Good day, and welcome to the NCR Corporation First Quarter Fiscal Year 2019 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Michael Nelson, Vice President of Investor Relations. Please go ahead,.

Good afternoon, and thank you for joining our first quarter earnings call. Joining me on the call today are Mike Hayford, President and CEO; Owen Sullivan, COO; and Andre Fernandez, CFO. Before we get started, let me remind you that our presentation and discussions will include forward-looking statements. These statements reflect our current expectations and beliefs, but they are subject to risks and uncertainties that could cause actual results to differ materially from those expectations. These risks and uncertainties are described in our earnings release and our periodic filings with the SEC, including our Annual Report. On today’s call, we will also be discussing certain non-GAAP financial measures. These non-GAAP measures are described and reconciled to their GAAP counterparts in the presentation materials, the press release dated May 7, 2019, and on the Investor Relations page of our website. A replay of this call will be available later today on our website, ncr.com. With that, I would now like to turn the call over to Mike.

Thanks, Michael, and thank you everyone for joining us today for our first quarter earnings call. I will begin with some of my views on the business before turning it over to Andre, who will review our financial performance, as well as discuss our outlook for 2019. Then Owen, Andre and I will take your questions. I'll begin on Slide 4 an overview of our first quarter performance. The first quarter demonstrated solid performance and we finished in line with our expectations. Second, the hard work we've put in to improve execution is generating results and puts us on track to improve our growth profile. Third, we had solid performance in our Banking segment where revenues increased 9% on a constant currency basis driven strong ATM revenue growth of 27% on a constant currency basis. The strong ATM revenue growth was driven by strength in North America across both large and small banks and first consistent with our strategy to shift our revenue mix we increased total recurring revenues by 6% which represented 49% of total revenues in the first quarter. Roughly half of the increase in recurring revenues were related to M&A activities. We define recurring revenue as revenues for services under contract for which revenues recognized over time. Finally, today we are reaffirming our full-year 2019 guidance. Andre will discuss this in greater detail during his remarks. Moving to Slide 5 and an overview of our financial performance in the quarter, consolidated revenue was $1.54 billion up 1% as reported and up 4% on a constant currency basis. The primary driver for the solid revenue performance was strength in our Banking segment. Adjusted EBITDA was flat and was in line with our expectations. Non-GAAP EPS was $0.48 also in line with our expectations. FX headwinds, increased interest expense,…

Thank you, Mike. I will begin with an overview of our segment results. As we mentioned on our last earnings call, we have reorganized the business by industry and beginning this quarter have changed our reporting segments to Banking, Retail, Hospitality and Other. This change will help us invest in a product mix unique to those industries and that focuses on recurring software and services to drive profitable growth. Slide 9 shows our Banking segment results. Banking revenue increased 9% constant currency led by a 27% constant currency increase in ATM revenue helped by Win 10 upgrades and replacements with particular strength in the North American market. Services also contributed to the revenue increase as hardware maintenance revenue improved on the back of stronger ATM sales. Software revenue in this segment was roughly flat to prior year as higher attached software and digital banking revenue offset several large term license sales last year that did not repeat. Operating income increased 20% constant currency driven by higher hardware and services revenue and helped by lower OpEx resulting from our productivity initiatives. We continue to see strength in both orders and backlog in our Banking segment. Echoing Mike's previous remarks, our digital banking platform showed improved growth and we signed on seven new digital banking customers, which will bring additional users and higher annual revenue. Now moving on to Slide 10 which shows our Retail segment results. Retail revenue increased 1% constant currency year-over-year driven by an increase in revenue from our JetPay acquisition as well as self checkout revenue partially offset by a large implementation project and software license sale in the prior year that did not repeat. We exited the quarter with a strong backlog position for self-checkout which gives us confidence in our full year self-checkout revenue plans. Operating…

Thanks Andre. In summary, we're off to a good start to the year. We remain confident in our strategy and are on track to bring new solutions to market. We continue to prioritize customers first spending when needed to improve product and service quality. We are making the targeted investments needed to drive accelerated growth in the years ahead and best position NCR to deliver increasing value to our customers and our stockholders. Our strategic mandate remains the same, strong execution and continue to transform our revenue mix to higher margin, recurring software and services revenues. The performance we delivered in the first quarter was consistent with that mandate. I am proud of the commitment and passion of the entire NCR team as we take on this journey to build a stronger NCR. There is much left to be done and we remain on the right path and on target to hit our full year financial and operational goals. Thank you for your time and now Andre, Owen, and I will take your questions.

