NCR VOYIX CORPORATION The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements and notes thereto included under Item 1. Financial Statements of this Form 10-Q and our Consolidated Financial Statements and notes thereto and related Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year endedDecember 31, 2021 (the "2021 Form 10-K").
Our discussion within MD&A is organized as follows:
•Overview. This section contains background information on our company, summary of significant themes and events during the quarter as well as strategic initiatives and trends in order to provide context for management's discussion and analysis of our financial condition and results of operations. •Results of operations. This section contains an analysis of our results of operations presented in the accompanying condensed consolidated statements of income by comparing the results for the three and six months endedJune 30, 2022 to the results for the three and six months endedJune 30, 2021 .
•Liquidity and capital resources. This section provides an analysis of our cash
flows and a discussion of our contractual obligations at
OVERVIEW BUSINESS OVERVIEWNCR Corporation ("NCR", the "Company", "we" or "us") was originally incorporated in 1884 and is a software- and services-led enterprise technology provider that runs stores, restaurants and self-directed banking for our customers, which includes businesses of all sizes. NCR is a global company that is headquartered inAtlanta, Georgia . Our software platform, which runs in the cloud and includes microservices and APIs that integrate with our customers' systems, and our NCR-as-a-Service solutions bring together all of the capabilities and competencies of NCR to power the technology to run our customers' operations. Our portfolio includes digital first software and services offerings for banking, retailers and restaurants, as well as payments processing and networks, multi-vendor connected device services, automated teller machines ("ATMs"), self-checkout ("SCO"), point of sale ("POS") terminals and other self-service technologies. We also resell third-party networking products and provide related service offerings in the telecommunications and technology sector. Our solutions are designed to support our transition to becoming a software platform and payments company. EffectiveJanuary 1, 2022 , the Company realigned its reportable segments to correspond with changes to its operating model, management structure and organizational responsibilities. The reportable segments effectiveJanuary 1, 2022 include: Payments & Network, Digital Banking, Self-Service Banking, Retail, and Hospitality. •Payments & Network - We provide a cost-effective way for financial institutions, fintechs, and neobanks to reach and serve their customers through our network of automated teller machines ("ATMs") and multi-functioning financial services kiosks. We offer credit unions, banks, digital banks, fintechs, stored-value debit card issuers, and other consumer financial services providers access to our Allpoint retail-based ATM network, providing convenient and fee-free cash withdrawal and deposit access to their customers and cardholders as well as the ability to convert a digital value to cash, or vice versa, via NCRPay360. We also provide ATM branding, management and services to financial institutions and businesses.
•Digital Banking - NCR Digital Banking helps financial institutions implement their digital-first platform strategy by providing solutions for account opening, account management, transaction processing, imaging, and branch services to enable financial institutions to offer a compelling customer experience.
•Self-Service Banking - We offer solutions to enable customers in the financial
services industry to reduce costs, generate new revenue streams and enhance
customer loyalty. These solutions include a comprehensive line of ATM hardware
and software, and related installation, maintenance, and managed and
professional services.
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•Retail - We offer software-led solutions to customers in the retail industry,
leading with digital to connect retail operations end to end to integrate all
aspects of a customer's operations in indoor and outdoor settings from POS, to
payments, inventory management, fraud and loss prevention applications, loyalty
and consumer engagement. These solutions include retail-oriented technologies
such as comprehensive API-point of sale retail software platforms and
applications, hardware terminals, self-service kiosks including self-checkout
("SCO"), payment processing solutions, and bar-code scanners.
•Hospitality - We offer technology solutions to customers in the hospitality
industry, including table-service, quick-service and fast casual restaurants of
all sizes, that are designed to improve operational efficiency, increase
customer satisfaction, streamline order and transaction processing and reduce
operating costs. Our solutions include POS hardware and software solutions,
installation, maintenance, managed and professional services as well as payment
processing solutions.
Corporate and Other includes income and expenses related to corporate functions
that are not specifically attributable to an individual reportable segment along
with any immaterial operating segment(s).
Eliminations include revenues from contracts with customers and the related costs that are reported in the Payments & Network segment as well as in the Retail or Hospitality segments, including merchant acquiring services that are monetized via payments.
NCR's reputation is founded upon over 137 years of providing quality products, services and solutions to our customers. At the heart of our customer and other business relationships is a commitment to acting responsibly, ethically and with the highest level of integrity. This commitment is reflected in NCR's Code of Conduct, which is available on the Corporate Governance page of our website. SIGNIFICANT THEMES AND EVENTS
As more fully discussed in later sections of this MD&A, the following were significant themes and events for the second quarter of 2022.
•Revenue of$1,997 million , up 19% compared to the prior year period, and up 23% excluding unfavorable foreign currency impacts •Numerous external macro factors, such as rising interest rates, the effects of the strongU.S. dollar, supply-chain challenges, high component costs, and high energy prices continue to impact quarterly results
STRATEGIC INITIATIVES AND TRENDS
In order to provide long-term value to all our stakeholders, we set complementary business goals and financial strategies. NCR is continuing its transition to become a software platform and payments company with a shift to a higher level of recurring revenue. Our business goal is to be a leading enterprise technology provider that runs stores, restaurants and self-directed banking through our software platform and our NCR-as-a-Service solutions. In late 2021, we established aspirational five-year financial goals for 2026, which include annual recurring revenue of 80 percent by 2026, annual earnings per share (non-GAAP EPS)(1) growth of 15 percent, and annual non-GAAP free cash flow(1) of$1 billion in 2026. Execution of our goals and strategy is driven by the following key pillars: (i) focus on our customers; (ii) take care of our employees; (iii) bring high-quality, innovative products to market; and (iv) leverage our brand. As we strive to achieve these aspirational five-year goals, we plan to capitalize on opportunities presented by the acquisitions of Cardtronics and LibertyX to accelerate our Payments & Network business as we go to market with a more robust offering in this segment. We also plan to continue to improve our execution to drive solid returns and to transform our business to enhance value for all shareholders. (1) With respect to our goals of free cash flow and non-GAAP EPS growth, we are not providing a reconciliation to the respective GAAP measure because we are unable to predict with reasonable certainty the reconciling items that may affect GAAP EPS and Cash flow from operations without unreasonable effort. For our definition of free cash flow, see the Financial Condition, Liquidity and Capital Resources section within MD&A. For our definition of non-GAAP EPS and our use of the term annual recurring revenue, see the Key Strategic Financial Metrics section within MD&A. 41
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OnFebruary 8, 2022 , NCR announced that its Board of Directors unanimously approved commencing a comprehensive strategic review, with the assistance of outside advisors, which will evaluate a full range of strategic alternatives available to NCR to enhance value for all shareholders. The Board has not set a timetable for the conclusion of its review of strategic alternatives. NCR does not intend to comment further on the strategic review process unless and until NCR has determined that further disclosure is beneficial or required by law. Shareholders are advised that there can be no certainty that the strategic review will result in a transaction, or if a transaction is pursued that such a transaction will be completed.
