Good day, and welcome to the NCR Corporation Fourth Quarter Fiscal Year 2014 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Gavin Bell, Vice President of Investor Relations. Please go ahead.

Good afternoon, and thank you for joining our Fourth Quarter 2014 Earnings Call. Joining me on the call today and offering opening remarks are Bill Nuti, Chairman and Chief Executive Officer; and Bob Fishman, Chief Financial Officer. Additionally, available on the call today for Q&A are Andy Heyman, Senior Vice President and President, Financial Services; Michael Bayer, Senior Vice President and President, Retail Solutions; and Paul Langenbahn, Senior Vice President and President of Hospitality. Our presentations and discussions today include forecasts and statements 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. Reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures and other information concerning such measures are included in the presentation materials and in our earnings release. These are also available on the Investor Relations section of NCR's website. A replay of the call will be available later today on our website, ncr.com. And with that, I'd like to turn the call over to Bill Nuti.

Thanks, Gavin. Good afternoon, everyone, and thanks for joining us today. Our Q4 and full year results came in within or above our updated guidance from our Q3 call. However, while Q4 was consistent with our internal expectations, 2014 was a challenging year, primarily as a result of retail end market challenges and FX headwinds. And while we navigated through these issues, we were disappointed with not being able to achieve our initial 2014 guidance. That said, 2014 was also a year of several accomplishments. Financial Services met or exceeded our internal expectations, made meaningful progress in strategic transformation and continued to gain market share in physical and digital channels. Our software and cloud businesses experienced significant growth, which allowed us to drive meaningful margin expansion, and our services business further pulled away from our competition with improved delivery. We also successfully integrated Digital Insight while simultaneously meeting our business plan and upgrading our Digital Insight cloud infrastructure to provide reliable service on a scalable, secure platform. And while Retail Solutions missed their internal operating income plan by over $100 million, we increased our leadership position in the burgeoning omni-channel software segment. NCR remains positioned at the forefront of consumer transaction technologies and are securely connecting consumers and businesses in more channels and more ways than ever before. Our global leadership is evidenced by the nearly 550 million transactions we enable around the world each day, of which now over 20 million are digital transactions and mainly mobile in nature. Today, I'm going to review Q4 and the full year results, as well as discuss a few areas where NCR made progress in 2014. I'll also speak to 2015 and some of the things we are focused on in the year ahead. Starting on Slide #3, which summarizes our results…

Thank you, Bill. I'll start on Slide 9, which shows our Q4 and full year operational result. We have included full year results on the slide, so you will have the information in one source, but I will focus the commentary on Q4 results. Revenue growth for Q4 is up 6% as reported, up 11% on a constant-currency basis and up 5% on a constant-currency basis excluding Digital Insight. As Bill mentioned, the operational gross margin rate was 30.2% driven by more software-related revenue in the mix. Expenses were slightly higher than the prior year at 16% of revenue. NPOI margin was 14.2%, up 100 basis points over prior year. EPS was $0.88, up from prior year despite unfavorable foreign currency fluctuations of approximately $13 million, with roughly $6 million in NPOI and $7 million in interest and other expense. The effective tax rate in the quarter was 20% and for the year, was 22%. The annual cash tax rate in 2014 was 12%, lower than the effective tax rate, which helps our free cash flow. The next slide shows our Q4 and full year GAAP results. The decrease in GAAP results is primarily related to the restructuring plan and pension expense. The restructuring plan charge, included in income from operations, was $33 million in Q4 2014 and $160 million in full year 2014. Pension expense was $150 million in Q4 2014, primarily driven by a mark-to-market charge due to the update in the U.S. mortality table. Pension benefit was $99 million in Q4 2013 due to higher discount rate. The $150 million charge in Q4 was noncash. We have significantly reduced our mandatory pension contribution in future years, which you'll see on Slide 23. Slide 11 is an update on the restructuring plan. As a reminder, we have included…

Thanks, Bob. I'll sum up on Slide #27. Our Q4 performance was in line with our revised expectations that we laid out for you in our Q3 call. The transformation of NCR continued in 2014, with further expansion of our software, cloud and other recurring revenues. Financial Services was a bright spot in Q4 and for the full year due to solid demand for our Branch Transformation solutions, as well as the impact of Digital Insight. Retail Solutions continues to face challenges, but we are navigating through the headwinds and are focused on driving improved performance from that business. And Hospitality had a good Q4 in terms of software and cloud. During the year, we also continued building a stronger NCR. Our restructuring program is delivering results, and we made progress against legacy issues like pension and Fox River. We are excited about who NCR is today. We have a solid team that is committed to providing value to our customers, and we are focused on execution in the year ahead. Operator, please open up the lines now. Thank you.

