First Quarter Overview
The following were the significant events for the first quarter of 2020, each of
which is discussed more fully in later sections of this MD&A:
•      Revenue decreased approximately 2% from the prior year period and 1%
       excluding unfavorable foreign currency impacts;


•      Segment results negatively impacted by the COVID-19 pandemic and Nashville
       Global Fulfillment Center outage;


•      Cash and cash equivalents as of March 31, 2020 of $1.21 billion, to
       improve liquidity to help manage through the COVID-19 pandemic; and


•      Task force implemented to pro-actively manage the impact of the COVID-19
       pandemic on our employees, customers and business.

Strategic Overview

Today's consumers expect, including as the world navigates in a COVID-19 pandemic environment, businesses to provide a rich, integrated and personalized experience across all commerce channels, including online, mobile and, increasingly as consumers are able to return to a more normal operating environment, in-store. NCR is at the forefront of this shift, assisting businesses of every size in their digital transformation journeys. Our mission is to be the leading software- and services-led enterprise provider in the financial, retail and hospitality industries. In the short-term, our focus has shifted to plans to manage our business through the COVID-19 pandemic, while prioritizing the health and safety of our employees and customers, and being positioned to capitalize on market opportunities when we return to a more normal operating environment. However, we also remain focused on our long-term mission, for which we have developed a long-term growth strategy built on taking care of our customers, improving execution of new product introductions, accelerating software and services revenue growth and executing spend optimization programs. This long-term mission and our strategy to execute it are designed to position NCR to continue to drive -- in the long-term -- growth, sustainable revenue, profit and cash flow, and to improve value for all of our stakeholders.

To deliver on our short-term and long-term mission and strategy, we are focused on the following main initiatives in 2020:



•      Customer Care - Support our consumers to continue operations in a safe
       manner and enable them to transform their operations rapidly to meet
       consumer needs and emerging industry or government programs in the
       COVID-19 environment; improve the customer experience and execution of new
       product introductions;



•      Business Continuity Plans - Manage our business through the COVID-19
       pandemic by focusing on business continuity plans, reducing our planned
       capital expenditures, improving our liquidity and increasing our financial
       flexibility to position our business, in the long-term, to 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 - In the short-term,
       we plan to reduce expenditures on targeted acquisitions as we manage our
       business through the COVID-19 pandemic to enable our business, in the long
       term, to increase capital expenditures in strategic growth platforms and
       targeted acquisitions to gain solutions that drive the highest growth and
       return on investment and will accelerate our NCR-as-a-Service vision;



•      Talent and Employee Care - Implement actions to protect the health and
       safety of our employees and protect as many jobs as possible to enable us
       to retain talent, and, in the long term, to continue to develop, reward
       and retain talent with competitive recruiting, training and effective
       incentive-based compensation programs; and



•      Sales Enablement - Provide our sales force with flexibility in services
       and operations to meet customer needs through the COVID-19 pandemic; and
       provide top-performing and secure products packaged to target our desired
       revenue mix and drive customer delight, 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 impact of the COVID-19 pandemic on our workforce, operations and financial results, including the impact on our customer's businesses; manufacturing disruptions, including those caused by or related to outsourced manufacturing or disruptions in our supply chain due to the COVID-19 pandemic; strength of demand for the products we offer or will offer in the future consistent with our strategy and its



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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 services and retail industries, new tax legislation across multiple jurisdictions, modified or new global or regional trade agreements, execution of the United Kingdom's exit from the European Union, uncertainty over further potential changes in Eurozone participation and fluctuations in oil and commodity prices; the transformation of our business and shift to increased software and services revenue, as well as recurring revenue; our ability to improve execution in our sales and services organizations; our ability to successfully introduce new solutions and compete in the technology industry; cybersecurity risks and compliance with data privacy and protection requirements; the possibility of disruptions in or problems with our data center hosting facilities; the impact of the March 2020 tornadoes in the greater Nashville area on an NCR Global Fulfillment Center in Mt. Juliet, Tennessee operated by a third party, including the sufficiency and effectiveness of our or our third-party logistics partner's business continuity plans, the adequacy of our property damage and business interruption insurance coverage and our ability to recover under the applicable policies; defects or errors in our products; the impact of our indebtedness and its terms on our financial and operating activities; the historical seasonality of our sales; tax rates and tax legislation; foreign currency fluctuations; the success of our restructuring plans and cost reduction savings initiatives; the availability and success of acquisitions, divestitures and alliances; our pension strategy and underfunded pension obligations; reliance on third party suppliers; the impact of the terms of our Series A Convertible Preferred Stock; our multinational operations, including in new and emerging markets; collectability difficulties in subcontracting relationships in certain geographical markets; development and protection of intellectual property; workforce turnover and the ability to attract and retain skilled employees; uncertainties or delays associated with the transition of key business leaders; environmental exposures from our historical and ongoing manufacturing activities; and uncertainties with regard to regulations, lawsuits, claims, and other matters across various jurisdictions.