Cybersecurity Risk Management
Similar to most companies, NCR and its customers are subject to more frequent and increasingly sophisticated cybersecurity attacks. The Company maintains cybersecurity risk management policies and procedures including disclosure controls, which it regularly evaluates for updates, for handling and responding to cybersecurity events. These policies and procedures include internal notifications and engagements and, as necessary, cooperation with law enforcement. Personnel involved in handling and responding to cybersecurity events periodically undertake tabletop exercises to simulate an event. Our internal notification procedures include notifying the applicable Company attorneys, which, depending on the level of severity assigned to the event, may include direct notice to, among others, the Company's General Counsel, Ethics & Compliance Officer, and Chief Privacy Officer. Company attorneys support efforts to evaluate the materiality of any incidents, determine whether notice to third parties such as customers or vendors is required, determine whether any prohibition on insider trading is appropriate, and assess whether disclosure to stockholders or governmental filings, including with theSEC , are required. Our internal notification procedures also include notifying various NCR Information Technology Services managers, subject matter experts in the Company's software department and Company leadership, depending on the level of severity assigned to the event.
Impacts from Geopolitical, Macroeconomic, and COVID-19 Challenges
We continue to be exposed to macroeconomic pressures as a result of the lingering impacts of the COVID-19 pandemic, supply chain challenges, foreign currency fluctuations, and spikes in commodity and energy prices as a result of geopolitical challenges, including the war inEastern Europe . We continue to navigate through these challenges with a sharp focus on and goal of safeguarding our employees, helping our customers and managing impacts on our supply chain. Despite the unprecedented environment, our teams are executing at a high level and we are advancing our strategy. The COVID-19 pandemic is complex and continues to evolve. While it is difficult to project the long-term impact of the pandemic, we expect it will negatively impact our business at least in the short-term. The ultimate impact on our overall financial condition and operating results will depend on the currently unknowable duration and severity of the pandemic, supply chain challenges and cost escalations including materials, labor and freight, and any additional governmental and public actions taken in response. The war inEastern Europe and related sanctions imposed onRussia and related actors have resulted in interest rate acceleration and inflation, including, but not limited to, a significant increase in the price of energy around the world, particularly in regions such asEurope that are significantly dependent onRussia for their energy needs, and continued commodity price increases due to disruption in the mining industry inUkraine and other factors. The war inEastern Europe has also contributed to further disruption in logistics due to the shipping difficulties in and around theBlack Sea and its ports, which have resulted in the rerouting of traffic to other ports and further logistics challenges. We expect that these factors will continue to negatively impact our business at least in the short-term. The ultimate impact on our overall financial condition and operating results will depend on the currently unknowable duration and severity of these activities. We continue to evaluate the long-term impact that these may have on our business model, however there can be no assurance that the measures we have taken or will take will completely offset the negative impact. For further information on the risks posed to our business from the COVID-19 pandemic and other factors, refer to Part I, Item 1A, "Risk Factors", of the Company's 2021 Form 10-K. For further information on exposures to foreign exchange risk, refer to Item 3, "Quantitative and Qualitative Disclosures about Market Risk", in this Form 10-Q. 42 -------------------------------------------------------------------------------- Table of Contents Results from Operations
For the three and six months ended
Consolidated Results The following tables show our results for the three and six months endedJune 30 , the relative percentage that those amounts represent to revenue, and the change in those amounts year-over-year. Three months ended June 30 Percentage of Revenue (1) Increase (Decrease) In millions 2022 2021 2022 2021 2022 v 2021 Product revenue $ 614$ 551 30.7 % 32.9 % 11 % Service revenue 1,383 1,126 69.3 % 67.1 % 23 % Total revenue 1,997 1,677 100.0 % 100.0 % 19 % Product gross margin 70 98 11.4 % 17.8 % (29) % Service gross margin 401 358 29.0 % 31.8 % 12 % Total gross margin 471 456 23.6 % 27.2 % 3 % Selling, general and administrative expenses 309 303 15.5 % 18.1 % 2 % Research and development expenses 59 69 3.0 % 4.1 % (14) % Income from operations $ 103$ 84 5.2 % 5.0 % 23 % Six months ended June 30 Percentage of Revenue (1) Increase (Decrease) In millions 2022 2021 2022 2021 2022 v 2021 Product revenue$ 1,130 $ 1,033 29.3 % 32.1 % 9 % Service revenue 2,733 2,188 70.7 % 67.9 % 25 % Total revenue 3,863 3,221 100.0 % 100.0 % 20 % Product gross margin 94 172 8.3 % 16.7 % (45) % Service gross margin 788 698 28.8 % 31.9 % 13 % Total gross margin 882 870 22.8 % 27.0 % 1 % Selling, general and administrative expenses 622 541 16.1 % 16.8 % 15 % Research and development expenses 124 135 3.2 % 4.2 % (8) % Income from operations $ 136$ 194 3.5 % 6.0 % (30) % (1) The percentage of revenue is calculated for each line item divided by total revenue, except for product gross margin and service gross margin, which are divided by the related component of revenue. 43 -------------------------------------------------------------------------------- Table of Contents Key Strategic Financial Metrics The following tables show our key strategic financial metrics for the three and six months endedJune 30 , the relative percentage that those amounts represent to total revenue, and the change in those amounts year-over-year.
Recurring revenue as a percentage of total revenue
Three months ended June 30 Percentage of Total Revenue Increase (Decrease)
In millions 2022 2021 2022 2021 2022 v 2021
Recurring revenue (1) $ 1,217 $ 929 60.9 % 55.4 % 31 %
All other products and services 780 748 39.1 % 44.6 % 4 %
Total Revenue $ 1,997 $ 1,677 100 % 100 % 19 %
Six months ended June 30 Percentage of Total Revenue Increase (Decrease)
In millions 2022 2021
2022 2021 2022 v 2021
Recurring revenue (1) $ 2,396 $ 1,803 62.0 % 56.0 % 33 %
All other products and services 1,467 1,418 38.0 % 44.0 % 3 %
Total Revenue $ 3,863 $ 3,221 100.0 % 100.0 % 20 %
(1) Recurring revenue includes all revenue streams from contracts where there is
a predictable revenue pattern that will occur at regular intervals with a
relatively high degree of certainty. This includes hardware and software
maintenance revenue, cloud revenue, payment processing revenue, interchange and
network revenue, and certain professional services arrangements as well as
term-based software license arrangements that include customer termination
rights.
