Good day and welcome to the NCR Corporation’s Second Quarter Fiscal Year 2020 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 sir.

Good afternoon, and thank you for joining our second quarter earnings call. Joining me on the call today are Mike Hayford, President and CEO; Owen Sullivan, COO; and Tim Oliver, CFO. Before we get started, let me remind you that our presentation and discussions will include forward-looking statements. These statements reflect our current expectations and beliefs, but they're 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 reports. 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 July 28, 2020, 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. Before I get started, I want to thank Andre Fernandez for all his work during his time at NCR. I appreciate all he's done, particularly around firming up our balance sheet, increasing the transparency with the investment community and helping organize our industry general manager structure. I also want to thank him for staying on until October 1 to ensure an effective leadership transition. I wish him well in his next endeavors. I will begin with some of my views on the business, including the impact from the coronavirus pandemic. Then I will review our second quarter performance and talk about the success we are having with our digital-first contactless solutions. Owen will then review our business progress. Tim Oliver, our newly appointed CFO, will then review our second quarter financial numbers. Then Owen, Tim and I will take your questions. Starting on Slide 4 Just 2 years ago, we began the shift to a customer-centric, digital- first, software and services business model. We made tremendous progress in 2019 and entered 2020 with strong momentum. When the global pandemic hit, we took aggressive steps to focus on 3 priorities: first, the security and safety of all of our employees around the globe; second, continuing to serve our customers; and third, protect the financial health of our company. I want to express my appreciation to our employees who have shown incredible commitment and flexibility as well as an intense dedication to support our customers during these difficult times. While our financial results in the second quarter are disappointing on a year-over-year basis entirely due to the coronavirus pandemic, we are quite pleased with our company's performance during the quarter. Our revenues and margins held up better than we had expected. Our…

Thanks, Mike. I will begin on Slide 6 and provide an overview of our current operating environment. As Mike mentioned, we built a plan in response to COVID-19 that we believe would get us through this difficult period. The plan prioritized taking care of our employees, our customers and our customers and the health of the business. Our team has done an outstanding job responding to the many challenges and specific actions that we put in place. We have performed and balanced throughout the quarter as we preserved cash and manage expenses while continuing to invest in the products and capabilities required to meet our strategic goals and compete and win in the markets we serve. We have seen our already strong relationships with customers accelerate, and we've become even more of a strategic adviser as we collaborated with them in navigating extremely choppy waters. Whether it has been assisting them in the accessing of the government PPP loans, helping them move to online or guiding them toward and implementing our contact solutions, we are creating even deeper relationships with our customers. While taking care of our employees and our customers, we are also accelerating our transformation to NCR as-a-Service. Our plan coming into 2020 was to continue the transformation of every aspect of the business to deliver the as-a-Service promise to our customers and investors. We are confident in stating that the efforts behind these imperatives have not been sidelined due to the challenges of COVID-19. These efforts to transform, address the range from how we build our products and offerings, to how we go to market, to our service and support, through to our Financial and reporting systems. As we drive the transformation of the business, we continue to strive to be an even more efficient and effective…

Great. Thanks, Owen. I first want to say how thrilled I am to be at NCR. It's great to be back with the leadership team with both old and new friends. I look forward to meeting those of you on the phone or reacquainting with some of you. As been the practice, my comments will presume a constant currency adjustment that removes the impact of foreign exchange. So Slide 10 presents the top-level view of our second quarter financial performance. Starting in the top left. Consolidated revenue was $1.48 billion, down 12% versus the 2019 second quarter. As we expected revenue was negatively impacted by the broader economic pause caused by the coronavirus pandemic. We'll dig into more specific drivers of the decline as we go, but more than 3/4 of that decline is attributable to lower hardware revenue, which was down $173 million or 29%. That said, our continued effort to shift to recurring revenue streams accelerated sequentially. In the second quarter, we shifted $22 million or almost 1.5 points of revenue to recurring revenue that was previously would have been booked upfront as a perpetual sale. Adjusted EBITDA decreased 24% year-over-year to $201 million, and the EBITDA margin declined by about 180 basis points to 13.5%. The combination of lower overall revenue; the strategic shift to recurring revenue, which, as shown, represented about $18 million; and the unabsorbed fixed cost collectively described this decrease. Non-GAAP EPS was $0.27, down $0.49 from the prior year second quarter. $0.09 of that decline resulted from the shift to recurring revenue that I just described, $0.07 from a higher quarterly tax rate of 33%, $0.05 from the increased interest expense primarily related to the precautionary borrowings that were initiated as part of the COVID action plan, and that leaves about $0.21 related…