Impacts from the COVID-19 pandemic

The impact of COVID-19 has grown throughout the world, including in the United States. Governmental authorities have implemented numerous measures attempting to contain and mitigate the effects of COVID-19, including travel bans and restrictions, quarantines, shelter in place orders and shutdowns.

We have been actively monitoring the global outbreak and spread of COVID-19 and taking steps to mitigate the potential risks to us posed by its spread and related circumstances and impacts. We continue to assess and update our business continuity plan in the context of this pandemic. We have taken precautions to help keep our workforce healthy and safe, including establishing a coronavirus task force in January 2020, thermal screening procedures at our manufacturing plants and call centers and remote working arrangements for the vast majority of our back-office employees. We expect the pandemic to create headwinds to our customers and our business until COVID-19 is contained, consumer confidence improves and the economic considerations rebound. Although, it is difficult to project how deep and how long the COVID-19 pandemic will last, we do expect it will negatively impact our business for at least the remainder of 2020.

With respect to our Banking segment, we are working with local governments to make sure that these businesses are designated as essential critical infrastructure businesses. Although we experienced installation delays, we have not experienced any significant impact to our recurring services revenue stream. We believe our ATM break-fix services, which represented the largest percentage of Banking segment revenue has remained strong, although there can be no assurance that such operations will not be impacted in the future with higher costs or labor availability.

With respect to our Retail segment, the food, drug and mass merchandising market, which includes grocery stores, drug stores and big box retailers, and which represented the majority of our Retail segment revenue, is currently designated as an essential critical infrastructure business in many jurisdictions. We have realigned our resources to support our customers as they respond to changing consumer demand, particularly with regard to self-checkout and contactless checkout. However, customers in our department and specialty retail market and in our small and medium business market, which is approximately 20% of our Retail segment revenue, have encountered significant adverse impacts in connection with COVID-19 as a result of temporary closures of physical stores and reduced consumer spending.

With respect to our Hospitality segment, the quick service restaurants, which are large chains and represent the majority of the Hospitality segment revenue, have remained busy with respect to drive-through and pick up services being in demand as many in-restaurant dining options are limited by social distancing and governmental orders. However, we do expect this market to be negatively impacted from lower new stores and less remodeling activity. For table service restaurants, which are sit-down restaurants with more than 50 locations, we expect negative impacts as a result of shelter-in-place orders. Although many of these businesses have experienced an increase in online and takeout ordering, we expect this market to be negatively impacted until consumer confidence improves once COVID-19 is contained. Customers in our small and medium business market have experienced significant working capital and adverse cash flow impacts as a result of the COVID-19 pandemic, which, similar to table service restaurants, is expected to continue until COVID-19 is contained and the economy begins to rebound.



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In order to build a stronger liquidity position, we have taken steps to improve working capital and are addressing certain business impacts with spending cuts. We have taken several steps to build our cash reserve to improve our financial liquidity and flexibility and provide a cushion to help weather the impacts of the pandemic. These steps include suspending our share repurchase programs, limiting our mergers and acquisition activity, reducing salary for members of our leadership team and certain salaried employees, reducing our planned capital expenditures, eliminating most contractors, curtailing travel, freezing merit increases and hiring. Additionally, on March 24, 2020, we drew the remaining available funds of $630 million on our five-year, $1.1 billion revolving credit facility and on April 13, 2020, we issued $400 million senior unsecured notes.

The degree to which COVID-19 affects our financial results and operations will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume.

Results from Operations

For the three months ended March 31, 2020 compared to the three months ended March 31, 2019

The following table shows our results for the three months ended March 31:


                                                   Three months ended March 31
In millions                                          2020               2019
Revenue                                         $      1,503       $      1,536
Gross margin                                             397                411
Gross margin as a percentage of revenue                 26.4 %             26.8 %

Operating expenses

Selling, general and administrative expenses $ 255 $ 252


   Research and development expenses                      65                 59
Income from operations                          $         77       $        100



The following table shows our revenue by geography for the three months ended
March 31:
                                                                                          % Increase
                                                                                          (Decrease)
                                                                                           Constant
                                                                               % Increase  Currency
In millions                       2020    % of Total      2019    % of Total   (Decrease)    (1)
Americas                       $    892      59%       $    920      60%          (3)%       (2)%
Europe, Middle East and Africa
(EMEA)                              403      27%            419      27%          (4)%       (2)%
Asia Pacific (APJ)                  208      14%            197      13%           6%         7%
Consolidated revenue           $  1,503      100%      $  1,536      100%         (2)%       (1)%



The following table shows our revenue by segment for the three months ended
March 31:
                                                                                          % Increase
                                                                                          (Decrease)
                                                                                           Constant
                                                                               % Increase  Currency
In millions                       2020    % of Total      2019    % of Total   (Decrease)    (1)
Banking                        $    763      51%       $    758      49%           1%         3%
Retail                              472      31%            511      33%          (8)%       (7)%
Hospitality                         169      11%            193      13%         (12)%      (12)%
Other                                99       7%             74       5%          34%        34%
Consolidated revenue           $  1,503      100%      $  1,536      100%         (2)%       (1)%

(1) The tables above for the three months ended March 31 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



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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 March 31, 2020:

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