Ladies and gentlemen, good day and welcome to the NCR Corporation First Quarter Fiscal Year 2020 Earnings Conference Call. Today's conference is being recorded. At this time I would like to turn the conference over to Mr. Michael Nelson, Vice President of Investor Relations. Please go ahead, sir.

Good afternoon and thank you for joining our first quarter 2020 earnings call. Joining me on the call today are Mike Hayford, President and CEO; Owen Sullivan, COO; and Andre Fernandez, CFO. Before we get started let me remind you that our presentation and discussions will include forward-looking statements within the meaning and protection of the Private Securities Litigation Reform Act. These statements reflect our current expectations and beliefs but they're subject to risks and uncertainties that could cause actual results to differ materially from those expectations. These risks and uncertainties are described in our earnings release and our periodic filings with the SEC including our annual reports. On today's call we will also be discussing certain non-GAAP financial measures. These non-GAAP measures are described and reconciled to their GAAP counterparts in the presentation materials, our earnings release dated April 30th, 2020 and on the Investor Relations page of our website. A replay of this call will be available later today on our website ncr.com. With that I would now like to turn the call over to Mike.

Thanks Michael and thank you everyone for joining us today. I will begin with some of my views on the business including the impact from the tornado that damaged our fulfillment center near Nashville, Tennessee and the impact from the coronavirus pandemic and then an overview of first quarter performance. Andre will then review our first quarter financial numbers; and Owen, Andre, and I will take your questions. I'll begin on slide four with an overview of our current operating climate. We entered 2020 with momentum across our businesses in the first two months of the year and then the increased global spread of the coronavirus pandemic began to impact our business. Also on March 3rd, a tornado damaged our fulfillment center near Nashville, Tennessee. Our fulfillment center is operated by a third-party and together we activated a recovery plan. We shifted shipments from other facilities and created another warehouse near Nashville. Shipments are now back to normal capacity and we have caught up on the backlog by mid-April, but the outage did adversely impact our first quarter performance. In terms of the coronavirus, we have had a task force in place since January which was originally put in place to focus on China and our supply chain. We then expanded it to include business continuity around the world. In mid-March we implemented a work-from-home policy around the world for our office-based employees. We continue to have employees in the field each day supporting our clients as well as employees who work in our production and distribution centers. We have worked with government agencies around the world to ensure that NCR's offerings are designated as central business. To date we have been successful in most jurisdictions. Nevertheless, since the coronavirus pandemic expanded globally in March, we have experienced challenges with certain customer installations as well as impacts to certain customer groups. We expect the pandemic to create headwinds to our customers and our business until COVID-19 is contained, consumer confidence improves, and the economy begins to rebound. Although it's difficult to project how deep and how long the coronavirus pandemic will last, we do expect it will negatively impact our business for at least the remainder of 2020. Let me shift to a brief summary of the impacts to each of our business segments. Our banking business is primarily focused on self-service and retail banking. The availability of self-service banking is a priority across the globe. This includes installing and maintaining ATMs as well as assuring availability of our digital banking platform. All of these critical functions of our bank customers are considered as part of essential infrastructure. Within our banking segment, we experienced challenges that caused ATM shipments and installation delays, but thus far they have been largely hardware and installation services related resulting in a decline in ATM hardware revenue and corresponding margins. Overall our ATM break/fix services, which represents the largest percentage of banking segment revenue, remains solid, driven by the maintenance backlog both from our 2019 ATM sales and from large customer service contract wins last year. However, there can be no assurance that such operations will not be impacted in the future. While a limited amount of our order activity pushed at the end of the first quarter, overall orders remained solid in the quarter with minimal cancellations. In the first quarter, we also continued to have positive momentum in our digital banking platform with eight new customers signed. Within our retail segment, the food, drug and mass merchandising market, which includes grocery stores, drug stores and big box retailers, accounts for the majority of our retail segment revenue. 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. Our professional services team has worked closely with our customers to meet the shift in demand and we expect preferences towards contactless and self-checkout to continue beyond the coronavirus pandemic. However, there will be a near-term pushout in selling additional self-checkout units as many of these customers are simply too busy operating their stores and are resource-constrained as they serve their customers. We are hopeful that these delays will be brief and believe that several of our large customers will resume the installation activity later in the second half of this year. Our convenience and fuel retail customers which include gas stations and convenience stores are also considered a critical function. We are not expecting the coronavirus pandemic to have much of an impact in this market. However, customers in our department and specialty retail market and in our small and medium business markets which account for roughly 20% of our retail segment have encountered significant