Thanks, Tim. So before I do a close, I'm going to ask Owen to just give a few more points on Slide 7 on the banking, just emphasize a few of the key points.

Sure. Thanks, Mike. Welcome to live TV. Within the banking industry, we continue to have success with our digital banking platform, including signing three new customers in the quarter, all of which were competitive takeaways. We have also had success cross-selling existing clients with new products, with 18 new business banking deals done in the quarter. Also in the quarter, our digital banking registered users increased 12% organically to more than 23 million. Elsewhere in banking, we have increased success shifting our software to recurring revenue. Our unattached software offerings, which are sold independent of ATM hardware sales, have very strong momentum. These software solutions include multi-vendor ATM solutions, enterprise monitoring, remote deposit capture software, transaction processing, branch transformation software and security applications. We continue to receive positive customer validation as we have migrated our software license solutions, both our unattached software and our ATM software, to recurring revenue. In the second quarter, we signed over 150 banks to a recurring revenue model that previously would have been revenue sold as an upfront software license. One such example is a software sale independent of hardware at NoteMachine, one of the U.K.'s largest ATM operators. We helped NoteMachine upgrade their transaction processing platform with no downtime, and they are now processing increased volume at a reduced cost. Mike, I'll turn it back to you.

Thanks, Owen. The second quarter of 2020 created a unique set of challenges for our management team to address. We put the health and safety of our employees as our number one priority. We said we must take care of our customers and continue to deliver the best service in the industry. And lastly, we said we must protect the interest of our company's shareholders and to care the company in an environment with limited visibility. To that end, we focus on preserving cash and maintaining our cash balance. I am pleased that the actions we took during the quarter not only preserved our cash but, in fact, increased our cash balance during the second quarter, and we expect to be free cash flow positive for the full year 2020. But more importantly, we continue to make progress on execution of our strategic goals to become a software- and services-led company with predictable recurring revenue streams as we help our customers run their stores, restaurants and self-service banking. Our competitive wins in the second quarter demonstrate the progress of our investments in our strategic platforms in digital banking; our next-gen Aloha; our cloud-based retail product, Emerald; payments; and our CFP self-service banking and ATM platform software. We will continue to focus on our transformation to drive NCR as-a-Service and achieve our 80/60/20 strategic goals. Our strategy remains consistent: seek to drive software and services to 80% of our total revenue, recurring revenues to 60% of our total revenue and expand EBITDA margin to 20% in our coming years. My message to the NCR team has been clear. The first half of the year is behind us, and we begin 2020.5. We took defensive actions to make it to an uncertain first half of the year, and now we turn the page. We enter the second half of the year focused on growing the business from the first half of the year and taking offensive actions. Our strategy is working, and our liquidity position is strong. We enter the second half with a large cash position and increased financial flexibility. We are confident that we can continue to weather the current crisis while also investing in innovative solutions and becoming an increasingly critical partner for our customers. We will look to allocate capital in our strategic growth platforms, such as digital banking, Emerald, Aloha payments and digital-connected services. And we will also consider tuck-in acquisitions and paying down debt. Our vision remains the same: become the software and service technology provider of choice to run restaurants, retailers and self-service banking. Thank you for your time today. And now we will open up the call for your questions. Operator?

[Operator Instructions] We'll go ahead and take our first question from Tim Willi with Wells Fargo. Please go ahead.