[Operator Instructions] And we'll take our first question from Dan Perlin with RBC Capital Markets.

I just wanted to explore a little bit more on this large client cancellation in the fourth quarter. Is -- one, I guess, is, is this just kind of the legacy self-checkout order that we had thought? Or was there something incremental to it? Is it endemic of the client-specific issues? Again, just double checking. Or is there something in the product that you were delivering that wasn't meeting their goals?

That's a good question. Michael Bayer speaking. No, it was a customized deal, a customized project, which we've designed in 2013, very close to the customer, and we've taken the initial order with the rollout plan, which we jointly selected. And throughout last year, the business climate for that specific customer changed drastically. We've taken the decision to take it out because we couldn't see a possibility for them to finance that deal and get that going. It was a one-off; has nothing to do with the major product line.

Yes. Dan, it was a nonstandard NCR product. It was not in the current product portfolio. We were being asked to build it for them.

Okay. Can you just elaborate a little bit on how you're thinking about that division? I mean, I saw your guidance of kind of 46%, but I'm thinking in terms of the bifurcation between your self-checkout business, which has historically been pretty good, and kind of the legacy register business, which has been a bit of an attriting asset. So how are we thinking about the cadence of layering that in throughout the year? And what are you seeing that might be good, bad, indifferent, relative to the environment that we just came out of last year?

There were a couple of things, which we've done internally, especially as we went through our software product rationalization to get ourselves straight on the product portfolio, which we are driving into the market, was also a lot of activity around self-checkout. And interesting enough, there are markets now opening within the self-checkout space. We are driving upside in countries where we -- or where others are challenged on other industries. So we have 3 very successful pilots of self-checkout in Russia. We have pilots in China on self-checkout. We see an uptick in Taiwan, so very, very interesting signs. Also, very interesting signs out of our installed base, where we go from a version 4. Currently, we are on version 5 and we're going end of life, so a lot of interest in upgrades in our self-checkout portfolio within our existing customers. With some of the changes, we've already seen early signs of recovery also internally how we go to market. We've seen a recovery in Q4 on our PS software maintenance margin. And again, we saw the first uptick on self-checkout. We've got a couple of big managed services deals, which we can't talk about yet, but in the final stage or already been awarded. And we have a very, very strong pipeline in North America, also in Canada, which will help us from a constant currency, currency green-dollar basis against the currency headwind we face somewhere else in the world. So the 46% or so, that might look high, are actually not that ambitious from my point of view given the fact that we compare it against the very low ball last year. It was a challenging year for us, but if you go back into '13, it doesn't look that prosperous. So I think it's a good reflection of our market position. We already see, especially North America, customers being through their work on EMV and PIN pads and moving back to their normal buying behaviors, moving back to their normal priority of business, which is much more favorable to us. And I anticipate and forecast an uptick end of Q2 and in second half due to those changes.

Okay. If I could just ask one more, then I'll hop back in. The 1Q guide for NPOI, once we've adjusted for the ForEx, still a little bit lower than what I would have expected. I'm wondering -- which kind of sets us up again for a little bit more of a back-end loaded year. So is there anything for -- is there anything that you can, I guess, identify for us to help us understand kind of the ramp? And then in what area should we be kind of thinking that the first quarter on NPOI is light? Is it -- you just had a pretty strong quarter in Financial Services. Is it in Retail? Or is it Hospitality? I just want to make sure we're level-setting that okay.