adverse impact in connection with the coronavirus pandemic, including temporary closures of physical stores and reduced consumer spending. We expect our hospitality segment will likely be the segment that is most impacted by the coronavirus pandemic. Within this segment, we have the quick-service restaurants which are large chains and represent the majority of our hospitality business. These customers remain busy with drive-thru and pickup services being in demand during the coronavirus pandemic. These customers are better positioned than other customers within the hospitality segment, but our business will be negatively impacted from lower new store openings and less remodeling activity during 2020. We expect our casual dining restaurants which are sit-down restaurants with more than 50 locations to experience negative impact as a result of shelter-in-place orders and social distancing practices. Although many of these customers have experienced an increase in their online ordering and take-out business we expect total revenue from this customer segment to be adversely impacted until COVID-19 is contained and customer confidence improves. Customers in our small and medium business market, mainly restaurants which represent roughly 3% of total NCR revenues, have experienced significant impact as a result of the coronavirus pandemic. We have been working closely with our customers to help them in this crisis and have enabled over 600 restaurant locations with online ordering in the hospitality business. And we are working with another 500 restaurant locations in the small and medium business market. We have also partnered with NYMBUS to support and assist small businesses impacted by COVID-19 with accessing Small Business Administration Paycheck Protection Program loans. Thus far, we have over 200 customers that have or are in the process of being funded by that program. We also continue to execute our strategy to shift our revenues to more recurring revenue streams. Until the coronavirus pandemic spread globally in March, we continued to have success with Aloha Essentials which bundled software, services, hardware and payments. During the first quarter, we added 372 incremental Aloha Essentials sites as subscription bundles. We also went live selling our payment solutions to quick service and table service restaurants as we had planned. We are working with our customers to help them manage the crisis and maintain our position as a valued supplier which we think will pay dividends long-term. We are also taking every measure we can to maintain and preserve our employee base since by doing so we believe the company will be in a stronger position once we emerge from this crisis. In an effort to maintain a stronger liquidity position, we have taken several steps to build our cash reserve to improve financial flexibility and provide a cushion to help weather the impacts of the pandemic. These steps include: suspending our share repurchase programs, limiting our M&A activity, reducing salaries from members of the leadership team and certain salaried employees, reducing our planned capital expenditures, eliminating most contractors, curtailing travel, freezing merit increases and freezing hiring, fully drawing down the remaining $630 million on our five-year $1.1 billion revolving credit facility and issuing $400 million of five-year senior unsecured notes. We have taken these actions and have built a large cash reserve to provide a cushion to address potential impact from the pandemic given the uncertainty over the depth and length of this crisis. Now moving to slide five and an overview of our first quarter performance. First, we continue to actively manage through the COVID-19 pandemic, including daily executive meetings of our executive team. Of course, we have been doing those virtually, but have continued to meet at least every day and many times twice a day to manage the changes to our business as they occur. Second, although overall revenues declined slightly due to the impact from the damage to our Nashville fulfillment center and the coronavirus pandemic, we did grow revenue in our banking segment in the first quarter. Third, we continue to increase our recurring revenue up 7% on a constant currency basis over the first quarter of last year. Fourth, our software and services revenue grew to 74% of total revenues in the first quarter, up from 68% in the first quarter of 2019. And lastly, we improved our liquidity position to prepare for the uncertainty of COVID-19. Now, moving to slide six, and an overview of our financial performance in the quarter. Consolidated revenue was $1.5 billion, down 2% as reported and down 1% on a constant currency basis. We estimate the combination of damage to our global fulfillment center in Nashville and the coronavirus have negatively impacted first quarter revenue by approximately $75 million to $80 million and was primarily impacted in the hardware and test software. However, despite the market interruption, we continued to execute our strategy to shift to recurring revenue streams with multiyear contracts. Our efforts have accelerated sequentially from last year. And in the first quarter, we shifted $19 million in revenue that previously would have been booked upfront to recurring revenues, an even higher number than we had anticipated for the quarter. Adjusted EBITDA decreased 14% year-over-year to $188 million. We estimate the combination of damage to our Nashville fulfillment center and the coronavirus negatively impacted first quarter adjusted EBITDA by approximately $20 million to $25 million. Q1 2020 non-GAAP EPS was $0.31 a share. These financial results are in line with the pre-announced expectations we released on April 7 of this year in conjunction with our bond offering. Lastly free cash outflow was $15 million for the first quarter of 2020, which improved due to improvements in working capital from the free cash outflow of $87 million during the first quarter of 2019. Free cash flow was also helped by a $25 million insurance advance we received late in the quarter from the loss of the Nashville facility. As a reminder, our historical free cash flow is typically negative early in the year. With that, let me pass the call over to Andre.