Thank you. Good afternoon, everyone. A couple of quick questions, if I could. Mike, could you talk about any shifts that you think you're seeing in the competitive landscape across any of the operating segments? I know we're still sort of early in this, but it seems like some people will take advantage of this to gain share. Others will struggle to stay up or be relevant. So I'm just curious if there's any areas where you're really seeing that opportunity emerge for NCR to be a clear winner while others sort of go out with the tide? And I have a couple of quick follow-ups.

Yes, Tim. It’s a great question. And again, we kind of framed the first half even as we were navigating COVID in a lot of uncertainty that we still stayed very focused on stayed very focused on our investments for the future. And then as we enter the second half really a shift to the offensive side. And we feel really good about our positioning. And the point that you raised, I'd say the two areas we see that the most are retail and in hospitality, where there have been a fair number of, I'll call them, just new entrants and new upstarts who have built or started to build some level of product but don't have the scale, clearly, are not positive cash flow yet. I don't have the number of customers that says they're going to make it to the next level. We think there's a distinct opportunity to go into that market, and we're already seeing some cases where we're winning back customers who started to look in customers who started to look in that direction, and we're taking them back. So we feel pretty good that coming out of this crisis, we'll be a stronger company, stronger relative to our competitors and probably as much an indication of some of them just not being able to survive this long of a challenge.

Great. And then just a couple of quick follow-ups. Owen, I think you quoted a growth rate for digital banking users. I think you said the number was 23 million, but I didn't catch the growth rate associated with that user base.

Yes. It was – the digital banking platform of registered users, Tim, grew 12% to just over 23 million. So that's across the digital platforms, DI and D3.

Is the 12% an acceleration? Because I know there's been some improved momentum coming across your digital banking business now for several quarters. I'm assuming that's an acceleration off of what we saw in the last quarter.

Yes. It is.

Okay.

Yes, it is. There's no doubt – yes.

And then last question I had, I guess, for Tim Oliver, and nice to meet you over the phone. Mike, Tim, Owen, is there anything we should think about with the new CFO and whether that's just the outreach to The Street? Or is this just sort of something that with Andre was sort of anticipated probably a while ago? And just that there shouldn't be too many changes in any way, shape or form, which is something that we'll start to see in the next couple of quarters around the reporting and the finance and the balance sheet and stuff like that?

No, I don’t think you will see anything externally different. Andre made a personal decision to go on and do something else. And we were lucky enough, as I think Tim referenced, that we've worked with him in the past. But our excellent reporting, I think, he's done really well. The transparency, the shift, the openness that Andre has brought, we'll definitely be continuing that going forward.

I think the only thing – and we had talked in the past about as we make the shift to recurring and NCR as-a-Service we call it, what other metrics will we share, we'll still continue to look at what else we share going forward. And so we'll keep on that track.

Andre has been incredibly helpful the last couple of weeks to try to get me up to speed for today. He's got – he's built a team that is very capable, and I think you should expect very similar high-quality analysis from us and me going forward.

[Operator Instructions] We will take our next question from Dan Kurnos from Benchmark Company. Please go ahead.

Great. Thanks. Good afternoon. Nice job, guys. Just maybe, Mike, can you kind of frame up a little bit more the push in contactless, your economics just around screens or kind of over the phone that you – or the phone-based solutions that you're implementing? Is there a payments opportunity there? And kind of what do you think sort of the TAM is as you guys kind of keep going down that path?