Net income (loss) from continuing operations and Adjusted EBITDA as a percentage of total revenue
Three months ended June 30 Percentage of Total Revenue Increase (Decrease)
In millions 2022 2021 2022 2021 2022 v 2021
Net income (loss) from continuing
operations attributable to NCR $ 35 $ (9) 1.8 % (0.5) % 489 %
Adjusted EBITDA $ 339 $ 281 17.0 % 16.8 % 21 %
Six months ended June 30 Percentage of Total Revenue Increase (Decrease)
In millions 2022 2021 2022 2021 2022 v 2021
Net income (loss) from continuing
operations attributable to NCR $ 2 $ 21 0.1 % 0.7 % (90) %
Adjusted EBITDA $ 610 $ 539 15.8 % 16.7 % 13 %
Non-GAAP Financial Measures and Use of Certain Terms:
The term "annual recurring revenue" is recurring revenue, excluding software
license sold as a subscription, for the last three months times four, plus the
rolling four quarters for term-based software license arrangements that include
customer termination rights.
Non-GAAP Earnings per Share ("Non-GAAP EPS") NCR's non-GAAP EPS is determined by
excluding, as applicable, pension mark-to-market adjustments, pension
settlements, pension curtailments and pension special termination benefits, as
well as other special items, including amortization of acquisition related
intangibles and transformation and restructuring activities, from NCR's GAAP
earnings per share. Due to the non-operational nature of these pension and other
special items, NCR's management uses this non-GAAP measure to evaluate
year-over-year operating performance. NCR believes this
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Constant Currency NCR presents certain financial measures, such as
period-over-period revenue growth, on a constant currency basis, which excludes
the effects of foreign currency translation by translating prior period results
at current period monthly average exchange rates. Due to the overall variability
of foreign exchange rates from period to period, NCR's management uses constant
currency measures to evaluate period-over-period operating performance on a more
consistent and comparable basis. NCR's management believes that presentation of
financial measures without this result may contribute to an understanding of the
Company's period-over-period operating performance and provides additional
insight into historical and/or future performance, which may be helpful for
investors.
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization
("Adjusted EBITDA") NCR's management uses the non-GAAP measure Adjusted EBITDA
because it provides useful information to investors as an indicator of strength
and performance of the Company's ongoing business operations, including funding
discretionary spending such as capital expenditures, strategic acquisitions, and
other investments. NCR determines Adjusted EBITDA based on GAAP net income
(loss) from continuing operations attributable to NCR plus interest expense,
net; plus income tax expense (benefit); plus depreciation and amortization; plus
stock-based compensation expense; plus other income (expense); plus pension
mark-to-market adjustments, pension settlements, pension curtailments and
pension special termination benefits and other special items, including
amortization of acquisition-related intangibles and restructuring charges, among
others. Refer to the table below for the reconciliations of net income (loss)
from continuing operations attributable to NCR (GAAP) to Adjusted EBITDA
(non-GAAP).
Special Item Related to Russia The war in Eastern Europe and related sanctions
imposed on Russia and related actors by the United States and other
jurisdictions required us to commence the orderly wind down of our operations in
Russia beginning in the first quarter of 2022. As of June 30, 2022 , we have
substantially ceased operations in Russia and are in the process of dissolving
our only subsidiary in Russia . As a result, for the three and six months ended
June 30, 2022 , our non-GAAP presentation of the measures described above exclude
the immaterial impact of our operating results in Russia , as well as the impact
of impairments taken to write down the carrying value of assets and liabilities,
severance charges, and the assessment of collectability on revenue recognition.
We consider this to be a non-recurring special item and management has reviewed
the results of its business segments excluding these impacts. We have not
adjusted the presentation of the prior year periods due to the immaterial impact
of Russia to revenue and income from continuing operations for the three and six
months ended June 30, 2021 .
NCR's definitions and calculations of these non-GAAP measures may differ from
similarly-titled measures reported by other companies and cannot, therefore, be
compared with similarly-titled measures of other companies. These non-GAAP
measures should not be considered as substitutes for, or superior to, results
determined in accordance with GAAP.
Three months ended June 30 Six months ended June 30
In millions 2022 2021 2022 2021
Net income (loss) from continuing operations
attributable to NCR (GAAP) $ 35 $ (9) $ 2 $ 21
Transformation and restructuring costs 49 7 76 15
Acquisition-related amortization of intangibles 45 23 86 43
Acquisition-related costs 3 56 8 83
Interest expense 67 61 130 106
Interest income (2) (1) (3) (4)
Depreciation and amortization (excluding
acquisition-related amortization of intangibles) 104 76 207 146
Income taxes - 31 13 48
Stock-based compensation expense 35 37 69 81
Russia 3 - 22 -
Adjusted EBITDA (non-GAAP) $ 339 $ 281 $ 610 $ 539
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Revenue
Three months ended June 30 Percentage of Total Revenue Increase (Decrease)
In millions 2022 2021 2022 2021 2022 vs 2021
Product revenue $ 614 $ 551 30.7 % 32.9 % 11 %
Service revenue 1,383 1,126 69.3 % 67.1 % 23 %
Total revenue $ 1,997 $ 1,677 100.0 % 100.0 % 19 %
Six months ended June 30 Percentage of Total Revenue Increase (Decrease)
In millions 2022 2021 2022 2021 2022 vs 2021
Product revenue $ 1,130 $ 1,033 29.3 % 32.1 % 9 %
Service revenue 2,733 2,188 70.7 % 67.9 % 25 %
Total revenue $ 3,863 $ 3,221 100.0 % 100.0 % 20 %
Product revenue includes our hardware and software license revenue streams as
well as cryptocurrency-related revenues. Service revenue includes hardware and
software maintenance revenue, implementation services revenue, cloud revenue,
payments processing revenue, interchange and network revenue, as well as
professional services revenue.
For the three and six months ended
The second quarter 2021 results include the operations of Cardtronics from the date of acquisition,June 21, 2021 , toJune 30, 2021 . As a result, revenue for the three and six months endedJune 30, 2021 includes$32 million from Cardtronics. Total revenue increased 19% for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 . Foreign currency fluctuations had an unfavorable impact of 4% on the revenue comparison. Product revenue for the three months endedJune 30, 2022 increased 11% compared to the three months endedJune 30, 2021 due to growth in POS and ATM revenue as well as the addition of cryptocurrency revenue following the acquisition of LibertyX inJanuary 2022 , partially offset by a decline in SCO hardware revenue. Service revenue for the three months endedJune 30, 2022 increased 23% compared to the prior year period due to growth in software related services, which includes the results of Cardtronics. Total revenue increased 20% for the six months endedJune 30, 2022 compared to the six months endedJune 30, 2021 . Foreign currency fluctuations had an unfavorable impact of 3% on the revenue comparison. Product revenue for the six months endedJune 30, 2022 increased 9% compared to the six months endedJune 30, 2021 due to growth in POS revenue as well as the addition of cryptocurrency revenue following the acquisition of LibertyX inJanuary 2022 , partially offset by a decline in ATM and SCO hardware revenue. Service revenue for the six months endedJune 30, 2022 increased 25% compared to the six months endedJune 30, 2021 due to growth in software related services, which includes the results of Cardtronics. Gross Margin Three months ended June 30 Percentage of Revenue (1) Increase (Decrease) In millions 2022 2021 2022 2021 2022 v 2021 Product gross margin $ 70$ 98 11.4 % 17.8 % (29) % Service gross margin 401 358 29.0 % 31.8 % 12 % Total gross margin $ 471$ 456 23.6 % 27.2 % 3 %
(1) The percentage of revenue is calculated for each line item divided by the related component of revenue.