Okay. Thanks, Mike. I'll focus my comments today on constant currency growth, which adjusts for the impact of foreign exchange. So to start slide seven shows our banking segment results. As Mike mentioned, banking revenue increased 3% despite a 5% decline in ATM revenue driven by coronavirus-related border closures and logistical challenges, and despite an approximately $14 million shift of software revenue to recurring revenue. We had virtually no cancellations in the quarter related to the damage of our global fulfillment center or to COVID-19, but we did have several hardware push-outs to subsequent quarters. Stronger software and services revenue pushed total revenue higher helped by our acquisition of D3 last year in digital banking, as well as higher service revenue both on installations from last year's strong ATM sales, as well as from a number of significant service wins last year. Operating income increased driven by a favorable mix of revenue, including higher margin on our ATM sales offset by lower initial gross margin on several new service contracts as well as increased investments in service level agreements, which negatively impacted margins. Moving on now to slide eight, which shows our retail segment results. Retail revenue decreased 7% and virtually the entire revenue decline was on the hardware side both from the coronavirus, as well as damage to our global fulfillment center, which pushed revenue into Q2 and the second half, as well as a tough comparison to 2019 on account of a large customer hardware sale last year, which was already planned. Fortunately, order activity in the quarter was in line with expectations and with last year and with particular strength from several large retailers in Europe, and with little cancellation activity. The decline in hardware revenue was partially offset by higher software and services revenue, which were broad across products and geographies. Operating income was down due to several factors. First COVID-19 and the Nashville tornado impact on revenue, while primarily hardware related, had a flow-through effect to income. Next, margin was impacted by the large hardware customer sale last year that I previously mentioned, but did not repeat. Third, operating expenses while planned were up due to such factors as our December acquisition of Zynstra as well as investments in the business including payments. And finally, operating margin was negatively impacted by increased investments among several large service contracts including a low initial margin on a significant contract we won last year as well as higher dispatches. Moving on to slide nine, which shows our hospitality segment results. Hospitality revenue decreased 12% also driven primarily by lower hardware sales. Now unlike banking and retail, our hospitality segment was mostly impacted by the disruption to our Nashville facility in early March since the facility was both a warehouse and final staging area for that business. As Mike mentioned, while we were able to stand up additional facilities with the help of our logistics partner, most of the revenue drop this quarter can be attributed to this event and the shift of that revenue to the future. Although to a lesser extent, this drop was then further exacerbated by COVID-19. Similar to our other segments, we grew services revenue in the quarter on the hardware maintenance side. First quarter operating income declined due to several factors. First, the loss of the Nashville facility negatively impacted hardware and attached software margin, while COVID-related delays further impacted hardware and installation revenue and margin. Second, operating expenses increased versus last year due to increased investment in the business which we signaled at the beginning of this year in addition to higher reserves on accounts receivable as well as operating expenses from our acquisitions last year. Finally, we also signaled earlier this year the shift from perpetual to recurring revenue via our Aloha Essentials bundle also contributed to the decline in operating income. Slide 10, we provide our first quarter revenue results under our previous operating segments. Software revenue increased 3% driven by higher software license sales in banking and in retail despite the shift to recurring revenue combined with higher cloud revenue driven by our acquisition of D3. Services revenue increased 10% with growth across all segments driven by an increase in installation revenue, strong hardware sales in previous periods as well as increased recurring revenue and hardware maintenance. And finally, as I've mentioned previously, hardware revenue was the most impacted in the quarter by both the coronavirus and our Nashville facility falling 18% and with declines across all segments. ATM revenue declined 5%, while the combination of self-checkout and point-of-sale declined 29%. The latter also impacted by the tough prior year period comp in retail that I mentioned previously. Recurring revenues increased 7% driven by growth in hardware maintenance, professional services activity and cloud revenue the latter from our D3 acquisition. In addition, we were able to increase recurring revenue in our professional services business by $23 million in the quarter via contracts that are at least 12 months in length and with the majority of those in our retail segment. Recurring revenue as a percentage of total company revenue increased to 53% from 49% in Q1 2019 in part due to the lower hardware sales. On slide 11, you can see free cash flow, net debt and adjusted EBITDA metrics. First, we are pleased with our performance on the cash side as free cash outflow was $15 million for the quarter, which improved from free cash outflow of $87 million in Q1 2019 due to year-over-year improvements in working capital that offset lower earnings, higher cash interest, capital and cash taxes. Free cash flow was also helped by a $25 million insurance advance we received late in the quarter from the loss of our Nashville facility. Recall the historic linearity of our cash flows and that the first quarter is typically free cash flow negative being a low earnings quarter as well as a quarter in which we have sizable cash outflows including the payment of annual performance bonuses to employees, the company 401(k) match and company HSA contributions to employee accounts. Also recall that we have already taken a significant number of actions to preserve cash during the crisis. Slide 11 also shows our net debt to adjusted EBITDA metric with a net debt leverage ratio of 3.1 times for the first quarter of 2020, which is up slightly from 2.9 times in the fourth quarter of 2019 due to higher net debt and in line with our cash flows. Naturally our net debt to EBITDA typically increases during the first half of the year then declines in the second half of the year when we generate the majority of our free cash flow. We have a solid balance sheet with anticipated sufficient liquidity. And as a result of the debt refinancing we completed last summer, we have no significant maturities until July of 2022. And as you know at the end of March, we drew down over $600 million on our revolver. Also at quarter end, we repatriated more cash to the U.S. than we have in recent years further increasing our liquidity position. Overall, we ended the first quarter with over $1.2 billion of cash on the balance sheet. And on April 13, we successfully issued $400 million in five-year senior unsecured notes as a precautionary measure in order to increase our cash position and improve our financial flexibility in an offering that was several times oversubscribed and placed among a deep and diverse investor base. We remain within our debt covenants and ended the first quarter with credit facility leverage of approximately 3.3 times in relation to the current covenant maximum of 4.75 times. Now finally a quick word with respect to the impact from the damage to our global fulfillment center near Nashville. We maintained substantial property damage insurance for this global fulfillment center and continue to work closely with our insurance carrier and claims adjusters to ascertain the extent of the damage to our inventory. At the end of the first quarter, as will be described in our Form 10-Q, we determined that over $100 million of the inventory was a total loss and was written off with an offsetting insurance receivable recorded in other current assets in our balance sheet. We are still evaluating additional inventory as to its recoverability. As previously mentioned, in the first quarter we received a cash advance of $25 million from our insurance carrier. And just last week we received a second advance of $40 million. With that I'll turn it back to Mike for closing comments.