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

Thanks guys, good evening. I wanted to start off on the broader demand environment in particular around the banking, including the backlog on ATMs was good into this quarter and it sounds like it is following through into next quarter. Especially most of the core provider were also saying good things about the banking channel and so I'm wondering Mike, if you can just talk about what you're seeing there, what are those conversations like and to the extent that you take a lens of sustainability around ATMs and then maybe also parse that around the other digital banking channel? Thanks.

Yes, I mean you can see by our results we had a pretty good quarter in our Banking segment. It was a little higher last year, we talked about the orders and the backlog in the second half of last year and with our manufacturing channel just it wasn't always translating to revenue, but we felt good heading into '19 and you can see in the first quarter the results are strong. As Andre talked about the backlog heading into the second quarter is also very strong so I feel very good about the second quarter. I think we talked about this heading into the year we felt that '19 would be a solid year for us in the ATM business and it is starting to bear out that way. On the digital banking, that you reference, I think we feel pretty good about I think, actually perhaps it is better than pretty good, we feel real good about the team that we've put in place late last year. They've been in there for about six months sort of the new leadership and they've taken that business and really moved it into kind of a winning attitude exhibited by the deals that we signed in the first quarter. I think we're back out in the market and we've put a dedicated sales team back in place that had not been in place for digital banking. We've put a team focused on taking care of our customers. We put additional CapEx in the software this year and have shared that roadmap with customers and prospects. So again, we feel great about the first quarter. We feel good about the outlook for that product going into the year. So first quarter was good and we don’t see anything going forward which would tell us to feel any less good about the rest of the year on the banking side.

Okay and if I could just followup on, I guess it's kind of two parts, one is on [indiscernible] in particular and other one is I think more broadly over this crossover point to recurring versus kind of traditional license. So you talked about I think Aloha being available kind of in the third and fourth quarters of this year for that will be a cloud based solution as opposed to license and I wanted to just get a sense of how much do you think that is going to have an impact in terms of lumpiness in the back half of the year around that segment relative to the say license sales and hardware sales in prior years? And then secondly more is an aggregate question, should we be preparing or should, are there any call outs I should say in the second half of the year that we need to be really concerned about as you go over this recurring kind of conversion to more of this cloud shift so that won't get offset when we build out our cadence? Thanks.

Yes, so on Aloha, we just started to rollout what we call Aloha Essentials which is really a bundled solution, so it's more of a bundling product that we have the Aloha Cloud extensions as well as the Aloha software product itself. So that's starting to rollout and then in the third and fourth quarter we'll be going to GA around our bundling with our payments integrated. So the JetPay integrated with Aloha, so we're excited about going to market with a more of a chunky product to serve that segment and then again turn that into a subscription based offering. I think and the broader question across the board it's really two aspects to going to recurring revenue streams, one is to move through subscription based whether it is cloud products or whether it's other products that we offer in a monthly subscription and obviously payments will be booked will be part of that maybe not in the planned subscription but in a transaction based pricing. So that's one aspect which really involves offering a new product in the marketplace and then a second aspect is taking software products that we've traditionally sold upfront as potential sell then in some other form whether it is a term license or whether it is a subscription based license as well. When we put our '19 plan together and shared our outlook with the Street we made some assumptions about how fast some of those traditional term licensees that in the past we had recognized will be shifting to either subscription or term based licenses were going to be booked upfront and we baked that into our plan. So as Andre talked about we will keep updating you on the path and the success, if we are more successful than we anticipate with the transition to recurring revenue streams I think Andre [ph] is already damp and may dampen our revenue in the back half of the year, but right now we think the numbers we gave you are solid that will continue. We're going to plan, we will execute the shift to recurring kind of on the pace that we anticipate and again we will share in every quarter as we make progress on what that means for you. So first quarter we have not done much shifting yet. The plan is starting to rollout and for the full year we've already just paid some level of that in the guidance that we've given you and if things change we will give you updates each quarter.

Got it, thank you.

And we'll take our next question from Katy Huberty with Morgan Stanley.

Thank you, good afternoon. Just going back to the ATM discussion, can you talk about how much of the strength in the quarter was tied to upgrading of existing technologies, upgrading the Win 10 versus adoption of new technologies versus like branch transformation? And then I have a followup.