For the three months ended
Gross margin as a percentage of revenue in the three months ended
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by profit of $4 million related to collections and inventory liquidation in
Russia . Gross margin for the three months ended June 30, 2021 included $7
million of transformation and restructuring costs and $9 million of amortization
of acquisition-related intangible assets. Excluding these items, gross margin as
a percentage of revenue decreased from 28.1% to 25.7% due to increases in fuel
costs, component parts, and interest rates on vault cash agreements as well as
other supply chain challenges that continued to negatively impact our costs. The
impact of these cost increases were partially offset by cost mitigation actions
implemented and an increase in the favorable higher margin software and services
revenue.
Six months ended June 30 Percentage of Revenue (1) Increase (Decrease)
In millions 2022 2021 2022 2021 2022 v 2021
Product gross margin $ 94 $ 172 8.3 % 16.7 % (45) %
Service gross margin 788 698 28.8 % 31.9 % 13 %
Total gross margin $ 882 $ 870 22.8 % 27.0 % 1 %
For the six months ended
Gross margin as a percentage of revenue in the six months endedJune 30, 2022 was 22.8% compared to 27.0% in the six months endedJune 30, 2021 . Gross margin in the six months endedJune 30, 2022 included$21 million of transformation costs,$46 million of amortization of acquisition-related intangible assets,$1 million of acquisition-related costs, and$10 million related to operating losses, impairments and other actions taken with respect to our operations inRussia . Gross margin for the six months endedJune 30, 2021 included$11 million of transformation costs and$16 million of amortization of acquisition-related intangible assets. Excluding these items, gross margin as a percentage of revenue decreased from 27.8% to 24.9% due to increases in fuel costs, component parts, and interest rates as well as other supply chain challenges that negatively impacted our costs. The impact of these cost increases were partially offset by cost mitigation actions implemented, employee retention credits, and an increase in the favorable higher margin software and services revenue.
Selling, General and Administrative Expenses
Three months ended June 30 Percentage of Total Revenue Increase (Decrease)
In millions 2022 2021 2022 2021 2022 vs 2021
Selling, general and administrative
expenses $ 309 $ 303 15.5 % 18.1 % 2 %
For the three months ended
Selling, general, and administrative expenses were$309 million compared to$303 million in the three months endedJune 30, 2022 and 2021, respectively. As a percentage of revenue, selling, general and administrative expenses were 15.5% compared to 18.1% in the three months endedJune 30, 2022 and 2021, respectively. In the three months endedJune 30, 2022 , selling, general and administrative expenses included$25 million of transformation costs,$18 million of amortization of acquisition-related intangible assets,$2 million of acquisition-related costs and$2 million of costs related to actions taken with respect to our operations inRussia . In the three months endedJune 30, 2021 , selling, general and administrative expenses primarily included$14 million of amortization of acquisition-related intangible assets and$59 million of acquisition-related costs. Excluding these items, selling, general and administrative expenses decreased slightly as a percentage of revenue from 13.7% to 13.2% primarily due to cost mitigation actions implemented. Six months ended June 30 Percentage of Total Revenue Increase (Decrease) In millions 2022 2021 2022 2021 2022 vs 2021 Selling, general and administrative expenses $ 622$ 541 16.1 % 16.8 % 15 %
For the six months ended
Selling, general, and administrative expenses were$622 million compared to$541 million in the six months endedJune 30, 2022 and 2021, respectively. As a percentage of revenue, selling, general and administrative expenses were 16.1% compared to 16.8% in the six months endedJune 30, 2022 and 2021, respectively. In the six months endedJune 30, 2022 , selling, general and administrative expenses included$46 million of transformation costs,$40 million of amortization of acquisition-related 47 -------------------------------------------------------------------------------- Table of Contents intangible assets,$7 million of acquisition-related costs and$6 million of costs related to actions taken with respect to our operations inRussia . In the six months endedJune 30, 2021 , selling, general and administrative expenses included$3 million of transformation and restructuring costs,$27 million of amortization of acquisition-related intangible assets, and$69 million of acquisition-related costs. Excluding these items, selling, general and administrative expenses decreased slightly as a percentage of revenue from 13.7% to 13.6%.
Research and Development Expenses
Three months ended June 30 Percentage of Total Revenue Increase (Decrease)
In millions 2022 2021 2022 2021 2022 v 2021
Research and development expenses $ 59 $ 69 3.0 % 4.1 % (14) %
For the three months ended
Research and development expenses were$59 million compared to$69 million in the three months endedJune 30, 2022 and 2021, respectively. As a percentage of revenue, these costs were 3.0% and 4.1% in the three months endedJune 30, 2022 and 2021, respectively. In the three months endedJune 30, 2022 , research and development expenses included$8 million of transformation costs. In the three months endedJune 30, 2021 , research and development expenses included$1 million of transformation benefits. After considering this item, research and development expenses decreased as a percentage of revenue from 4.2% to 2.6% due to cost-mitigation actions implemented and an increase in revenue year over year. Six months ended June 30 Percentage of Total Revenue Increase (Decrease) In millions 2022 2021 2022 2021 2022 v 2021
Research and development expenses $ 124
3.2 % 4.2 % (8) %
For the six months ended
Research and development expenses were$124 compared to$135 in the six months endedJune 30, 2022 and 2021, respectively. As a percentage of revenue, these costs were 3.2% and 4.2% in the six months endedJune 30, 2022 and 2021, respectively. In the six months endedJune 30, 2022 , research and development expenses included$9 million of transformation costs. In the six months endedJune 30, 2021 , research and development expenses included$1 million of transformation costs. After considering this item, research and development expenses decreased as a percentage of revenue from 4.2% to 3.0% due to an increase in revenue year over year and cost mitigation actions implemented. Interest Expense Three months ended June 30 Increase (Decrease) In millions 2022 2021 2022 v 2021 Interest expense $ 67$ 61 10 %
For the three months ended
Interest expense was$67 million compared to$61 million in the three months endedJune 30, 2022 and 2021, respectively. Interest expense is primarily related to the Company's senior unsecured notes and borrowings under the Company's Senior Secured Credit Facility. The main driver was related to the increase in interest rates on the Senior Secured Credit Facility partially offset by lower average outstanding principal balances. 48
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Six months ended June 30 Increase (Decrease)
In millions 2022 2021 2022 v 2021
Interest expense $ 130 $ 106 23 %
For the six months ended
Interest expense was$130 million compared to$106 million in the six months endedJune 30, 2022 and 2021, respectively. Interest expense is primarily related to the Company's senior unsecured notes and borrowings under the Company's Senior Secured Credit Facility. The main driver was related to the increase in total outstanding debt as a result of the closing of the acquisition of Cardtronics in the second quarter of 2021, combined with an increase in interest rates on the Senior Secured Credit Facility.