Yes. So – at a bigger-picture level, we obviously shifted to digital-first 1.5 years ago now in terms of strategy and started building out much more on the mobile device. We've always had a very strong footprint and product offering in digital banking, but we started to add that in other parts of the business. So when COVID hit us in mid-March, early April, Owen and the team went and said, "What else can we do to shift the contact away from our device, whether that's a ATM, whether that's a SCO, whether it's a POS, whether that's any other device that a customer and consumer might be touching and move it to move to your mobile device, move it to a device that you control as opposed to something else, somebody else has touched?" So we moved down the path. I think you raised a really good issue. So in some areas, it's really just an extension. So when you go up to ATM, there's a couple of different ways that we've implemented it. But you don't actually have to touch the ATM. You can touch your mobile device, set up a transaction to make a deposit, make a withdrawal and not have to touch the screen. Same on a SCO. We moved very quickly with one of our very large retailers who wanted to move from actually completing a transaction by touching a self-checkout to actually using their mobile app, where the consumer could actually complete the payment on their app, and we helped them facilitate that. And then on to Hospitality, the restaurant space, which is more appropriate where we've developed an app or rolled it out to our customers already, where you can pay at the end of a meal and you can complete a transaction with your mobile device attached to your table by scanning a QR code. So we'll actually pop a menu when you enter the restaurant with a QR code. And unlike a lot of systems that do, we'll actually pop a menu that you can order from your mobile device. And then at the end of the meal, you can actually pay with your mobile device, and we'll facilitate that payment for your current acquirer or will run into our merchant acquirer. And in that case, we charge a fee. So in some cases, we're able to get a transaction fee. In other cases, it really is us extending and adding some capabilities to our systems that others maybe don't have in the marketplace.

Got it. And then in your prepared remarks, you did allude to reverting back to sort of the tuck-in strategy along with considering debt, given the strong free cash flow quarter here. I'm just curious – and maybe if you want to take it in tandem with some of those players that weren't able to scale, I'm sure you would – I'd like to have first global or whatever, some major payments platform to go out and buy. But is there something small that maybe gets you some initial scale to accelerate your efforts? Or are you looking at that high-value debt and just and maybe want to take that out if you have the cash flow to do so?

Well, I think we'll continue to look at both. Clearly, we put a lot of that – we put the debt, additional debt. We drew down on the revolver. We took it on some more bonds. It's just a precaution. I'll tell you, in mid-March, it looked scary. It looked a lot more uncertain back then as we looked at what was going to happen, just a lot more unknowns. I think right now, we feel pretty good that it's played out the way we expected it to play out. And then as we look forward, if things stay – they're not great, but if they stay kind of the way they are bumping along, we feel pretty good about our outlook for the year. So then we have excess liquidity on our balance sheet that we put on there protect ourselves. So at some point, we'd look to pay some of that back, whether we pay back the revolver, we pay back some of the debt. And then I think as we pointed out, there may be some opportunities to do some more tuck-ins. We've been doing that successfully in 2019 and in 2018. And so as we get more clarity in the future, we feel better about starting to get back and adding some more products in that fashion.

We'll take our next question from Katy Huberty with Morgan Stanley. Please go ahead.

Yes. This is Kieran Kenny on for Katy. Thanks for taking my question. I just had two quick ones. So first, do you have a sense of what percent of revenue in the quarter was tied to mobile and contactless solutions? And then when a customer shifts to one of these solutions, is it often larger versus smaller than historical deals? Or it seems like it may be incremental. So just any color there would be helpful.

Yes. I don't think we'll call out the transaction specifically or the business. Again, in some cases, like with an ATM or with a self-checkout device, it really helps us sell our product, and particularly as we go forward. So the ability to integrate with a self-checkout where people can do the transaction without touching the device, we think, is very important. Obviously, digital banking, the mobile device has been a mainstay to that footprint. And then we talked about the restaurants and rolling that out. Some of that is extending the Aloha Essentials product marketability. We had, as Owen talked about, really good success in a difficult market, actually selling new clients to Aloha Essentials. And then part of that is when you sign up with NCR and the whole Aloha suite, you get all these capabilities, which allow you to differentiate your experience with your consumers. So we don't really track it as a discrete as much as it makes our products more competitive.

Got it. That makes sense. And then just quickly on recurring revenue, could you remind us what's included in that calculation? Is that all revenue tied to longer-term contracts that are built on a monthly basis?