Yes. I would answer that question by maybe providing a bridge first on full year and then on Q1. When I think about our guidance, starting from 2014 NPOI of $820 million, we are facing $50 million of FX headwind. So that would bring the prior year, call it, down to $770 million. The restructuring plan that we have in place will help 2015 by roughly $25 million. You think of that as being the $18 million of savings we got in 2014 compared to the $70 million we'll get in 2015 and then 50% of that dropping to the bottom line. So my starting point is, call it, $795 million of NPOI. And then going from there, we talk about a midpoint of 5% constant-currency revenue growth for the full year in 2015. And that typically brings with it somewhere around 15% to 20% flow-through on NPOI. And then that's how you get the range on the full year. To answer your Q1 question, Q1 is a little lighter. If I do the same math for Q1, I'd start off with last year as $155 million. I would back out $10 million for FX to get me to $145 million. I benefit around $5 million due to the restructuring plan, so that takes me to $150 million. I'm seeing constant-currency revenue growth of around 5% or $75 million. That brings with it a little lower flow-through, call it, 10% to 15% in Q1. But what is offsetting that is approximately $15 million of headwind, mostly compensation-related, as we compare this year to weaker performance in Q1 of last year. So we do need to overcome those headwinds in Q1. Those headwinds are more easily overcome throughout the full year. But in Q1, the reason you're seeing a little lower NPOI is because of that. I will say this; that NPOI in Q1 reflects about 17% of the full year NPOI, which is roughly what we've done the last 3 or 4 years.

And we'll take our next question from Paul Coster with JPMorgan. Paul Coster - JP Morgan Chase & Co, Research Division: First up, the operating margins in the Retail segment were pretty disappointing at times last year. And it seemed like you had a more fixed cost base to that business than you would have liked. Can you talk about how the restructuring or other things are making that more variable, if they are at all?

I'd say there were 2 major contributors to that trend you're pointing to. The first one is related to a restructuring of our Professional Services business and how we cover our Professional Services footprint. The second one is really related to a mix. We've seen higher utilization and higher sales in our high-end product mix. I'd like to point specifically to Connected Payments, which was a big success factor for us in the second half of last year. We've now added 6,000 additional stores. We launched a private cloud offering for our top retailers who don't want to be on a multitenant cloud. We've transacted 1.7 billion payment transactions through our systems on this platform last year. And we have POS-ed 10,000 transactions a day in December. So long story short, it was mix and the benefit out of restructuring, especially in Professional Services.

Yes, Paul. A couple more thoughts for you on this. First of all, in 2014, one of the areas we did a poor job in internally was in the management of PS costs. So when you look at our PS business in '14, we probably burned through about $20 million of excess cost in PS. And that's been rightsized over the course of the last, call it, 3 months. So that should be helpful to us. And one thing that was encouraging about Q4 for Retail was also the improvement in operating margins in the quarter from the prior quarter and then the prior 2 quarters, in fact. So I feel better about the job the team is doing there, and I feel confident in the outlook that Bob gave you today in that business, as it relates at least to the ability for us to manage fixed costs. Paul Coster - JP Morgan Chase & Co, Research Division: Okay. Two more quick questions. The Retail business is more back-end loaded than perhaps all of us would like. But you've alluded in the past to a sort of sequential dependency here on EMV and data security. Why is it that you're not participating in the strength that some of the EMV companies are seeing already in the retail purchasing cycle?

Well, I'd say 2 things. Well, one is when you think about the front end of a retail store and the technology deployed, a lot of attention and capital has been spent on PIN pads and terminals as it relates to preparation for EMV and further on from that tokenization around meeting the mandate in October. And what that does is it takes that amount of money being spent on that technology away from upgrading POS terminals and other peripherals. It also -- what it does secondly for us, what it has done for us is that, combined with the entirety of the data security issue, has delayed in some ways the focus on driving software, omni-commerce and omni-channel software deals out. We're seeing some of that come back. We saw some of that in Q4, which was quite positive. We're seeing some of that here in terms of activity in Q1. But those are the 2 key reasons why we're not participating as much as you might see other vendors in that space. Paul Coster - JP Morgan Chase & Co, Research Division: Okay. Last question really for Bob. The assumptions that go into 2015 guidance, we might as well, I think, know what kind of dollar-euro exchange rate you've assumed, so that we can sort of make incremental decisions moving forward. And also, are there any other sort of big macro assumptions that have gone into these numbers in terms of emerging markets or Europe or Asia Pac?