Other Income (Expense), net
Other income (expense), net was income of$1 million and expense of$1 million in the three months endedJune 30, 2022 and 2021, respectively, and income of$10 million and expense of$18 million in the six months endedJune 30, 2022 and 2021, respectively, with the components reflected in the following table: Three months ended June 30 Six months ended June 30 In millions 2022 2021 2022 2021 Interest income $ 2$ 1 $ 3$ 4 Foreign currency fluctuations and foreign exchange contracts (7) (3) (7) (7) Bank-related fees (3) (2) (5) (21) Employee benefit plans 10 3 21 6 Other, net (1) - (2) - Other income (expense), net $ 1$ (1) $ 10 $ (18) Employee benefit plans within Other income (expense), net includes the components of pension, postemployment and postretirement expense, other than service cost. The increase in Employee benefit plans in 2022 compared to the prior year period is primarily related to actuarial gains related to the pension plans that are being amortized throughout the year. In the six months endedJune 30, 2021 , the Company incurred bank-related fees of$19 million related to certain structuring and commitment fees as a result of the financing transactions entered into during the first quarter of 2021 related to the transaction with Cardtronics.
Income Taxes
Three months ended June 30 Six months ended June 30
In millions 2022 2021 2022 2021
Income tax expense (benefit) $ - $ 31 $ 13 $ 48 For the three months ended
Income tax provisions for interim (quarterly) periods are based on an estimated annual effective income tax rate calculated separately from the effect of significant, infrequent or unusual items. Income tax expense was approximately zero for the three months endedJune 30, 2022 compared to$31 million income tax expense for the three months endedJune 30, 2021 . The change was primarily driven by discrete tax expenses and benefits. In the three months endedJune 30, 2022 the Company recognized a$6 million benefit from provision to return adjustments and a$7 million benefit related to uncertain tax position settlements and statute of limitation lapses. In the three months endedJune 30, 2021 , the Company recognized a$34 million expense from recording a valuation allowance against interest limitation carryforwards in theU.S. and a$14 million benefit from the deferred tax impact of a tax law change enacted in theU.K.
For the six months ended
Income tax expense was
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adjustments and a $7 million benefit related to uncertain tax position
settlements and statute of limitation lapses. In the six months ended June 30,
2021 , the Company recognized a $34 million expense from recording a valuation
allowance against interest limitation carryforwards in the U.S. and a $14
million benefit from the deferred tax impact of a tax law change in the U.K.
The Company is subject to numerous federal, state and foreign tax audits. While
we believe that appropriate reserves exist for issues that might arise from
these audits, should these audits be settled, the resulting tax effect could
impact the tax provision and cash flows in 2022 or future periods.
Income (Loss) from Discontinued Operations
The Company recognized income from discontinued operations, net of tax, of$6 million and$5 million in the three and six months endedJune 30, 2022 , respectively. The income from discontinued operations, net of tax, was primarily driven by insurance recoveries partially offset by immaterial updates to various environmental remediation matters. In the three and six months endedJune 30, 2021 , there was no activity related to discontinued operations.
Revenue and Adjusted EBITDA by Segment
The Company manages and reports its businesses in the following segments: Payments & Network, Digital Banking, Self-Service Banking, Retail, and Hospitality. Segments are measured for profitability by the Company's chief operating decision maker based on revenue and segment Adjusted EBITDA. Adjusted EBITDA is defined as GAAP net income (loss) from continuing operations attributable to NCR plus interest expense, net; plus income tax expense (benefit); plus depreciation and amortization; plus stock-based compensation expense; plus other income (expense); plus pension mark-to-market adjustments, pension settlements, pension curtailments and pension special termination benefits and other special items, including amortization of acquisition-related intangibles, restructuring charges, among others. The special items are considered non-operational so are excluded from the Adjusted EBITDA metric utilized by our chief operating decision maker in evaluating segment performance and are separately delineated to reconcile back to total reported income (loss) from continuing operations attributable to NCR. This format is useful to investors because it allows analysis and comparability of operating trends. It also includes the same information that is used by NCR management to make decisions regarding the segments and to assess our financial performance. Corporate and Other includes income and expenses related to corporate functions that are not specifically attributable to an individual reportable segment along with any immaterial operating segment(s). Special Item Related to Russia The war inEastern Europe and related sanctions imposed onRussia and related actors bythe United States and other jurisdictions required us to commence the orderly wind down of our operations inRussia beginning in the first quarter of 2022. As ofJune 30, 2022 , we have substantially ceased operations inRussia and are in the process of dissolving our only subsidiary inRussia . As a result, for the three and six months endedJune 30, 2022 , our non-GAAP presentation of the measures described above exclude the immaterial impact of our operating results inRussia , as well as the impact of impairments taken to write down the carrying value of assets and liabilities, severance charges, and the assessment of collectability on revenue recognition. We consider this to be a non-recurring special item and management has reviewed the results of its business segments excluding these impacts. We have not adjusted the presentation of the prior year periods due to the immaterial impact ofRussia to revenue and income from continuing operations for the three and six months endedJune 30, 2021 . 50