Thanks Andre. On Slide 12. In summary, the coronavirus pandemic is creating uncertain times. We expect the crisis will continue to impact our 2020 performance as our customer base is facing challenging times, particularly our retail and hospitality customers. However we believe the proactive actions we are taking, including taking care of our employees and helping our customers manage through the pandemic will put NCR in a stronger competitive position coming out of this crisis. We are actively managing our business through this difficult time and have identified additional levers that we could pull across the business, if they were needed to adjust to the current operating climate. We have built the cash reserve to maintain strong liquidity and increase our financial flexibility to address the uncertainties of the business. Overall, our long-term strategy remains intact and we will continue to shift our revenue mix towards more software and services and more recurring revenue streams. We believe NCR is on solid footing to weather the current crisis, help our customers survive and prosper and come out the other end in a stronger competitive position. And with that, I'm going to open it up for questions. Operator, can you open up the line?

Thank you. We will take our first question from Dan Perlin with RBC Capital Markets.

Hey, guys. This is Matthew Miller on for Dan. Can you hear me? Great. Thanks for taking the questions. I'll ask both of them upfront. First, from your end-of-March update you indicated that about 44% of your business were seeing near-term impact with logistics. Wondering if you could provide any update on that percentage and your ability to get product across borders to where it needs to be. And then my second question was as it pertains to doing business in this new virtualized world, it sounds like it hasn't really affected signing new business but you did mention some challenges with customer installations. Wondering if you could just elaborate on that point a bit more across your segments and share how those conversations have been going with your customers. Thanks.