In terms of the exchange rates and the FX impact that we're giving, those are all based on end-of-January exchange rates. And then the second part of your question, Paul, if you wouldn't mind repeating that for me? Paul Coster - JP Morgan Chase & Co, Research Division: Well, what I want to know is have you assumed sort of the worst of emerging markets, at least in Europe? What would be big swing factors in the macro world that would, therefore, sort of impact our expectations around the year?

Yes. Again, when we're talking emerging markets, and I think I'll let Andy give his perspective, you're talking mainly Financial. And we've alluded to the fact that Russia and China were the big headwinds in '14 and will continue to be in '15. But maybe Andy can add a little bit more color around how you think about emerging markets and Financial.

Yes. I think when you look at it from our perspective and you look at kind of the FX-neutral growth in '14 being around 6% and then the estimates out there for '15 being in the 3% to 5% range, really what you're looking at is continued normal, healthy growth on the top line for Financial Services, offset by the geopolitical risk, specifically with Russia and China, anticipated. We thought it was prudent to be conservative on those lines given what we're seeing right now. So I think your point about could there be upside if those 2 countries in particular come back, I think the answer is yes to that, although for us to plan on that right now we don't think would be prudent.

We'll take our next question from Ian Zaffino from Oppenheimer. Ian A. Zaffino - Oppenheimer & Co. Inc., Research Division: I'm just trying to understand the Financial Services guidance. Can you actually give us maybe an understanding of, by region, what you're expecting and maybe what's going to outperform the 3% to 5% constant currency, what might underperform? And I know you alluded to sort of China, but as you think about Europe, as you think about the U.S., and also just maybe a discussion about bank Branch Transformation assumptions.

Yes. This is Andy again. So in terms of regionally, for 2014, and you saw some of this in our opening comments, in the developed markets, we had a fantastic year last year. You look at the United States, you look at Brazil, you look at Canada, you look at Western Europe, all of these areas growing high-single digits, low-double digits, same with Middle East and Africa as well. So really good balanced growth other than the situations that we have with Russia and China and then, of course, some FX issues that hit us. So as we look at '15, we really don't see a difference relative to '14. We think we have more pressure, specifically in Russia and China. And we think the other markets that I just mentioned should continue to be mid- to high-single digit growth for most of them, with a couple that should get to low-double digit growth as well. In terms of product mix, in terms of what you talked about, again, for us in '14 versus '13, Branch Transformation in particular doubled for us. So we had the first year where it was a 9-figure year for us in Branch Transformation into the mid-100s in terms of revenue. We see another significant increase in '15, probably low 9-figure levels, call it, $100 million or so in '15, again, Branch Transformation growth. And then we also see other high-value areas, specifically around omni-channel and security, driving continued a mix shift for the business. So you can see how our margins expanded the last couple of years. We're anticipating a continuation of that as well into '15. Ian A. Zaffino - Oppenheimer & Co. Inc., Research Division: Okay. And when you talk about the low hundreds of millions, is that just the machines themselves? Or does that include sort of the retrofitting in the walls and the wiring and sort of all the other ancillary pieces that come with it? Or is that just short of the machines and then you would add on top of it?

You're talking Branch Transformation now? Ian A. Zaffino - Oppenheimer & Co. Inc., Research Division: Yes, yes, specifically.

Yes. Well, first of all, just to be clear, low $100 million, not hundreds of millions, just to be clear. So think of it as in the 130-ish kind of million range for Branch Transformation growing into '15 another $100 million or so. And that revenue is an all-in revenue. It includes primarily product revenue. There are some installation services. There's quite a bit of software in terms of content there. You're looking at an average selling price of something more like 2x a typical type of ATM. And then there's a recurring revenue stream in terms of high-availability service that also goes with that. But it's primarily product revenue.

We'll take our next question from Katie Haverty with Morgan Stanley.

This is Natalia Kogay for Katie. So it looks like inventory management drove some meaningful improvements in working capital. Can you provide details around what happened during the quarter and whether the strength is sustainable in 2015?

