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NCR CORPORATION

(NCR)
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NCR : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A) (form 10-Q)

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08/02/2019 | 04:13pm EDT
Second Quarter Overview
The following were the significant events for the second quarter of 2019, each
of which is discussed more fully in later sections of this MD&A:
•      Revenue increased approximately 11% from the prior year period and 14%
       excluding unfavorable foreign currency impacts;


•      Banking revenue increased 20% and operating margin rate increased 190
       basis points from the prior year period;


•      Retail revenue increased 4% and operating margin rate declined 40 basis
       points from the prior year period; and

• Hospitality revenue increased 2% and operating margin rate declined 320

basis points from the prior year period.

Strategic Overview


The rise of digital first commerce, mobile engagement and globalization have
dramatically altered the relationship between business and consumer.
Increasingly, mega-trends such as big data, the Internet of things and the cloud
are driving the next generation of changes in consumer behavior. Consumers now
expect businesses to provide a rich, integrated and personalized experience
across all commerce channels, including online, mobile and in-store. NCR is at
the forefront of this commerce shift, assisting businesses of every size in
their digital first channel transformation journeys. Our mission is to be the
leading software- and services-led enterprise provider in the financial, retail,
hospitality and telecommunications and technology industries, with solutions
designed to allow businesses in the industries we serve to deliver a rich,
integrated and personalized experience to consumers across digital and physical
commerce channels, enabling our customers to move their business forward in a
digital first environment. To fulfill this mission, we have developed a
long-term growth strategy built on taking better care of our customers,
improving execution of new product introductions, accelerating revenue growth
and executing spend optimization programs. We believe that our mission and
long-term strategy position NCR to continue to drive growth, sustainable
revenue, profit and cash flow, and to improve value for all of our stakeholders.

To deliver on our mission and strategy, we are focused on the following main initiatives in 2019:

•      Customer Care - Improve the customer experience and execution of new
       product introductions;



•      Stockholder Value - Accelerate profitable top-line revenue growth by
       investing in and shifting our revenue mix to recurring software and
       services revenue streams we identify as strategic growth platforms, while
       improving the Company's cost structure;


• Strategic Growth Platforms and Targeted Acquisitions - Increase capital

expenditures in strategic growth platforms and target acquisitions to gain

       solutions that drive the highest growth and return on investment;



•      Talent and Employee Care - Develop, reward and retain talent with
       competitive recruiting, training and effective incentive-based
       compensation programs; and


• Sales Enablement - Provide our sales force with top-performing and secure

products packaged to target our desired revenue mix and drive customer

delight and stockholder value, as well as invest in appropriate training

programs to enable success.




Potentially significant risks to the execution of our initiatives and
achievement of our strategy include the strength of demand for the products we
offer or will offer in the future consistent with our strategy and its effect on
our businesses; domestic and global economic and credit conditions including, in
particular, those resulting from the imposition or threat of protectionist trade
policies or import or export tariffs, global and regional market conditions and
spending trends in the financial, retail and hospitality industries, modified or
new global or regional trade agreements, the determination by the United Kingdom
to exit the European Union and the execution of the same; uncertainty over
further potential changes in Eurozone participation and fluctuations in oil and
commodity prices; our ability to transform our business model and to sell
higher-margin software and services with recurring revenue, including our
ability to successfully streamline our hardware operations; the success of our
restructuring plans and spend optimization program; our ability to improve
execution of new product offering or integration of acquired product offerings;
market acceptance of new solutions; competition in the information technology
industry; cybersecurity risks and compliance with data privacy and protection
requirements; disruptions in or problems with our data center hosting
facilities; defects or errors in our products; the historical seasonality of our
sales; tax rates and new US tax legislation; and foreign currency fluctuations.



                                       47

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Table of Contents

Results from Operations

For the three and six months ended June 30, 2019 compared to the three and six months ended June 30, 2018



The following table shows our results for the three and six months ended June
30:
                                          Three months ended June 30          Six months ended June 30
In millions                                 2019               2018             2019             2018
Revenue                                $      1,710$      1,537$     3,246$     3,054
Gross margin                                    471                403             882               823
Gross margin as a percentage of
revenue                                        27.5 %             26.2 %          27.2 %            26.9 %

Operating expenses

   Selling, general and administrative
expenses                               $        252$        261$       504$       506
   Research and development expenses             62                 65             121               131
   Asset impairment charges                       -                183               -               183
Income from operations                 $        157$       (106 )$       257       $         3



The following table shows our revenue by geography for the three months ended
June 30:
                                                                                          % Increase
                                                                                          (Decrease)
                                                                                           Constant
                                                                               % Increase  Currency
In millions                       2019    % of Total      2018    % of Total   (Decrease)    (1)
Americas                       $  1,029      60%       $    875      57%          18%        19%
Europe, Middle East and Africa
(EMEA)                              452      27%            418      27%           8%        13%
Asia Pacific (APJ)                  229      13%            244      16%          (6)%       (3)%
Consolidated revenue           $  1,710      100%      $  1,537      100%         11%        14%



The following table shows our revenue by geography for the six months ended June
30:
                                                                                          % Increase
                                                                                          (Decrease)
                                                                                           Constant
                                                                               % Increase  Currency
In millions                       2019    % of Total      2018    % of Total   (Decrease)    (1)
Americas                       $  1,949      60%       $  1,764      58%          10%        12%
Europe, Middle East and Africa
(EMEA)                              871      27%            826      27%           5%        11%
Asia Pacific (APJ)                  426      13%            464      15%          (8)%       (4)%
Consolidated revenue           $  3,246      100%      $  3,054      100%          6%         9%



The following table shows our revenue by segment for the three months ended June
30:
                                                                                          % Increase
                                                                                          (Decrease)
                                                                                           Constant
                                                                               % Increase  Currency
In millions                       2019    % of Total      2018    % of Total   (Decrease)    (1)
Banking                        $    868      51%       $    725      47%          20%        23%
Retail                              558      32%            537      35%           4%         6%
Hospitality                         202      12%            198      13%           2%         3%
Other                                82       5%             77       5%           6%         8%
Consolidated revenue           $  1,710      100%      $  1,537      100%         11%        14%


The following table shows our revenue by segment for the six months ended June 30:

                                       48

--------------------------------------------------------------------------------

  Table of Contents

                                                                                          % Increase
                                                                                          (Decrease)
                                                                                           Constant
                                                                               % Increase  Currency
In millions                       2019    % of Total      2018    % of Total   (Decrease)    (1)
Banking                        $  1,626      50%       $  1,446      47%          12%        16%
Retail                            1,069      33%          1,058      35%           1%         4%
Hospitality                         395      12%            402      13%          (2)%        -%
Other                               156       5%            148       5%           5%         8%
Consolidated revenue           $  3,246      100%      $  3,054      100%          6%         9%



(1) The tables above for the three and six months ended June 30 are presented
with period-over-period revenue growth or declines on a constant currency basis.
Constant currency is a non-GAAP measure that excludes the effects of foreign
currency fluctuations. We calculate this information by translating prior period
revenue growth at current period monthly average exchange rates. We believe that
examining period-over-period revenue growth or decline excluding foreign
currency fluctuations is useful for assessing the underlying performance of our
business, and our management uses revenue growth adjusted for constant currency
to evaluate period-over-period operating performance. This non-GAAP measure
should not be considered a substitute for, or superior to, period-over-period
revenue growth under GAAP.
The following table provides a reconciliation of geographic revenue percentage
growth (GAAP) to revenue percentage growth constant currency (non-GAAP) for the
three months ended June 30, 2019:

© Edgar Online, source Glimpses

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