Good day everyone. Welcome to the NCR Corporation First Quarter Fiscal Year 2016 Earnings Conference. Today's call is being recorded. At this time, I'd like to turn the conference over to Mr. Gavin Bell, Vice President of Investor Relations. Please go ahead, sir.

Good afternoon and thank you for joining our first quarter 2016 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 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 from operations excluding the impact of special items. Reconciliation of these non-GAAP financial measures to the 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. With that, I'd like to turn the call over to Bill Nuti.

Thank you, Gavin. And good afternoon, everyone. Bob will take you through the financials in one moment. But I wanted to provide my perspective on Q1. NCR got off to a solid start in 2016. Revenue and cash flow performance as we expected while operating income and EPS were ahead of our expectations. It was doing on the back of higher software growth and improving productivity. That being said, there were no surprises in Q1 and the results do not change our thesis on our potential 2016. On the positive side, I was encouraged by Q1 orders, a mix of those orders including double digit software orders of a growing backlog, higher services file value and momentum in a number of our strategic solution offers such as branch, store and restaurant transformation as well as unified commerce and payments and security. Additionally, we made more progress than I expected on our business transformation initiative. Focus on eliminating risk and increasing productivity, reengineering of digit business licenses and making the associated savings sustainable while simultaneously reinvesting and self funding acquired growth investment. On the latter point, the Blackstone relationship has been a significant net positive and we appreciate the access to their resources, assistance and scale. On the constructive side, I was disappointed with ATM volume and margins in the quarter. While we expected these results, we were collectively driving towards strict goals in these areas and did not achieve them. That said ATM volume in the backlog remain strong, large distributed are now beginning to rollout and this will improve revenue growth in Q2 and the back half of 2016. As for margins, once NCR's new ATM products ramps to higher volume and our cost come down commensurate with that volume, we should see solid improvement. Additionally, the strategic agreement we are announcing today with Wells Fargo is truly a bellwether moment for NCR. It is also sign of things to come as customers around the world begin to contemplate moving to a single vendor and to one strategy with NCR. As we move to the shift today we acknowledge that a change in external reporting may require more of our time. Because of that we are dedicated to providing more contexts on today's call and you more of our time of the coming month. We are enthusiastic about this change and reporting and are already seeing benefit internally. These are the right metrics NCR will focus on and we hope that you see that as you become more accustom to these changes. Overall, despite the obvious macroeconomic and FX challenges all global multinational technology companies are facing, I was pleased with where we landed in Q1. And remain optimistic about our potential. Including an increase revenue and EPS guidance that Bob will talk about in a moment. I'll now turn the call over to Bob Fishman to review the results. Bob?

Thank you, Bill. Slide 4 shows our financial highlights for Q1. Revenue was down 2% on an as reported basis due to currency headwinds and in line with the guidance we provided in February. Revenue was slightly up on a constant currency basis. Our recurring revenue increased 3% in Q1 and 7% constant currency. As a reminder, NCR's recurring revenue includes hardware and software maintenance as well as cloud revenues. At the end of Q1, recurring revenue reached 48% of our total revenue. And as you know, we focused on this metric because this particular basket of revenue generates higher margins than total enterprise margins and is a better indicator of the sustainability of future revenues and margins. Looking at margins, Q1 operational gross margin was 27.4% which was down 20 basis points as reported and 60 basis points constant currency. This was primarily driven by lower hardware margins which we expect to improve later in the year as unit volume increases and new product introduction ramps up. We also expect improvement from increased productivity and efficiency gain. Q1 non-GAAP EPS was $0.38 above the top end of our guidance range we previously provided and included $0.04 negative impact from pension expense and OIE that I will cover in more detail on the next slide. Lastly, free cash flow was as expected due to higher working capital requirements to support revenue later in the year. Slide 5 shows our Q1 operational results on an as reported in constant currency basis. I'll provide more detail on revenue and gross margin on the segment charts. Expenses were lowered by $4 million and reflect a responsible expense management in the quarter. The year-over-year decrease in non-GAAP operating income is primarily related to $5 million of additional pension expense in the current quarter. As…