Yes. Our focus on working capital is really on all 3 major areas: receivables, inventory and payables. Inventory was lower. You have to keep in mind, though, that inventory benefited from the restructuring plan. We had talked previously about writing off around $50 million. So inventory is lower by that amount, but that doesn't benefit free cash flow because that's a noncash item. But outside of that, that $50 million, the team did a real nice job operationally in terms of both finished goods and raw materials. I'd say I'm even more focused on DSO, and so it was encouraging for me to see the 1-day improvement, and we'll continue to be on that path really over the next couple of years in terms of improving accounts receivable. So that would be a bit of a summary. Overall, the cash conversion cycle improved in Q4.

And as it relates to your 2015 free cash flow guidance, what is your assumption on working capital performance? Do you expect it to be a positive or a negative versus '14?

For 2015, what we'll see is the same. As revenue grows, the requirement for working capital will grow, and it's around that 13% number. So think of revenue growth x the 13% but then less. My goal is to improve DSO by 1 day, and that helps that number by $15 million to $20 million. So that's how I think about working capital.

And the last question, I guess, the question to Bill. Midway last year, you spoke about evaluating your product portfolio and looking at some strategic alternatives. Do you have any updates on that front? And which areas do you see as noncore to NCR?

We're still looking at that and evaluating opportunities to divest noncore businesses. That's underway, so no major change there. And we'll continue to look at that throughout the year and come back to you at some point when we have more definitive follow-up.

Your next question is from Gil Luria with Wedbush Securities.

On your ATM business growth, you're saying the developed economies are going to contribute more than developing economies because it's counterintuitive. How much of that is due to Windows XP upgrades helping with that, which also helps your mix? And how long do you think that that's going to last?

Yes. This is Andy. So when we look at Windows 7 in terms of developing markets, I would not single that out as a driver for the developed markets right now relative to the developing markets. I think the major thing driving growth in the developed markets right now is the need for our customers to drive costs out of their retail network while, at the same time, transforming their omni-channel experience so they can improve their service to consumers. That message is -- that need for banks and other financial institutions is creating an investment cycle for people to go through a much more advanced implementation of a software portfolio and other branch-transformative technologies. So that's really what's going on in Canada, in the United States, in the Middle East and in Western Europe. In terms of developing markets, it's largely a situation where we've got geopolitical risks that really started to hit us in the fourth quarter and we anticipate could continue to hit us in '15, mostly targeted towards Russia and China. So hopefully, that helps get a little bit more precise versus just the developed versus developing market story.

Sure. And then in terms of the new headquarters, what's going to be the net outlay after tax benefits for the next couple of years? And what's the time for a payback on that investment?

In terms of our headquarters, which was announced, I suppose, earlier in the quarter, our goal there is for an operating lease. The plan is to move into that building sometime in early 2018. And really that's when the operating lease payment would start. The goal is to have that lease payment to be less than what we would pay for the existing facilities that we're in. So there's a consolidation play here that'll benefit the P&L.

And no investments until then?

No. No, in terms of it being an operating lease, so no impact to the free cash flow.

Last question about the 2 free cash flow excluding items: discontinued operation and the pension outlay. Discontinued operation, do we still have Fox River in there? If not, what's in there? And how long is that outlay going to last? And then on pension, this $35 million level, is that now the run rate that we expect going forward? Or does that also lap at some point?

Yes. In terms of discontinued ops, it's primarily Fox. What you'll see in the 10-K is the reserve for Fox at the end of 2014 is around $40 million. So think of that as being the Fox outlay over the next couple of years. In terms of pension, that $35 million has come down significantly. You'll remember 3 years ago, that was more like $150 million. I think there is some improvement that can be made to the $35 million, but it's small. Think of that as $30 million to $35 million on an ongoing basis. That reflects primarily the 15 to 20 international plans that we have. There are no U.S. contributions expected for the next 5 years.

We'll take our next question from Meghna Ladha with Susquehanna.

Bill, last quarter, you discussed execution issues as one of the reasons for 2014 weakness. Since then, what steps have you taken that will help NCR avoid the same issue this year?