-------------------------------------------------------------------------------- Table of Contents The following tables show our segment revenue and Adjusted EBITDA for the three and six months endedJune 30 , the relative percentage that those amounts represent to segment revenue, and the change in those amounts year-over-year. Increase Increase (Decrease) Three months ended June 30 Percentage of Revenue (1) (Decrease) Constant Currency In millions 2022 2021 2022 2021 2022 v 2021 2022 v 2021 Revenue Payments & Network$ 332 $ 54 16.7 % 3.2 % 515 % 526 % Digital Banking 131 129 6.6 % 7.7 % 2 % 2 % Self-Service Banking 679 645 34.1 % 38.5 % 5 % 9 % Retail 562 562 28.2 % 33.5 % - % 4 % Hospitality 238 215 11.9 % 12.8 % 11 % 11 % Other 61 77 3.1 % 4.6 % (21) % (19) % Eliminations (2) (12) (5) (0.6) % (0.3) % 140 % 140 % Total segment revenue$ 1,991 $ 1,677 100.0 % 100 % 19 % 22 % Other adjustment (3) 6 - Total revenue$ 1,997 $ 1,677 19 % 23 % Adjusted EBITDA by Segment Payments & Network$ 97 $ 19 29.2 % 35.2 % 411 % Digital Banking 56 55 42.7 % 42.6 % 2 % Self-Service Banking 142 140 20.9 % 21.7 % 1 % Retail 104 121 18.5 % 21.5 % (14) % Hospitality 46 39 19.3 % 18.1 % 18 % Corporate and Other (98) (89) (160.7) % (115.6) % 10 % Eliminations (2) (8) (4) 66.7 % 80.0 % 100 % Total Adjusted EBITDA$ 339 $ 281 17.0 % 16.8 % 21 % (1) The percentage of revenue is calculated for each line item divided by total revenue, except for Adjusted EBITDA, which are divided by the related component of revenue. (2) Eliminations include revenues from contracts with customers and the related costs that are reported in the Payments & Network segment as well as in the Retail or Hospitality segments, including merchant acquiring services that are monetized via payments. (3) Other adjustment reflects the revenue attributable to the Company's operations inRussia for the three months endingJune 30, 2022 that was excluded from management's measure of revenue due to our announcement to suspend sales toRussia and anticipated orderly wind down of our operations inRussia . The revenue attributable to the Russian operations for the prior period of$11 million is included in the respective segments. 51
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Increase Increase (Decrease)
Six months ended June 30 Percentage of Revenue (1) (Decrease) Constant Currency
In millions 2022 2021 2022 2021 2022 v 2021 2022 v 2021
Revenue
Payments & Network $ 631 $ 76 16.4 % 2.4 % 730 % 741 %
Digital Banking 267 $ 252 6.9 % 7.8 % 6 % 6 %
Self-Service Banking 1,290 $ 1,273 33.5 % 39.5 % 1 % 4 %
Retail 1,108 $ 1,082 28.7 % 33.6 % 2 % 6 %
Hospitality 449 $ 394 11.7 % 12.2 % 14 % 15 %
Other 129 $ 154 3.3 % 4.8 % (16) % (13) %
Eliminations (2) (20) $ (10) (0.5) % (0.3) % 100 % 100 %
Total segment revenue $ 3,854 $ 3,221 100 % 100.0 % 20 % 23 %
Other adjustment (3) 9 -
Total revenue $ 3,863 $ 3,221 20 % 23 %
Adjusted EBITDA by Segment
Payments & Network $ 195 $ 22 30.9 % 28.9 % 786 %
Digital Banking 112 109 41.9 % 43.3 % 3 %
Self-Service Banking 254 277 19.7 % 21.8 % (8) %
Retail 171 219 15.4 % 20.2 % (22) %
Hospitality 87 75 19.4 % 19.0 % 16 %
Corporate and Other (195) (156) (151.2) % (101.3) % 25 %
Eliminations (2) (14) (7) 70.0 % 70.0 % 100 %
Total Adjusted EBITDA $ 610 $ 539 15.8 % 16.7 % 13 %
(1) The percentage of revenue is calculated for each line item divided by total
revenue, except for Adjusted EBITDA, which are divided by the related component
of revenue.
(2) Eliminations include revenues from contracts with customers and the related
costs that are reported in the Payments & Network segment as well as in the
Retail or Hospitality segments, including merchant acquiring services that are
monetized via payments.
(3) Other adjustment reflects the revenue attributable to the Company's
operations in Russia for the six months ending June 30, 2022 that were excluded
from management's measure of revenue due to our announcement to suspend sales to
Russia and anticipated orderly wind down of our operations in Russia . The
revenue attributable to the Russian operations for the prior period of $19
million is included in the respective segments.
The following table provides a reconciliation of segment and total revenue
percentage growth (GAAP) to revenue percentage growth constant currency
(non-GAAP) for the three and six months ended
Three months ended June 30, 2022 Six months ended
Favorable Revenue Growth % Favorable Revenue Growth %
Revenue Growth (Unfavorable) FX Constant Currency Revenue Growth (Unfavorable) FX Constant Currency
$ in millions % (GAAP) Impact (non-GAAP) % (GAAP) Impact (non-GAAP)
Payments & Network 515 % (11) % 526 % 730 % (11) % 741 %
Digital Banking 2 % - % 2 % 6 % - % 6 %
Self-Service Banking 5 % (4) % 9 % 1 % (3) % 4 %
Retail - % (4) % 4 % 2 % (4) % 6 %
Hospitality 11 % - % 11 % 14 % (1) % 15 %
Other (21) % (2) % (19) % (16) % (3) % (13) %
Eliminations 140 % - % 140 % 100 % - % 100 %
Total segment revenue 19 % (3) % 22 % 20 % (3) % 23 %
Total revenue 19 % (4) % 23 % 20 % (3) % 23 %
52-------------------------------------------------------------------------------- Table of Contents Segment Revenue
For the three and six months ended
Payments & Network revenue increased significantly for the three and six months endedJune 30, 2022 compared to the prior year periods, primarily due to additional payments processing revenue from the acquisition of Cardtronics, which occurred onJune 21, 2021 . Additionally, the three and six months endedJune 30, 2022 includes cryptocurrency transaction processing revenue following the acquisition of LibertyX inJanuary 2022 .
Digital Banking revenue increased 2% and 6% for the three and six months ended
Self-Service Banking revenue increased 5% and 1% for the three and six months endedJune 30, 2022 , respectively, compared to the prior year periods. Foreign currency fluctuations had an unfavorable impact of 4% and 3% on the three and six month revenue comparisons, respectively. For the three months endedJune 30, 2022 , the increase in revenue is due to an increase in ATM hardware sales and an increase in software and services revenues, including software licenses and hardware and software maintenance. For the six months endedJune 30, 2022 , the increase in revenue compared to prior year period is due to an increase in software and services revenues, including software licenses, hardware maintenance and professional services partially offset by a decline in ATM hardware sales. The decline in ATM hardware sales was due in part to supply chain challenges that resulted in temporary order fulfillment delays during the first quarter of 2022. Software and services revenue as a percent of total Self-Service Banking segment revenue was 67% in the second quarter of 2022 and 2021. Retail revenue was flat for the three months endedJune 30, 2022 compared to the prior year period and increased 2% for the six months endedJune 30, 2022 compared to the prior year period. Foreign currency fluctuations had an unfavorable impact of 4% on the three and six month revenue comparisons, respectively. Revenue results were primarily due to higher point-of-sale hardware and point-of-sale solutions revenue partially offset by a decrease in services revenue and self checkout hardware revenue. Hospitality revenue increased 11% and 14% for the three and six months endedJune 30, 2022 , respectively, compared to the prior year period, driven primarily by an increase in point-of-sale hardware and point-of-sale solutions revenue, as well as an increase in services and payments processing revenues. For the operations grouped as Other, revenue decreased 21% and 16% for the three and six months endedJune 30, 2022 , respectively, compared to the prior year period, primarily due to a decrease in hardware maintenance revenue in the telecommunications and technology business.