Yes so we would go, we have this with our sales team so we call Win 10 a tailwind for our company particularly '19 and while we have, Andre has the exact number of the core installs, you know the core install our upgrade is relatively, it is a smaller transaction for us. So we think what's happening is there is a little bit of core upgrades going on, it is not a huge number for us, but more likely we're seeing people who have ATMs that are on the latter end so maybe instead of stretching to 10 years, they are 7, 8 or 9 years old and that is upgrading the ATM to a whole new device. We think part of that is, again we think Series 80 we came out with last year the demand as you know took off on us a little faster than we anticipated last year we are continuing to see strength in that product. So I think what's driving the numbers is more ATM than strictly core upgrades.

Okay, and Andre, can you just walk through some of the gross margin dynamics particularly in Retail and Hospitality just based on the comment it sounded like hardware was weak, but then it doesn't necessarily connect to the fact that the margins were down year-over-year?

Yes, what we're tracking and probably confusing, you'll have to go back and listen, as you know we had some long timers to the impact both revenue and the margin year-over-year. But maybe I'll – let me take you through Retail first and then Hospitality, hopefully that will help. So I think in first on Retail, I mentioned we had a pretty good score quarter and also but point-of-sale less and so overall the margins were down. I think the good thing whether it's retail or hospitality arena ATMs we're seeing a better overall pricing environment. So we're not seeing too much pricing pressure across all the hardware lines. That said and we are also improving our some of the hardware cost issues we had last year. As Mike said, we're still on track to have the launch which is in our plan this year, but we've had still a little bit of residual overhang that are coming through that we didn’t have last year at this time that is impacting the gross margins on the hardware. So that's retail hardware. On the software side, again we saw, I think I said in my prepared remarks, we saw some revenue growth, but it was really more of a shift going on in retail software. Remember we're now shifting to acquisitions JetPay accounted for a lot of our revenue growth this year whereas we had a drop in licenses. So overall we had revenue growth in software, but we had had a little bit of margin degradation due to the shift. And then finally on services, again we had – we talked about a few times, we had this big implementation project last year in services that we didn’t have this year, so that dropped our revenue, but it actually improved…

Okay, thanks. If I could just squeeze one more in for Mike, there was a headline earlier that there could be strategic interest in the company which I assume you are not going to comment on directly, but can you just from a high level talk about how you and the Board think the team is doing on the patient to value creation? Obviously there is a lot more work to do, but do you think the market is giving you credit for the execution thus far and if not what are the avenues that you'd think about that could close the gap between valuation and fundamentals?

Yes, I mean, I think that as you've seen as we rolled out our strategy last November, November 7, and that kind of laid out the focus on shifting, getting some topline growth shifting the mix to recurring revenues and shifting mix topline services. So, that was literally fourth quarter last year. We rolled that strategy out internally. We obviously work very closely with our Board. We mapped out a multiyear plan for how we get there and then we obtained and elevated our level of investment in our internal products as well as you've seen us do a handful of acquisitions to continue to push the recruiting and the shift to software and service. But we know the multiyear path, so I think again we look at the first quarter results and we go – we're going to make incremental headway on our targets. I don’t think we're going to try to get our words ahead of our actions and our results. I think our Board is 100% behind us on what it is going to take and how we're going to get there. Our focus is executing on the products that can take care of our customers and executing the plan. I think our Board understands that that execution will yield value to our shareholders at some point in the future and I think they are patient enough to stick with us on that.

Thank you.

We'll take our next question from Matt Summerville with D.A. Davidson.

Thanks. [indiscernible] first to some sort of the banking or ATM I should say order and backlog can you get a little bit more granular from a number standpoint, that's something you've been willing to provide in the past? And then also in the context of the backlog are you still shipping for lack of a better term, delinquent stuff that in an ideal world still would have gone out last year, is that still a component of the backlog that you come into Q2 with?

Yes I don’t know if I can say delinquent, but so there's two parts, so first of all we did give a little bit of color on orders and backlog last year I think primarily because we were pretty open to the fast that we had some manufacturing transition issues to get our hardware out the door, particularly on ATMs and self-checkout, but we felt that the sales environment and orders were strong we gave that color. We won't be giving that going forward. I don’t think every quarter we're going to share with you orders and the level of our backlog. We'll give you directionally where it stands. So I don’t, you know we ran into the year with a pretty strong backlog which has helped us sell out our manufacturing, both the plants that we owned as well as the plants that we leverage third parties for. But I don’t know if I'd say that there's a bunch of delinquent or blatant demand if you will. I think demand has been pretty solid. We feel like we've caught up with the backlog and the demand and now we're heading into each quarter every second quarter with a pretty solid look at it and continue to see good order flow.