Yes. I'm going to start and then I'll probably ask Owen to add a little color. But just you referenced our call we had on March 31, so exactly a month ago. And I'll tell you as we look at the business today a month later, we really haven't changed our view, our opinion of how our business is continuing to hold up, including some of the areas that are impacted but also areas that have been doing well. And our view of the year, our view of 2020 is very consistent today as to what it was on March 31. Our view of second quarter is quite frankly the same as well. So I think the fact that we were able to look and forecast out fairly early and take some actions — and that seems to be again at least for 30 days holding true in terms of our outlook. I think the logistics — I'll have Owen speak to the logistics. We had — it's literally what I'd call the shock wave of the coronavirus pandemic that really if you think about it hit all of us around the globe in mid-March. So almost five, six weeks ago now, where we like other companies shifted from working in the office, we shifted to work from home. We had countries around the globe, who went to shelter in place and limited movement. And I think we saw the biggest wave of that in end of March and early April. I think we're seeing now maybe even a little thawing in place-to-place where things are starting to improve. We still are — Adrian Button, who runs our manufacturing works with our suppliers to keep our plants operating and then keep our supplies coming in. He has to work every day to keep getting people to the plants getting supplies to clients. Bob Ciminera, who runs our services platform, has to get our employees out and get to locations. We had examples. We covered on one of our weekly calls with our employees where we had somebody in the Philippines, who actually took his equipment, put it on his bike and pedaled his bike to get to an ATM to make the repair. So we've had to work through those issues. We've had a lot of success with having our workers, our employees in the field and our products declared essential products in jurisdictions around the globe. So, we've continued to address those things. And if anything, I don't think they're any worse today than they were when we did that call 30 days ago. But, I'll let Owen if you want to add a little color to that?

Yes, Mike. I would say two things. One, from 30 days ago, our view of the market, the business, the customer outlook, hasn't changed. We saw order flow come through the end of the first quarter and into the second quarter. The logistics, you asked about, was a huge effort on the part of Adrian and his team. For those of you that were with us 18 months ago and talked about some of the challenges that we had within the manufacturing operations environment, we're a long way from there, and what that team has done to manage through the logistics has been significant. What I refer to as the rolling thunder across the globe of the pandemic, managing through the supply chain issues, managing through the COVID impact on various locations around the globe — they've done a great job keeping manufacturing going, keeping production going. The logistics are clearly about moving product, whether it's raw materials or finished goods across borders, and then once getting them to the customer, the logistics of customers having resources available, especially in the retail segment. Those folks are really under siege. They're incredibly active. So we've seen some push-outs. I think in the opening comments, the reference was that we didn't see cancellations, but we did see a sliding to the right due to some of these logistical challenges, both getting equipment there and then getting it installed. But again from 30 days ago, when we spoke with you at the end of March, we have not seen a shift in either mindset or intent on the part of the customer.

That's great. Thank you very much.

And we will take our next question from Tim Willi with Wells Fargo.

Hi. Thanks and good afternoon. I had a couple of questions here. First one is sort of from the financial side. Andre, could you — is there any way to think about how to delineate the COVID impact that you called out in a couple of areas around revenue and operating income versus Nashville? Just within sort of understanding that Nashville probably a little bit more temporary in nature. COVID, at least understanding what that impact is, and sort of what the journey back to recapture that would be. Great. And then, two more quick ones. So, on the bank side, obviously you've really changed the trajectory of the digital banking business over the last 24 months or so going from losing customers to now on a net basis starting to see growth. There's been a lot of talk obviously about a big shift to digital in all aspects of the consumer's life over the last month. I would assume that holds true in banks as well. And I'm just curious, if there's any color you could provide around sales discussions, pipelines, up-sell activity around the digital banking platform. Even if maybe there's a lull just because of the current environment, is there any sense on your end that that moves up in priority with banks or would bode well at some point for the pipelines and signings in that business versus what you might have thought when we kicked-off the year and everything seemed a little bit more normal?

Yes, Mike I'll take that. So, yes, I think Tim, the — so we said, $75 million to $80 million of revenue and $20 million to $25 million of EBITDA. It's about 0.75 related to COVID and 0.25 related to Nashville. And the Nashville impact, I think in my prepared remarks, were mostly impacted hospitality, because the Nashville facility was — is primarily a hospitality facility. So that's how I think about the breakdown both on revenue as well as EBITDA.

Great. And then, two more quick ones. So, on the bank side, obviously you've really changed the trajectory of the digital banking business over the last 24 months or so going from losing customers to now on a net basis starting to see growth. There's been a lot of talk obviously about a big shift to digital in all aspects of the consumer's life over the last month. I would assume that holds true in banks as well. And I'm just curious, if there's any color you could provide around sales discussions, pipelines, up-sell activity around the digital banking platform. Even if maybe there's a lull just because of the current environment, is there any sense on your end that that moves up to priority scale with banks or would bode well at some point for the pipelines and signings in that business versus what you might have thought when we kicked-off the year and everything seemed a little bit more normal?