Thank you, Bob. In summary, Q1 results as [Technical Difficulty] exceeded our internal expectations and guidance. Like any quarter there were things that went well and areas for improvement. However on balance Q1 was a good start to 2016 and I am incrementally more positive on the year due to solid orders, software mix, a higher backlog and services file value, omni-channel solutions traction and a fast start on our business transformation initiative. Ultimately these are the factors that give us the confidence to raise our revenue and the EPS guidance on the year. Before I dismount for questions, we spent considerable time at the Investor Day last month on the maturity of the omni-channel market and how it is becoming increasingly mainstream across multiple industries and on a global basis. I am pleased today that there were a number of important sign posts in our Q1 results that validate the continued maturation and growth of the omni-channel market. For example, much of NCR's Q1 faster order and revenue growth can be attributed directly to omni-channel implementations, applications or upgrades. Additionally, the significant growth of self-checkout correlates to the beginning of the retail store transformation cycle. In fact, we are seeing similar trends in branch transformation and retail banks and hospitality transformation and quick service and fast casual dining. We are even seeing early signs of small and middle size businesses wanting to get on board. Moreover, strategic relationship like Wells Fargo is directly focused on our customers improving their omni-channel experience for their customers, their team member. Everywhere we looking our P&L, the implement of omni-channel is growing and making an impact. As we look ahead for the omni-channel market, it is important to note that NCR is on the forefront of helping our customers' respond to the disruptive changes in globalization, digitalization, consumerism and the internet-of-things. It is estimated that by 2020, 75% of businesses will have digital transformation underway. A larger involving channel integration and transformation technologies. However, only 30% of these efforts are predicted to be successful. As businesses evolve, the need to keep up with and ultimately lead a new ever era of connected markets is a promise. Channel integration and transformation is this realignment of our new investment and technology and business model to more effectively engage digital customers at every touch point in the transformation journey. NCR is a pioneer in the channel integration and transformation sphere both the physical and digital. And the organic and inner -- investment we have made today are paying off. And it is a need to upgrade legacy technology charges and business process methodologies becomes even more prevalent. We are now in a position to lead the way and keeping up with the fast pace of change in a rapidly evolving world. Operator, we'll now open the floor for questions.

Thank you. [Operator Instructions]. We'll go first to Kartik Mehta with Northcoast Research.

Good afternoon, Bill. Good afternoon, Bob. I wanted to you talked about the ATM business Bill maybe not meeting your expectations and I am just wondering is there any particular geography or do you think this is more a case of just ordering taking longer than you anticipated?

What I talked about Kartik was a fact that at the beginning of Q1 we've established higher goals for ourselves internally. First is what the backlog would suggest we can shift, and I thought we can get $10 million maybe $20 million more of revenue moved into Q1 from Q2 and Q3 by working with our customers on some acceleration of their roll out. That is not happened so the good news is that the backlog for ATMs now is up about 19% year-over-year. So we have a very strong ATM hardware backlog but in Q1 that would have also driven revenues higher and software attach higher. So for us we established and set goals. We would have like to have gotten there. I am not just point and the effort and not surprised by the outcome. In fact, we did a little bit better than we thought we would at the beginning of Q1 but again good news is on the backlog going into Q2 and Q3.

And then Bill it seems those services is continuing to do well. If you broke that out between ATM and retail or however else you would want to break it out, can you talk about the parts that are doing well? Maybe the parts where you would like to see improvement if there are any.

This is Bob. The way that Kartik we like to look at the services business is really is in terms of hardware maintenance, implementation services, managed services, those are the buckets that we are looking at. All had very solid quarter in Q1. Implementation services we are starting to do more third party implementation services. The hardware maintenance growth was up because the file value was up. And then the managed services which has the growing trend that we are seeing across really all the industries. So we saw good growth Kartik across all those three lines of business.

Perfect. And then Bill just one last question. You talked about maybe or Bob you talked about some headwinds, economic headwinds maybe in Europe. But I don't know if you said EMEA, I apologize. I just was -- I was hoping you could talk about which countries you are seeing that? And if you've seen any improvement throughout the quarter?

