of KeyBanc.

Just a second quick follow up, Bob, and I apologize if I misheard you. Did you say that FX had a positive influence on your bottom line in the second quarter? And if so, can you help me understand the mechanics behind that?

Yes. It just so happens that where we had our costs, our plant for example, in Budapest, some of our costs in India, those currencies worked in our favor and so our cost came down. We're not talking a huge number. It's less than a $5 million favorability in Q2, but it did happen to swing in our favor in that quarter. We will see a little bit of headwind in Q3 and Q4 and overall for the year, about $10 million.

Were there hedges behind this? I mean the rupee's been getting hit for a while here. I guess I'm still not understanding. Every other company I speak with is talking about the rupee being a headwind.

Yes, we've outsourced a significant piece of our transaction processing to Accenture. It helps to bring our cost down in that type of relationship. In Budapest, we obviously have our manufacturing plant. So that's the favorability we're seeing.

Well, look, thank you all for joining us today. We appreciate that. And obviously if you have further questions, Gavin and Bob will be available to talk to you. Thanks a lot. And we'll talk to you soon. Take care.

This concludes today's conference. Thank you all for your participation. You may disconnect your lines at this time.