Well, primarily, Meghna, the -- if you look to 2014 in total, I would say, as a year, I would not classify the execution issues, in and of themselves, any greater than a year we've done well or a year we've done poorly. However, they're magnified when you're not meeting your commitments. And last year, I would say primarily, the execution issues were on Retail. So on that front, as you know, we've made a number of changes to personnel over the course of 2014. I'm happy to say that those changes appear to be quite positive in terms of people, in terms of org structure, in terms of processes and overall talent. Now I would also say that we had to get into some technical issues in the year like PS cost I described earlier to Paul and other areas around expense management. But I feel a lot better about where we are today vis-à-vis Retail execution. And as I look around the company, I would say while we will have execution issues in '15, we're all working hard to ensure that they're accretive to what was the '14 result, meaning they are less than '14 in terms of impact on the year.

Okay. And then in Retail, you've talked about expanding Retalix beyond the grocery segment. Are there any new wins that you can potentially discuss today?

Michael Bayer speaking. Retalix has product also outside the grocery segment. So our Global Enterprise and Merchandise business is a former Retalix business, where we've seen growth, where we've seen cross-sell and upsell within our retail account, as well as stand-alone business. There is a PCR business in Retalix, Petroleum & Convenience, which has ongoing growth globally, especially in Asia. And with the portfolio rationalization, some of the Retalix products and especially applications will become our core application for our go-to-market independent of the segments. So think about that more in terms of what is the best software -- Service-as-a-Software solution for loyalty moving forward cross-segment rather than thinking about a segment approach when it comes to core product and core platforms.

Okay. And then I have a question for Bob. How much visibility do you typically have on your pipeline for the year? And how comfortable are you with the '15 guidance that you've put out today?

I missed the first part of the question in terms of comfort, with regards to what, Meghna?

Okay. So the first one was how much visibility do you typically have on your pipeline for the year? And how comfortable are you with the '15 guidance that you've put out today?

In terms of visibility for the pipeline for the year, I would say, right now, Meghna, about 41% of our business falls into the recurring revenue category. And then we come into the year with a little over $1 billion in backlog. So think about that as having about 60-plus percent of the year in terms of revenue that's quite visible. The rest really comes from sell and bill. And what we've done this year is we have taken a more pragmatic approach with regard to looking at sell and bill in the form of orders and backlog for Q2, 3 and 4 to develop guidance. And I would classify guidance as responsible. I'm not ultra-conservative and not out there in terms of being aggressive. I would say responsible. Bob?

Yes. One of the reasons why I gave the more detailed bridge earlier in the call was just to focus on the areas that I think are important when analyzing NCR. And so you have to first acknowledge that there are FX headwinds, and then after that, include the benefit for the restructuring plan. And we will execute very successfully on the restructuring plan. And then it really comes down to the constant-currency revenue guidance by division. And hopefully, what has come across on this call is that the numbers that we have are very achievable. We haven't talked a lot about Hospitality. We've talked about Retail, one, not being an easier compare; two, some momentum coming into the year. We talked about Andy's business in Financial seeing good growth in the developed markets, some challenge in Russia and China. And then when I look at Hospitality, that's a business that grew constant currency 6% last year with significant headwinds on the legacy quick-service restaurant that really should not happen again in 2015. So I feel very good about the 5% to 9%. And then within Emerging, that's just us going after -- being very selective in terms of us going after the right deals in Emerging. So again, I look at the revenue guidance, I'm comfortable with that and the margin flow-through.

We'll take our next question from Kartik Mehta from Northcoast Research.

Bill, I wanted to get your perspective on Digital Insight, the type of growth you're anticipating for 2015 considering all the new signings that you've been able to get in 2014.

I'd say first of all, on DI in general, Kartik, it was a good year for us across the board. I was really pleased with the performance of DI in the year, the revenue synergies we were able to achieve in FI through the small bank segments, the integration of our technology and people. And so overall, it has a materially positive impact on our business, and most importantly, positioned our Financial business well for the future. Perhaps, Andy, you can comment on '15 and what you're expecting there as well.