Really, year-over-year Kartik, the headwinds we saw mainly pertain to the ATM phase and they really came in the form of the following. The year-over-year compares in Turkey way off meaning Turkey in Q1, 2015 had a great quarter. Q1, 2016 was weak. The oil market of Middle East and Africa are all challenged right now. Still we are seeing some issues in Middle East and Africa but they are in my view non-cyclical and I expect them to return to some level of growth here in the back half of the year overall. But when you look across all of that businesses, it really with the ATM space in Q1 where we saw a geographic challenges all other lines did quite well.

We will hear next from Paul Coster with JPMorgan.

Just a few quick questions. The first one is -- it sounds good that you've got a strategic win with Wells Fargo, but surely other retail banks now will be looking at that somewhat skeptically with a view to perhaps going in a different direction to differentiate. Isn't there a risk now of Balkanization? I realize you haven't disclosed much information yet but sort of prima fascia, it sounds like it could work both ways.

Paul you might think that on the surface Paul but for us we are seeing interest from all of our large customers to go down a very similar path. I would not want to paint the Wells Fargo partnership in any more than a large bank and a large innovative fin-tech provider coming together and working on their behalf to provide their customers and their team members with great solutions. We are looking at doing that with other large banks around the world. Andy Heyman, you may have some comments on that.

Yes. Thanks, Bill. Welcome, Paul. I think it's bigger than just the big bank space. I think what we are seeing is a growing trend based on the desire for significant retail network transformation to simplify the technology infrastructure to enable the cost improvement and the revenue growth that financial institutions are striving to achieve. And whether it's big banks or small banks, whether it's the United States or the rest of the world the trend is growing. To your question about well could this provide a tailwind for competitors, as we see the competitive landscape shaping out, we see this trend is highly favorable especially as our top two competitors merge by the end of this quarter. So we are optimistic about this trend. And time will tell if that optimism proves out but we do like a lot what we see just like Wells we have similar win in with our largest deal ever in Mexico. We had our largest deal ever on the same formula in the community financial institution space in the United States. And we are seeing that demand pick up globally.

Okay. A couple of things on a couple of points on the guidance. Bob, you talked to a couple of times about the add-back of pension fund expense being higher than expected. Did you actually mean that? Or do you mean that -- I mean I don't think the pension expense has actually gone up versus prior expectations. It's just that now we have to add it back because you are not using NPOI -- is that the correct interpretation of what you were saying?

Yes. The best way to think about that Paul is there is roughly now that we recap the financial to include pension expense and no longer have NPOI, those $10 million of pension expense in the close year in 2015 and around $20 million in 2016. So think of it is a full year $10 million headwind, $5 million of that came in Q1 because you remember in Q2 of last year that's when we sold the over funded pension plan in London. So as we get to the later quarter you'll have less of a difference for the full year as $10 million and for Q1 as $5 million.

Okay. Got it. All right. And then well I've got a bunch of questions but I'll just round it out with one big one, which is why raise the full year guidance at the moment? It didn't seem to me to be necessary in view of the -- sort of across the first and second quarter, it was an okay start for the year, but no reason at this point in time to raise the bar on yourselves.

Yes. We relative because we -- we got a significant beat in Q1. We feel good about the balance of the year. FX was moving in our direction for the first time in a while even though we did see some OIE headwind. So when we put all of that together and looked at the backlog, looked at file value and funnel, we had growing confidence and that allowed to us increase the guidance and send a stronger signal.

Yes. Paul, I'd add a few things from my point of view. We've a very solid start for the year. And overall -- over the -- and in particular software orders, they were up about 11% year-over-year driven by software licenses and PS. So the mixes of orders were very good and order book is solid overall. The backlog coming into Q2 now is up about 6% year-over-year now and very, very solid and we are anticipating a solid Q2 in terms of orders as well, and in particular software orders. We have good file value, file value go to solid on the year and so when you do the math on all of that and higher conversion of a very big hub of backlog right now in the back half, it was actually responsible of us to raise guidance.

[Operator Instructions] We will move next to Alembic Global Advisors' Matt Summerville.

Thank you. First of all, just with respect to the ATM business, you mentioned launching a new family of machines. Can you talk about how the timing of that rollout or availability is going to look as we progress throughout 2016? And then what you think are the top maybe three or four differentiating factors versus your competitors?

Hi, Matt. Andy why don't you take that one.