And then there is followup, you gave some color on the North American ATM environment, can you maybe talk about what you're seeing within EMEA, Asia-Pac and Latin America and then I was curious as to whether the DI adds you mentioned the seven new customers who I was curious as to whether that's a gross or net number and if you see that kind of momentum continuing in the balance of the year. Thank you.

Digital banking that's a gross number so it's new adds, I don’t have it in front of me whether we lost anybody during the quarter, I don’t – I'm not aware of any – but those are new adds, those are new sales victories. I don’t know Andre or Owen somebody want to give EMEA or…?

This is Owen. I'd just say from an ATM across the board both in North America across the various segments we saw really positive momentum and both the installation activity as well as the order rate. EMEA was equally very positive across all of the metrics that we would look at. Asia was slightly off and we continue to see more of a softer Asian market, but as we look across EMEA, South America, Central America and North America we saw positive trends across all those markets.

Okay, thank you guys.

We will take our next question from Dan Kurnos with Benchmark Company.

Great, thanks. Mike just, we saw there was a small - another small acquisition you talked about kind of some more tuck-ins. It sounds like the POS space in general has gotten, I don't know a little bit more competitive. I'd just love to hear sort of what you're seeing from sort of filling out that stack and kind of going to that one throat to choke philosophy here, how much more you need to tuck-in if you're sort of on pace to reach the target M&A for the year? And then I got a followup to that, thanks.

Well the really not as what technical asset the Houston based reseller Aloha. And just a little back, and so when Radiant started going out to market years ago they used a distributor model, so think about it as a capital distributor as a way to reach the marketplace faster, not deploying a lot of capital across the whole country. And I think that model has done extremely well and we still have a lot of distributors who are very integral to our success. We actually had Owen [ph] about a month ago to meet with them and talk about our plans and our future. So that will continue to be a big part of our business on the Aloha side is the distributors. We had a couple opportunities, the one we did in Denver the last fall and then Texas did less than Houston where we had distributers, so we're interesting in kind of monetizing the business they had built and we went and worked out a deal. So couple of aspects, one is anytime we get closer to the end customers and then we have about half of our business in Aloha is direct and the other half is through distributors. So this shifts it over to the direct side. As we look at our strategy you kind of referenced here the marketplace is becoming more and more vertical and so as we look at our business there having direct access to customers so that we can cross-sell our Aloha Essentials, so we can cross-sell and integrate higher payments offerings. So I think as part of our strategy we would like to have a more vertically integrated offering. I think having access to customers directly, we feel helps it in some aspects, but again we'll still have a large distributor segment of that marketplace as well.

Got, it. That's helpful. And then just strategically, you know look I guess to the potential strategic interest, I don’t know that where banking would fit, but obviously on the restaurant side we've seen and I think might have even talked about this or us either to a degree or lesser degree last call, but we've seen a bunch of the food delivery guys getting more vertically integrated, level up caviar, et cetera. It seems like you guys if you get large enough have an opportunity to be may be a partner with somebody else who or acquired or at least to partner with somebody else which would certainly benefit you with your analytics capabilities, I mean are you guys is that a consideration or is that in the game plan or do you need to get like you just said more vertically integrated before that becomes maybe a reality?

Yes, I mean, I think our – our model in the restaurant to be at the point-of-sale or to help them as they have to navigate into [indiscernible] would have to handle kind of a multimode delivery model, integrate with the different access points that a consumer has to make those orders, I think we feel pretty good about our strategy to get there. I don’t know that we would say we would have to be part of a service like that as opposed to being interoperable. Our customers are the restaurants are the hospitality entities who have to operate in that mode. So I think the technology we bring are now set to peak. I don’t, I think I'd say vertically integrating within a specific food delivery service is really critical for our success.

Got it, thank you.

We will take our next question from Paul Coster with JP Morgan.

Yes, thanks for taking my question. So you seem to be having a good deal of success in executing on your productivity initiatives, but I wonder how we're supposed to interpret them at this point because for instance on the hardware side where I think everyone would acknowledge it's somewhat elevated demand at the moment. The net effect of the productivity is to reduce the loss by half and overall the spend optimization side the $100 million of savings is essentially being given back on real estate and personnel expense. So are we just now, is it just sort of housekeeping and then we've got a way through the growth initiatives to kick in or do you think this is the starting point for another round of productivity?