Yes. So of course, we're talking about a SaaS business here, which, in any one year, given that we're not booking licenses in onetime revenues, it's a lot about investment in 2 things: One is innovation, new products that you can attach on to existing customers; and two is salespeople, adding more salespeople to go get more customers. With both of those, the results become per-site, per-month revenue improvements. So as we're looking at this year, we're looking at this year as a big growth year in terms of more salespeople, more modules, more users signed on from a financial institution perspective and really gravitating towards our long-term model of double-digit growth. For '15, we think it'll be more tempered than that, probably in the mid- to high-single digits, depending on where things come out in terms of acceleration of deals and implementation of those.

And then, Andy, with -- based on your comments, it seems like you're going to be investing for growth in that business for future. Does that imply that maybe the margins could be impacted negatively? Or should the margins kind of stay where they were in 2014?

Yes. I would say 2 things. First of all, when we're talking about their gross margins, you're talking about a business that the more we can drive growth, the more we're able to leverage a fixed-cost structure in terms of hosting and support. So our margins ought to gravitate in a positive way on the gross margin line. From an operating margin perspective, which may have been the heart of your question, I do think '15 is an opportunity for us to make investments in both the product portfolio and the sales teams. We want to be balanced with that and to ensure we don't get ahead of ourselves in terms of what salespeople can sell or what products we bill for. So the operating margins, we don't look for great margin expansion on DI in '15, although '16 and beyond, we would anticipate that.

And, Andy, just I wanted to make sure I understood what you said on Branch Transformation and get a clarification. Were you saying expect about $230 million in revenue in 2015 from Branch Transformation, from $130 million, add $100 million? Did I understand that correctly?

Yes. You're in the right ballpark. Think of it as a mid-100s, adding another -- in terms of $100 million plus, call it, $130 million, 140-ish range, add another $100 million onto '15.

And then I think you said expect that, that drives about 2x the average sales price of a regular ATM and most of that is product. Would that imply -- and I know this is rough math, but would that imply about 3,500 units or so that you would want to place in 2015 to kind of get to that number?

You're in the right ballpark.

Okay. Okay. And then, Bill, just a last question. Looking at your ATM results for the year, and as you sit back and reflect on it, do you think you gained market share? And if so, what regions do you think that occurred?

I do. I mean, I think when you look at the results for NCR, and we have not seen all of our competition yet, but what we've seen so far would suggest we have gained market share, in particular in Western Europe and in the U.S. or areas where I would point to as key markets where we've gained share and in specifically the branch space overall. Any further comments on that, Andy?

Yes, I think that's right. I think we are -- when you go to customer share and you look at specific countries, it's very clear we're picking up share. You look at us versus competition, where, take Western Europe as a great example, we're talking about high-single, low-double digits growth, depending on whether you're looking at orders and revenue. Our competitors are not nearly in that range. You go to Canada, you go to Middle East, you go to Africa, you go to the United States, and each of these regions, we're picking up material share.

And just to give you, Kartik, a bit more color on that, just to break apart Russia from Western Europe. On the full year 2014, we grew revenues in Europe, Middle East and Africa, without Russia, by 17%. In Q4 alone, it was up 7%. So you can see the impact that Russia is having on our total aggregate growth on the year and in the quarter, but you can also see that when you take it out, that we're having a solid performance and clearly show growth in those markets.

We'll take our next question from S.K. Prasad Borra with Goldman Sachs.

Firstly, can we revisit the topic of synergies between the various divisions? What kind of back-end synergies do you have between Financial Services business and the Retail side?

The question is around synergies across the divisions. When I think about the synergies across the divisions, I think about the 2 horizontal groups. It's operations and the supply chain, and then it's our services business. Those are the 2 pieces that provide the synergies, whether it's call centers, whether it's the 5 manufacturing plants, that's where we see the benefit.

Okay. And you talked about the Professional Services business, and you mentioned $20 million of excess costs, which you saw in third quarter. When you say excess costs, what was that particularly regarding? Is it the first phase of implementations, which you did at some of those retailers not working out? And did you have to pay any penalties related to that? And when you think about, say, 2015, do you have a good number of, say, Phase 1 of the great deal of projects in the pipeline?

I'll ask Michael comment in a moment, but I want to clear something up. The $20 million in excess PS costs is really a full year number, not a Q3 number alone. So it's a full year number. Michael?