Segment Adjusted EBITDA
For the three and six months ended
Payments & Network Adjusted EBITDA increased significantly for the three and six months endedJune 30, 2022 compared to the prior year period, primarily due to additional payments processing revenue from the acquisition of Cardtronics, which occurred in the second quarter of 2021. Payments & Network Adjusted EBITDA for the three and six months endedJune 30, 2022 has been negatively impacted by higher interest rates, which increases the cost of our vault cash rental obligations. Digital Banking Adjusted EBITDA increased 2% and 3% for the three and six months endedJune 30, 2022 , respectively, compared to the prior year period, driven by an increase in recurring revenue. Self-Service Banking Adjusted EBITDA increased 1% and declined 8% for the three and six months endedJune 30, 2022 , respectively, compared to the prior year period. The increase in Adjusted EBITDA for the three months endedJune 30, 2022 compared to the prior year period was primarily due to favorable revenue mix on increased software and services revenue, partially offset by supply chain challenges and increased fuel costs which drove up component and other costs, particularly in ATM hardware, hardware maintenance and transaction services. The decline in Adjusted EBITDA for the six months endedJune 30, 2022 compared to the prior year period was primarily due to supply chain challenges and increased fuel costs. These headwinds were partially offset by an increase in recurring revenue. Retail Adjusted EBITDA declined 14% and 22% for the three and six months endedJune 30, 2022 , respectively, compared to the prior year period, primarily driven by product cost and mix, increased labor costs, and other supply chain challenges in the first half of 2022. 53
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Hospitality Adjusted EBITDA increased 18% and 16% for the three and six months endedJune 30, 2022 , respectively, compared to the prior year period, primarily driven by an increase in revenue driven by subscription and payments processing. These improvements were partially offset by supply chain challenges and increased fuel costs which drove up component and other costs, particularly in transaction services and hardware in the first half of 2022. Corporate and Other Adjusted EBITDA loss increased 10% and 25% for the three and six months endedJune 30, 2022 , respectively, compared to the prior year period, primarily due to infrastructure costs of the Cardtronics business that was acquired onJune 21, 2021 .
Financial Condition, Liquidity, and Capital Resources
Cash provided by operating activities was$118 million in the six months endedJune 30, 2022 compared to cash provided by operating activities of$310 million in the six months endedJune 30, 2021 . The decrease in cash provided by operating activities in the six months endedJune 30, 2022 was driven by lower operating earnings as well as the unfavorable movement in net working capital accounts, partially offset by cash received upon termination of interest rate swap contracts in the first and second quarters of 2022. NCR's management uses a non-GAAP measure called "free cash flow" to assess the financial performance of the Company. We define free cash flow as net cash provided by (used in) operating activities less capital expenditures for property, plant and equipment, less additions to capitalized software, plus/minus restricted cash settlement activity, plus acquisition-related items, less the impact from the initial sale of trade accounts receivables under the agreement entered into during the 3rd quarter of 2021, and plus pension contributions and settlements. We believe free cash flow information is useful for investors because it relates the operating cash flows from the Company's continuing and discontinued operations to the capital that is spent to continue and improve business operations. In particular, free cash flow indicates the amount of cash available after capital expenditures for, among other things, investments in the Company's existing businesses, strategic acquisitions, repurchases of NCR stock and repayment of debt obligations. Free cash flow does not represent the residual cash flow available for discretionary expenditures, since there may be other non-discretionary expenditures that are not deducted from the measure. Free cash flow does not have a uniform definition under GAAP, and therefore NCR's definition may differ from other companies' definitions of this measure. This non-GAAP measure should not be considered a substitute for, or superior to, cash flows from operating activities under GAAP.
The table below reconciles net cash provided by operating activities to NCR's
non-GAAP measure of free cash flow for the six months ended
Six months ended June 30
In millions 2022 2021
Net cash provided by operating activities 118$ 310 Expenditures for property, plant and equipment (32)
(30)
Additions to capitalized software (142)
(110)
Restricted cash settlement activity 37 1 Transaction costs - 55 Pension contributions 9 9 Free cash flow (non-GAAP) $ (10)$ 235 Financing activities and certain other investing activities are not included in our calculation of free cash flow. Other investing activities primarily include business acquisitions, divestitures and investments. During the six months endedJune 30, 2022 , the payments for business combinations totaled$1 million , net of cash acquired, for the cash consideration paid related to the acquisition of LibertyX completed in January of 2022 and the acquisition of Cardtronics in June of 2021. The LibertyX acquisition was completed via issuance of NCR common stock in exchange for the outstanding shares of LibertyX. During the six months endedJune 30, 2021 , the payments for business combinations was$2,464 million , mainly related to the acquisition of Cardtronics completed in the second quarter of 2021. Our financing activities include borrowings and repayments of credit facilities. During the six months endedJune 30, 2021 , in connection with the acquisition of Cardtronics, we issued new senior unsecured notes for an aggregate principal amount of$1.2 billion and amended and restated the Senior Secured Credit Facility to add an incremental term loan for$1.505 billion , of which 54 -------------------------------------------------------------------------------- Table of Contents$200 million converted into the Revolving Credit Facility. Additionally, we paid$32 million of deferred financing fees related to these transactions. Financing activities during the six months endedJune 30, 2022 also included dividends paid on the Series A preferred stock of$8 million , proceeds from employee stock plans of$14 million as well as tax withholding payments on behalf of employees for stock based awards that vested of$36 million . Financing activities during the six months endedJune 30, 2021 included dividends paid on the Series A preferred stock of$8 million , proceeds from stock employee plans of$18 million , and tax withholding payments on behalf of employees for stock based awards that vested of$25 million . Long Term Borrowings The Senior Secured Credit Facility consists of term loan facilities in an aggregate principal amount of$2.055 billion , of which$1.94 billion was outstanding as ofJune 30, 2022 . Additionally, the Senior Secured Credit Facility provides for a five-year Revolving Credit Facility with an aggregate principal amount of$1.3 billion , of which$420 million was outstanding as ofJune 30, 2022 . The Revolving Credit Facility also contains a sub-facility to be used for letters of credit, and as ofJune 30, 2022 , there were$24 million letters of credit outstanding. As ofJune 30, 2022 , we had outstanding$1.2 billion in aggregate principal balance of 5.125% senior unsecured notes due in 2029,$500 million in aggregate principal balance of 5.750% senior unsecured notes due in 2027,$650 million aggregate principal balance of 5.000% senior unsecured notes due in 2028,$500 million in aggregate principal balance of 6.125% senior unsecured notes due in 2029, and$450 million in aggregate principal balance of 5.250% senior unsecured notes due in 2030.