Yes. Our – rather, everybody uses a little bit different definition recurring. Our simple recurring revenue, our definition is it's revenue that we don't have to go out and sell in a given calendar year. So everything is a multiyear contract. Obviously, software. There's some SaaS, and there's some subscription in there. We had really good success in professional services, transitioning from services that were sold by the hour or by the day into services sold for – we had a really large five-year contract. We were the application management over a five-year window for a large client in the retail space. Our global services footprint, where we have five-year contracts to support the hardware, whether it's SCO or ATM. So all those are things that just help with the predictability of our revenue stream. Obviously, over time, we believe that helps raise our EBITDA margin and just makes our business more predictable.

We'll take our next question from Dan Perlin with RBC Capital Markets.

Hey guys. This is Matthew Miller on for Dan. Thanks for taking my question. I was wondering specifically on banking, specifically like the health and maybe more so general attitudes of your banking clients. Do you think they're feeling more comfortable operating in the current environment? And I'm just curious on the demand. Would you characterize that as pent-up up or maybe like new demand given the current environment?

Yes. I think everybody – one of the things that Owen and I have done as we've been working from home is we literally have merged to – we've called two to three clients every week, the executives that are – and our customers. And so we've talked to a lot of banks. There's some very large banks and some smaller regional banks, community banks, credit unions, et cetera. And it's hard, but I think that the same challenge we have is trying to figure out what's going on with the health crisis, what's going on with the economic crisis. We had some challenges with some of the social issues out in the market that cause impacts to some of the branches and some of the ATM. So I think there's just a lot hitting everybody. So the level everybody. So the level of comfort, I think it's – you see a little bit of what's going on and what I'm going to do. I'd say the one consistent theme is people feel pretty good about our relationship and where we're going. We keep trying to find bankers who are backing away from the ATM channel, and we haven't found that. They have shifted from a brands-first to a digital-first, but digital-first and then an ATM connectivity and then tying them all together, as we talk about our strategy for self-service banking and some of the things that we've done with some large clients, where we built a platform that connects what you do in a branch to what do you do at an ATM, to your digital platform. So I would say the overall tone that we're getting, there's the uncertainty and the caution. But I think, again, I use the words: it's a lot scarier in March than it is today. People recognize we're going to have to live with this mode. I think people are getting more optimistic about the future. I think people are starting to release more capital budgets. Our top of our pipeline is getting stronger. And so I'd say sitting here today, we feel much better than we did on our April call and much better than we did when we did that quick call at the end of March.

We will take our next question from Paul Coster with JPMorgan. Please go ahead.

Hi. This is Paul Chung on for Coster. Thanks for taking my questions. So just on your accounts receivable benefit in the quarter and for the first half, what's kind of driving that? And what were your expectations for kind of second half in AR? And then given the nice start to the first half, I know you mentioned you expect free cash flow positive, but given you've already hit 50% of last year's free cash flow and CapEx is probably down, can you also confirm that CapEx number for the year? And what stops your cash flow from being up this year as 4Q is typically your seasonally strongest quarter?

Yes. I'll let Tim start on the AR question.

So I think first, I'm not sure there's anything typical about seasonality this year, right? I think the pandemic is going to outrun some of the typical seasonality we've seen. That said, too, some of the timing on cash flows were self-inflicted, and we're trying to be a little bit more linear in the way we conduct really all levels of business. That said, AR can only be collected once. We overcollected in Q2. The quality of our receivables is exceptionally – it stood up well and was much stronger than perhaps we even gave it credit for as we went into the quarter. Made some good progress on receivables in that 60- to 90-day past due range that we had, for some reason, had gotten a little bit ahead of us. And we made excellent progress there. It brought that back down into a more reasonable range. So while there's still AR to be collected, I think the overachievement is now behind us, and Q3 would be a more typical quarter. It is true that Q4 is our best cash flow quarter most years, and I suspect it will be a very good one this year. I'm not sure whether it will be the best. But since there's not much certain in the world right now, we're just going to continue to say that we are going to be free cash flow positive for the year and let the year play out.

Okay. And then on your OpEx cuts, do you see any of these cost saves kind of becoming permanent? I know you mentioned some elimination of some contractors. Just want to get a sense for how to model out next year OpEx. Thank you.