Okay. So Matt just as you know this is a very big deal for us and it has been several years in the making from an R&D perspective and was a center piece in the Wells' strategic relationship that we signed in the first quarter. And several other big relationships in the quarter as well. In the first quarter we shipped a couple of hundred units so it's fully baked now. We are not talking about labs and pilots, we are in deploying that mode now. We will be shipping many thousands this year so we have -- it's passed all of the key certifications and other quality test that you want to see. In terms of what's different about this, its a few things; first of all, very much future proved capabilities in terms of supporting omni-channel need. Things like video ready, NFC ready, those kind of things. The industrial design on the unit is thought of by our customers at a differentiation more Apple like if you will. In terms of its industrial design, that's a second key. Then the third area is availability on this significantly improved the availability book because the deposit the liability and speed and the cash dispense capabilities are world class and really disrupt our sales in terms of where we look already the leaders with our current generation, this leapfrog ourselves in anybody's else's design in terms of what's going on in the industry. So there is differentiation has been crucial. I'll just give you one stat as we are seeing in the field right now. If you can imagine this throughput we measure in high density moment, so think of it is on a given busy day 2,000 transactions moving up to 4,000 transactions. So you can imagine cost per transaction significantly changing in very high volume situation. So lots of benefits for customers that helped them both grow revenues, control cost in a highly secured way.

Matt, this is Bob. I just want to Matt mention that a lot of these pieces are interconnected. We spent capital over the last couple of years. Our capital was down in Q1 because we are going to have a record number of new product introduction across NCR not just in ATM. It's self-checkout platform, point-of-sale. And those products ramp we really have a fresh start in terms of taking cost out of the product. And so while you might see margins challenged initially, and as we ramp through the year margin rates will improve primarily in hardware margin in ATM. So it all fits together as this product revenue starts to grow.

And then just a follow up -- got it. And then just as a follow-up, kind of a similar question with respect to retail in either point-of-sale -- more so self-checkout -- you mentioned the changes coming in, in labor rates. And I'm sure we've all sort of seen that. What do you think that does to the adoption curve, the level of conversion, if you will, of non-self checkout lanes to self-checkout lanes? And what are the conversations you're having with your customers suggesting about that? When is that inflection, if you will -- if it's not happening already -- when is that coming?

Yes. Matt. This is a great question. We are seeing that now. Candidly the biggest driver for self-checkout today is that it is a component of a retail stores overall store transformation initiative meaning if you want to go speak with the CIOs of mass merchandiser, of large grocery stores, of convenient stores, you will find that within 10 years a very high correlation of them expect that the number of lanes they are currently assisted meaning people are there checking you out, will go from about 80% today down to about 5%, 10 years from now. Now there will be a number of modalities of what we call self-checkout today that will feature prominently in that store transformation solution. We offer a complete solution today. Some checkout is a component of that solution. For example mobile point-to-sale, mobile checkouts, click and collect, cash management, loyalty, retail one and the whole host of our software solution above and beyond that are part of that solution. Now labor rate is causing as a function, causing a number of our customers to even more so speed up their transition, so that 10 year horizon that I thought will play out is now probably five to seven years as labor rate rise not just in the US but in terms of in place around the world. We are now seeing self-checkout being sold in markets like Russia for example in a high degree of volume and other markets. We never saw self-checkout seller again. So Michael Bayer do you have other comments on that.

Yes, Bill. Matt, I would add to what Bill already outlined that is also some factors which were not so much in the forefront of thinking of our customers like availability of labor. In the lot of the top 20 to 50 cities around the world availability of labor to look at the cash register is a big issue for the retailers. It's also the question of efficiency of labor with ongoing disruption of employees who do self- replenishment or other work being called again and again back to the cash register compare -- combined that with the young generation of people who are much more technology savvy and want to do it their own way and with the global increasing opening hours, you see a business case to self-checkout introduction and customers who don't have self-checkout today. But you also see now the move to higher density checkout solutions in our installed customer base. So all of that comes together and with the product portfolio we have as well as our specialist sales force and the global reach, we are acting on the forefront of this momentum.

And Matt just to put this in perspective for you, in Q1 order growth for SCO, for self-checkout was 100% year-over-year is doubled. So we saw on a big number by the way. So we saw a very significant increase in customer traction again mainly in line with what we expected in terms of store transformation but no doubt the density of lanes will move more aggressively to -- and more of self-checkout modality as a result of higher labor rate.