Well, I think we've been pretty upfront about where we exited 2018 and what the challenges are we faced in 2018 and then what we felt we needed to do going into 2019. So the two areas you referenced, the one is the SG&A cost take out, we needed to do that to address some decisions that were made in the past that were going to cause cost increase to us in 2019. So we've done that and we feel good about that to the extent that it is not necessary dropping to the bottom line, we get that. I think that part of your point is that we're doing those cost actions to address some of the costs that we're pulling on board. Same issue on the hardware we did not have a great year in hardware profitability last year and as we build the plan in 2019 we couldn’t get all the way to breakeven, but we took a big chunk out of it. We believe we're going to take more than 50% of that loss out in 2019 and as Andre talked about in the first quarter we're right on the targets that we had set. Any additional future actions, I don’t think that's really what we're talking about yet. I think right now we're still focused on executing quarter-to-quarter, getting our plan, hitting our numbers, and delivering quite frankly to the Street what you guys expect.

Hey Paul, this is Owen. Just how I think about it is three buckets. So first is the hardware, I think we've given you our goal and as to have sort of more than half the loss in 2019 versus 2018 I think we said in our prepared remarks that we're on plan. So we're feeling good about that. Services, we didn’t give you goal, but I think you've seen historically the margin expansion. And so we're hoping, I think we've been more conservative in our revenue outlook, but we're optimistic that you are going to continue to see services margin expansion into 2019 as a result of those efforts. And then finally on this $100 million, remember we did the $100 million because we saw it was largely SG&A because we saw SG&A tick up and actually because of your material there you'll see that SG&A and R&D went up by about a point from '17 to '18. The nice thing now, if you look at Q1 2019, that same measure were down about six tenths of a percent. SG&A and R&D Q1 '19 to '18 and then our hope is that we can achieve some reduction in that same measure for full year '19 versus '18. So that's where we're going at. We're offsetting the headwinds as Mike said but hopefully it's enough where we can get down maybe a tenth or two on that measure by the end of the year.

Thank you, very helpful. And then on the hardware front, if I may just ask one question there, the mix of customers in this first quarter, did it shift towards tier ones in the banking sector or did it go down market? Was there any customer concentration that you want to say cool out?

Yes, this is Owen, Paul. The mix on the banking side in particular continued to be well balanced especially in North America. So we had handful of our G1 [ph] clients, but I would say momentum in our name accounts which are the middle market accounts strengthened in the quarter and we saw that with the backlog and order rate that came out of the first quarter and that was true overseas as well.

Thank you.

So, no imbalanced concentration.

And we'll take our next question from Rob Wildhack with Autonomous Research

Hi guys. I wanted to get your thoughts on self-checkout and POS in the quarter, what are the drivers of decline here and then what's your outlook for those products for the remainder of the year?

Yes, I'll mention self-checkout. We talked about strength that we have. We had good orders I think particularly coming from the [indiscernible] market, I think we mentioned that. And then likewise I think at point-of-sale we had some very strong orders last year or the revenue I should say that didn’t repeat this year, so we had a difficult comp that we were going up against. That said, if you – we did say I think in our prepared remarks that the combination of self-checkout and POS was down slightly, but you had those two dynamics at work that were going on to deliver slightly down year-over-year for the quarter.

And we remain focused on the outlook for the year at both SCO and POS to be on plan with their numbers, we would expect growth on both product lines. The combined first quarter we were down 3% between SCO and POS. But again back order rates were positive and from our outlook for the year we're feeling comfortable with the plan that we got and that calls for growth in volume [ph].

Okay thanks, and then just on the payments business, can you talk about the attach rates for JetPay and the results you're seeing with that business so far?

Yes, I mean we're still very really early stage so we did until fourth quarter last year we moved quickly to start to integrate JetPay with both Aloha and with Silver. So the [indiscernible] side and then the Silver the SMB side and we've done that. We've got some customers up and running. So the team is building on our use cases, so we can do a broader set of transaction and then as we talked about later this year it will good [ph] TA [ph] probably into the second quarter and into the third quarter and then we'll start rolling it out more broadly. So right now the volumes of growth on payments are de minimis, so there not much payment growth revenue in this risk quarter for us.

Okay, thank you.

I'd like to turn the conference back over to Mike Hayford for closing remarks.

I want to thank everyone today for joining us. In closing, we're pleased with the progress we made in this first quarter. We remain focused on our goals which include our commitment to generate profitable growth, investments to drive a mix shift to recurring software and services revenues, and enhanced free cash flow generation. Again thanks for joining us today. Thanks for your time. We look forward to speaking with you on our second quarter call.