Yes, we entered the year – and on our first call, we talked about taking out about $90 million of ongoing recurring costs. We deferred a lot of those recurring actions during the first half. We said we want to take care of our employees, and so we did not go through and do reductions in staff as a lot of other companies had done. We didn't feel that was right when there was so much uncertainty in the first half of the year. We did take out a lot of actions, contractors, discretionary spending, plant equipment et cetera, et cetera. We did preserve our investment in product, as we talked about, our strategic product investment. So you see some savings, a lot of cash savings in the first half. As we get into the second half, we will start to look at how we take out more costs related to recurring saves and get back on track with that $90 million number. I don't know how much of that we'll get this year because we -- again, we didn't do the actions in the first half. But we'll get back to taking out those costs for the long haul and give you an update next quarter.

We’ll take our next question from Matt Summerville with D.A. Davidson. Please go ahead.

Thanks. Sort of to one of the earlier questions, can you maybe talk about just the cadence from month-to-month and what you've seen in July in terms of incoming order rates across banking, retail and hospitality? Have you indeed seen material sort of sequential improvement over the last 3.5 months?

Yes. I'll start. This is Mike, Matt. Clearly, April was a scary month, right? So most of the shelter-in-place starting to take effect the third week of March. So in April, there wasn't a whole lot of activity. And obviously, our salespeople have been not on the road face-to-face either. So it's been via the phone. So April would have been very challenging month. And as you probably would expect, each month gets a little better as people get either used to it or more comfortable or more – becomes more normal, this new kind of new norm. So I think we would say our sales activity and our pipeline activity has improved each month as we've gotten into this. And I'll let Owen add any color to that.

Yes, I would say Matt that that is fact that the momentum on the pipeline has continued to build. We're seeing, on the retail side, conversion of that pipeline to order activity, starting in Europe actually. We had some really nice activity there. We're seeing it in the U.S. for retail right now. So we hope that continues, but we like the momentum it's building. On the Hospitality side, as Mike said, certainly a huge pause in that sector. But if you recall, our large relationships with the quick-service restaurants, it makes up a big part of the Hospitality business. And we're starting to see new store commitments and openings and projects back on track. So we're seeing that momentum pick up. The – on the banking side, the funnel's picked up, and I will say that we're seeing the right momentum in order activity. It's -- they're probably -- they're being very cautious as they look at the second half of the year. But as we came into July, we saw the order rates start to pick up again. So we like the funnel. We now need to focus on the conversion to order across all 3.

Yes, and I think one of the earlier questions is the -- what is the tone and tenor of bankers or the same would be the same for the retailers or hospitality. And I think everybody is looking for the same thing: when is there -- when do they have certainty in an end to this crisis? So we do need that to happen before people start to release their capital and turn those prospects actually into order. So we're going to -- we'll be a little cautious other than the good words around some upside activity. But until those turn into orders and revenue, we'll have to wait and see how this thing plays out.

The last comment I will make about the pipeline activity and that mindset, we are seeing a really nice build of pipeline and conversion from the banks on the software side. And as I talk to Frank Hauck, who now runs banking for us and his team, they would suggest that there is much more strategic focus and investment into the platforms that differentiate and create the right customer experience for their customers that they're positioning with the software. The hardware will follow. It's a bit more, as he describes it, discretionary spend, the hardware is. But again, we're seeing the funnel build the conversion to -- from it is a little slower, but we really like the activity we've been seeing on the software side, which is really strategic investment on the part of the banks.

And then just a little bit as a follow-up, how do you guys see hardware profitability or hardware losses playing out in 2020 maybe relative to how you ended 2019?

Yes, obviously, with the reduction in volume, it's going to be a difficult year for us, a challenging year to get the same -- as you recall, 2019 over 2018 was a very good improvement in our margin. We took a number of very specific actions. So 2020 is going to be a challenging year, meaning margin's going to be down over 2019. And part of that's going to depend on how much of the RAB comes back in the second half, if any, or whether that starts to come back in 2021. I think at this stage, we're very focused on getting our cost structures in place for where we anticipate the 2021 calendar year to be, and that's what we'll do in the second half of the year.