We will hear next from Gil Loria with Wedbush Securities.

Hi, guys. This is Aaron on for Gil. Just a quick one from me. Regarding free cash flow, how do you foresee the seasonality of cash flow for this year? And specifically what percent do you think we'll see in Q4?

Yes. This is Bob. We typically see a negative free cash flow in the first quarter. We actually beat our internal plan in the first quarter and free cash flow was an out flow primarily because of the working capital build. When I look at the next three quarters of the year, last year we did roughly $385 million of free cash flow, we will be $480 million this year to get to the mid point. I feel good that all the trends they are headed in the right direction. So we got CapEx being lower, we'll have another very good year with cash tax rate. And there is no one time item, disk ops is lower. Overall it comes down to the back half of revenue and profit. So it's hard for me to flowchart the exact number in Q4. But I'll say that I am very comfortable with how the year is playing out and confident within the guidance range.

And our final question will be from our follow up from Paul Coster.

Yes. Thanks. So just drilling down into the software for a moment. You talked of, I believe, an increase in backlog. What was the composition of that backlog particularly in terms of the licensing versus maintenance? And the attach versus non-attach? And what does that have -- what does that imply in terms of future gross margins for that segment?

Yes. The license backlog growth that was up mid single digit was a good sign. I think about PS also being up in the quarter slightly as well. Some of the main driver of backlog growth for us going into Q2 is software license. And that facing a strong Q1 order growth in that period. Now about a little over half of our revenue in Q1 in software license was unattached. As the volume of hardware growth for ATM and self-checkout in the back half and both with grow significantly over Q1. The attach for that will also grow for us. So the opportunity we have is to over achieve our unattached forecast in the back half and really that is a stretched target for the year because by itself the attach growth in the back half is quite high.

Which is the better margin business? The attached or the unattached?

They are both about the same, Paul. They are both about the same. They both in the mid to high 50s on software license.

I would say the software license piece is probably even higher than that because it's typically only carrying the software and more from the previous year. So I would say that the software license when you look at the four streams within software license is probably 80% to 90% in terms of the gross margin. There can be some third party elements to that but overall that's our highest margin stream.

Got it. All right. So the second-half looks like it's going to be pretty strong, but we have heard a variation on this story before. What are the risks that we might see some push-outs of projects for instance?

Paul I think we were in similar circumstances last year and we did what we said we were going to do even a little bit higher than that. So we feel like we are in the same seasonality position we were in. I think Bob and I have incrementally more confident this year given our order flow through, software orders, backlog, file value and frankly the fast pace at which we are driving up our business transformation initiative. But Bob you may have thoughts on that.

Yes. There are a few strengths in our favor in the back half of the year. Certainly we are laughing to Bill's point we got that the higher volume but we are also laughing those conversion rate that troubled us in Q3 and Q4 of last year around the backlog flow through. So conversion rate will be better as well. And then I have been pleased with the overall transformation initiative. You remember in Analysts Day we said we were going down three paths. We said we were engaging the help of Alex Partners to do an eight week full body scan or what we call quick strike that eight week analysis and this Friday and we received and we will be implementing at a number of performance improvement around sales enablement, services and software transformation and cost takeout. The other initiative that has been launched is zero based budgeting which will drive in your savings but also give us a run rate over the next couple of year, and then finally we've been going after cost of goods in hardware and cost of services within our overall services platform for end year savings. So those three initiatives are driving improvement in the back half of the year but it has been also give us the run rate for the next couple of years and the project plans to execute on that.

And Paul on conversion rating, a very interesting factoid for you is that while conversion rates of our backlog will go up in the back half of this year, we are modeling them actually to be down from 2014. So if not get return to normalized conversion rate, they might and that might be upset and they might not. So right now we are modeling this on our customers' roll out schedule and increase in the conversion rate which is still below 2014.

And I'll turn the conference back to you all for closing remarks.

Well, thank you all for joining us. I do want to tell you that we have a number of investor events coming up in the next two months. We intend to be quite visible in the market. And of course we think you will out there. But thank you again for joining us. We'll see you in July. Bye, bye.

Okay. We'll now conclude today's conference. Thank you all for joining us.