Yes, I think what we've seen here is we had efficiency gains as we've had a build an operation around centers of excellence, which I thought we are not meeting the requirements of our customers and we are not big enough from a business point of view. So that drove a lot of savings. In terms of the projects, I'm very positive about the projects. That is also one of the reasons why you see a bit stronger H2 versus H1 in our trajectory because a lot of these projects have started, will start, are awarded, are in the process of being awarded and have to be closed before peak season, which, depending on the country you're looking at, starting in October or starting in November. So a solid pipeline for PS and I anticipate PS and all of the other software-related businesses of Retail to again positively contribute to the mix of Retail P&L.

Okay. And probably just the last one on Retail. In the guidance of the 4% to 6% year-on-year growth you're expecting, what kind of a spending environment are you expecting in Retail in general? Are you expecting the spending to improve in general? And you mentioned that some of the spending which got locked in the security segment, that's probably coming out now. Did you see signs of that in the fourth quarter itself?

What I've seen is, quite frankly, a very mixed bag. We have -- if you look into the U.K., we have almost a price war being started by Tesco, which is impacting the market there. However, even in this challenging environment, you will see retailers in the U.K. taking investments to catch up, to show themselves as innovation leader or to rework the way how they do business. We have a fantastic new store opening with one of our customers for a self-checkout concept where 70% to 75% self-checkout customers are targeted for the U.K. with a very, very positive feedback. So you're going to see innovations still being driven and the market leaders in that innovation game in retail will track the others also into that whole bucket. And as we said earlier, now the priorities are already starting to shift back in North America, as all of the decisions or almost all of the decisions on security, EMV, PIN pads and so on and so forth have been made. We are back to "normal" in terms of user experience, customer experience and how to improve the multi-channel experience of the end customers of our retailers.

And we will take our last question from Matthew Lipton with Autonomous Research.

Bill, I just wanted to make sure I understood you right. You made an interesting point about the guidance in Retail in particular and that sell and bill, you're using a new formula. I know when the guidance was cut on the third quarter call, part of that was you felt the pipeline was -- the dynamics of the pipeline were changing. So are you using the same methodology for 2015 that you had used back in 3Q when you made the guidance reduction in Retail?

We are. And what I would tell you is that what we're going to talking to you about in a future quarter, perhaps maybe even Q2, is the -- one of the most important metric today for us is really no longer backlog per se or orders per se. The reason that is, is because orders and backlog, the way we've described it to you in the past, does not include key portions of the business. For example, does not include file value for services, which is about -- on any given day, about 25% of our business. It does not include consumables. It does not include any of the acquisitions, if you will. So what we're working on now is a really true backlog metric which would include legacy backlog, as you know it, plus SaaS ACV or think of it as file value for our cloud business, plus file value for services, meaning what dollar amount of service contracts do we have in the pipeline for the next 12 months? That will equate to probably over 90% coverage of revenue. And we're beginning to look at that now more holistically and using that as well to refine our guidance.

And last one from me. I guess it's probably for Andy. I think a lot of people will be surprised that both the Branch Transformation revenues are coming from the products side. When you think about it, it might imply that you're actually taking some shares. So is it your leadership position in multivendor software or the fact that you were the first to the market with that tablet-based strategy? And what are some of the things that you think might be allowing you to see outsize unit growth in Branch Transformation?

Yes. In terms of the things that are driving growth in Branch Transformation, for us, it's very much a -- I would boil it down to 3 things. First of all, we've got a very strong position on the software side that's been evolving towards a true omni-channel capability. So that's the first thing that is resonating with customers. The second thing is the combination of our hardware design and the service offer around that is very difficult to compete with. And the scale that we have plays very well in each of our key markets. So that's the second big thing. And the third big thing is execution. These are fairly complex programs that customers are looking at. They have to trust who they're working with when they sign transformative contracts, and they want to partner with somebody that they trust can execute both in terms of subject matter expertise, schedule adherence and quality. Those are the 3 reasons that we're winning.

And thank you, all, for joining us. We'll see you in April. Goodnight.

This concludes today's conference. Thank you for your participation.