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

Hi, guys. This is Mark on for Ian. Thanks for taking our questions. Just a quick follow-up on – can you guys just give a sense of the momentum between sort of the domestic market and international? It sounds like momentum is fairly strong on digital for both hospitality and banking. Is that more domestic or international or sort of both, I guess, starting to catch up? Thanks.

Yes, this is Owen. I would – I think I think I mentioned we're starting to see, on the retail side, momentum in the Asia Pacific market and in the European market, which the corollary there is that they were dealing with COVID ahead of us, not that, to Mike's point, COVID is going away, but I think people have put enough shock absorbers on to understand that they're going to have to deal with round 2 or round 3 or COVID’s here to stay. And they're starting to do that. But the retailers, the big-box retailers, the grocery stores, as you would understand and see, they've been doing fine. And we're benefiting from that, and we're starting to see that momentum move across the globe on the retail side. Most of our Hospitality is U.S.-based, except for our large quick-service clients. And we're seeing those who are outside the U.S. -- like I said there, we're starting to see order momentum, and that's picking up. And on the banking side, I would say, not as dramatic a delineation in terms of how Europe is responding to all of this. It's probably more consistent in the U.S. than Europe right now, where they've been cautious. But the pipeline is building. And the order rate activity, albeit a little slow, has -- is going in the right direction.

We will take our final question from Kartik Mehta with Northcoast Research.

Hi, good afternoon. Mike, as you look at banking orders or retail orders, early on in the crisis, I think they were being deferred. And I'm wondering today, as you look at those orders, are they still being deferred? Or are you seeing cancellations?

Yes, we haven’t seen any – we had the challenges very early on. Logistics timing, again, a lot of uncertainty of when people could install. So we had some deferrals. We've seen no cancellations related to that. So it's just a question of when we're able to get the implementations done. We talked about a very large retail client of ours in the second quarter, who typically would be implementing a lot of SCO, just has been too busy to do it. We don't think any of those are lost. It's just a timing issue when they actually take the self-checkout devices and implement. So we feel good about the fact that people are still holding tight to moving forward.

And then just on the ATM side, you read a lot about branch closures and banks rethinking what the branch configuration should be. How do you think that will impact your banking business both on the NPM side and then on the DI side?

Yes, Kartik, it's an interesting question. Again, we've talked to -- it's hard to get data, right, because it's all so new, and everybody's got a point of view. So we've done a lot of direct outreach with the banks and the credit unions and the people who are buying from us. And the interesting perspective is they tell the story around in the old days, right? So retail banking was a branch-centric model. And it went from branch then to an ATM to try to push out, be more efficient, cover more hours, 7 by 24 and move from transactions to an ATM. And then it was – and then in the mid- to late 90s, digital banking came and digital banking was kind of an extension of the branch and the ATM network. And now the way banks are thinking about it is that retail relationship starts with digital banking. So they flipped it around. But then it goes to an ATM to do transactions. And then lastly, it goes to branches. So when they think about reconfiguring retail banking, they think about reconfiguring branches and their branch network, reducing the number of branches. But at least the empirical feedback we're getting is that they're still viewing ATM as a critical component in their retail delivery.

That concludes today’s question-and-answer session. Mike Hayford, at this time, I will turn the conference back to you for any additional or closing remarks.

Thanks. So in closing, we feel really good about the progress we made during a difficult second quarter. While we took care of our employees, took care of our customers, we managed our cash flow and continued to invest in strategic software solutions. We are confident we have the financial flexibility to continue to navigate through the COVID-19 crisis successfully. In the second half of 2020, we will shift to offense and focus on executing our 80/60/20 strategy. Thank you all for joining us today. We look forward to speaking with you at the end of the third quarter. Thank you.

This concludes today’s call. Thank you for your participation. You may now disconnect.