See Note 5, "Debt Obligations", of the Notes to Condensed Consolidated Financial Statements included in Item 1 of this Report for further information on the Senior Secured Credit Facility.
Employee Benefit Plans In 2022, we expect to make contributions of$17 million to our international pension plans,$80 million to our postemployment plan and$1 million to our postretirement plan. For additional information, refer to Note 9, "Employee Benefit Plans" of the Notes to Condensed Consolidated Financial Statements. Series A Convertible Preferred Stock As ofJune 30, 2022 , the redemption value of the Series A Preferred Stock was approximately$276 million . Holders of Series A Convertible Preferred Stock are entitled to a cumulative dividend at the rate of 5.5% per annum, payable quarterly in arrears. Beginning in the first quarter of 2020, dividends are payable in cash or in-kind at the option of the Company. During the six months endedJune 30, 2022 and 2021, the Company paid cash dividends of$8 million , respectively. The Series A Convertible Preferred Stock is convertible at the option of the holders at any time into shares of common stock at a conversion price of$30.00 per share, or a conversion rate of 33.333 shares of common stock per share of Series A Convertible Preferred Stock. As ofJune 30, 2022 andDecember 31, 2021 , the maximum number of common shares that could be required to be issued upon conversion of the outstanding shares of the Series A Convertible Preferred Stock was 9.2 million shares. Cash and Cash Equivalents Held by Foreign Subsidiaries Cash and cash equivalents held by the Company's foreign subsidiaries atJune 30, 2022 andDecember 31, 2021 were$318 million and$412 million , respectively. Under current tax laws and regulations, if cash and cash equivalents and short-term investments held outside theU.S. are distributed to theU.S. in the form of dividends or otherwise, we may be subject to additionalU.S. income taxes and foreign withholding taxes, which could be significant. Summary As ofJune 30, 2022 , our cash and cash equivalents totaled$398 million and our total debt was$5.66 billion , excluding deferred fees. As ofJune 30, 2022 , our borrowing capacity under the Revolving Credit Facility was approximately$856 million . Our ability to generate positive cash flows from operations is dependent on general economic conditions, the competitive environment in our industry, and is subject to the business and other risk factors described in Item 1A of Part I of the Company's 2021 Annual Report on Form 10-K and Item 1A of Part II of this Quarterly Report on Form 10-Q (as applicable). If we are unable to generate sufficient cash flows from operations, or otherwise comply with the terms of our credit facilities, we may be required to seek additional financing alternatives. We believe that we have sufficient liquidity based on our current cash position, cash flows from operations and existing financing to meet our expected pension, postemployment, and postretirement plan contributions, remediation payments related to environmental matters, debt servicing obligations, payments related to transformation initiatives, and in the long-term (i.e., beyondJune 30, 2023 ) to meet our material cash requirements. 55
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Material Cash Requirements from Contractual and Other Obligations
There have been no significant changes in our contractual and other commercial
obligations as described in our Form 10-K for the year ended
Critical Accounting Policies and Estimates
Critical accounting policies are those that are most important to the portrayal of our financial position and results of operations. These policies require highly subjective or complex judgments, often employing the use of estimates about the effect of matters that are inherently uncertain. Our most critical accounting estimates pertain to revenue recognition, inventory valuation, goodwill and intangible assets, pension, postretirement and postemployment benefits, environmental and legal contingencies, and income taxes, which are described in Item 7. of our 2021 Form 10-K.
New Accounting Pronouncements
See discussion in Note 1, "Basis of Presentation and Summary of Significant Accounting Policies" of the Notes to Condensed Consolidated Financial Statements for new accounting pronouncements.
Forward-Looking Statements
This quarterly report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended, pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (the "Act"). Forward-looking statements use words such as "expect," "anticipate," "outlook," "intend," "plan," "confident," "believe," "will," "should," "would," "potential," "positioning," "proposed," "objective," "could," "may," and words of similar meaning, as well as other words or expressions referencing future events, conditions or circumstances. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Act. Statements that describe or relate to NCR's plans, goals, intentions, strategies, or financial outlook, and statements that do not relate to historical or current fact, are examples of forward-looking statements. Forward-looking statements are based on our current beliefs, expectations and assumptions, which may not prove to be accurate, and involve a number of known and unknown risks and uncertainties, many of which are out of NCR's control. Forward-looking statements are not guarantees of future performance, and there are a number of important factors that could cause actual outcomes and results to differ materially from the results contemplated by such forward-looking statements, including those factors relating to: •Strategy and Technology: transforming our business model; development and introduction of new solutions; competition in the technology industry; integration of acquisitions and management of alliance activities; our multinational operations; and our strategic review announced onFebruary 8, 2022 •Business Operations: domestic and global economic and credit conditions; risks and uncertainties from the payments-related business and industry; disruptions in our data center hosting and public cloud facilities; retention and attraction of key employees; defects, errors, installation difficulties or development delays; failure of third-party suppliers; the impact of the coronavirus (COVID-19) pandemic and geopolitical and macroeconomic challenges; environmental exposures from historical and ongoing manufacturing activities; and climate change •Data Privacy & Security: impact of data protection, cybersecurity and data privacy including any related issues •Finance and Accounting: our level of indebtedness; the terms governing our indebtedness; incurrence of additional debt or similar liabilities or obligations; access or renewal of financing sources; our cash flow sufficiency to service our indebtedness; interest rate risks; the terms governing our trade receivables facility; the impact of certain changes in control relating to acceleration of our indebtedness, our obligations under other financing arrangements, or required repurchase of our senior unsecured notes; and any lowering or withdrawal of the ratings assigned to our debt securities by rating agencies; our pension liabilities; and write down of the value of certain significant assets •Law and Compliance: protection of our intellectual property; changes to our tax rates and additional income tax liabilities; uncertainties regarding regulations, lawsuits and other related matters; and changes to cryptocurrency regulations •Governance: impact of the terms of our Series A Convertible Preferred ("Series A") Stock relating to voting power, share dilution and market price of our common stock; rights, preferences and privileges of Series A stockholders compared to the rights of our common stockholders; and actions or proposals from stockholders that do not align with our business strategies or the interests of our other stockholders 56 -------------------------------------------------------------------------------- Table of Contents Additional information concerning these and other factors can be found in the Company's filings with theU.S. Securities and Exchange Commission , including the Company's most recent annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Any forward-looking statement speaks only as of the date on which it is made. The Company does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Information About NCR NCR encourages investors to visit its web site (http://www.ncr.com), which is updated regularly with financial and other important information about NCR. The contents of the Company's web site are not incorporated into this quarterly report or the Company's other filings with theU.S. Securities and Exchange Commission . 57
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