Yes, Tim. Well, I tell you there is no question that I don't think we go back on some of these areas coming out of the COVID-19 issue whenever it ends. Things like self-service or digital banking or contactless customer experiences I think are going to be important, certainly digital banking. We've seen the volumes as some of the relief checks have been coming out from the government—the volumes on our digital banking platforms have spiked as consumers get on and look for the money. So we've seen obviously an increase in online banking usage since customers are not going to the branches. We haven't seen whether the comp volumes are going to grow long term. But if you look at within a bank, the greatest opportunity is most banks have an offering today, but not all customers are fully penetrated — I think the latest status out is about 50% penetration across the board. So we charge by the accounts. I think the greatest opportunity for us is banks having more customers sign up for online banking. We again haven't seen the complete stats for that yet. I would say as we look at it through 2020 banks spending the time and investing dollars, capital and team, I'd say if anything we'd look at that and say that might get pushed out a little bit — some of the decisions to shift or add banks to make a decision to change to a new platform. So we saw real strong momentum in the first quarter. We had some really good wins against some other named competitors. So we were very excited about the momentum in the last two years in digital banking. So we — there might be a little slowdown in adding new names this year, I think the account volumes will go up as you referenced. And certainly going forward it will be a very important product.

And we will take our next question from Matt Summerville with D.A. Davidson.

Thanks. A couple of questions. First I was wondering if you could comment — it sounded like if I heard you correctly Andre, incoming orders in retail were sort of flattish relative to the prior year. If you could provide some additional color into what you saw in banking as well as hospitality. And any comment color you can provide in terms of the pace of business in April relative to maybe how orders looked overall in the first quarter.

Owen, you want to give a little color on the order backlog that we were at the end of first quarter?

Yes. So retail has a little different flavor to it than hospitality. Clearly we saw a slowdown, a significant slowdown on the hospitality side especially in the SMB market. On the large chains we saw more of a push-out as they slowed their new store openings and remodeling activities. So hospitality clearly had between the three industries the most significant fall off momentum. On the retail side as we commented in the upfront, we saw a shift right; a lot of the self-checkout and even retail pause was more movement to the right than cancellation of activity. We actually have seen order activity be pretty steady from the retail segment albeit they're looking out more to the later in the second half of the year, as they balance the workload activity with resource requirements and I think as they continue to gauge the extent and depth of coronavirus. But as you recognize on the banking side pretty flat, and then on the retail side, we saw kind of a steady albeit down year-over-year slightly.

Thank you. And then just as a follow-up what would you have to see in your business Mike in order to sort of look at kind of round two as far as cost reductions? And has anything changed with respect to what you're targeting for 2020 versus what you reported out a month ago on your COVID-19 update call? Thank you.

Yes. Again, on where we sit today in our outlook we're — I'd say if anything accelerating the cycle time of getting information in and adjusting our outlooks and our forecast and then going through a very formal process every month. But as we do that today at the end of April we have no — I would not put any changes to where we felt we were at the end of March for the full year outlook. If anything I'd tell you the business units are probably a little more optimistic about the third quarter. And I think Owen and Andre might take some of that optimism and put a little hedge on that in terms of how we plan the year. But right now it looks — it's very consistent to what we saw 30 days ago. If things continue the way we've seen them today and the way we sounded 30 days ago the actions that we've taken to really manage our cash flow very aggressively and manage the cash spend very aggressively I think we've been in really good shape. We built that cushion — the large cash pile — really to address uncertainty. So we think now looking at each month, looking at April then looking at May and clearly looking at the second quarter, if we get to the second quarter and the second quarter plays out the way we expected it to play out and the third quarter still looks like it looks to us today, I think we'll feel pretty good about the full year. And again we're going to have negative impacts for the year. But based on what we planned and what activities are in place, I think if it executes the way it's going to we'll be in good shape. If we get to the second quarter and the depth of COVID-19 and the duration looks a little longer, I think that's when we would evaluate using some other levers to reduce some additional cost.

Mike, can I add to where the savings both on the earnings side and the cash side are? We're working that hard every day and I would say we've got even more identified than we did four weeks ago particularly on the cash side, because when you — and on the cash side particularly internationally, because you're seeing certain countries give pension relief, part of the CARES Act was payroll tax relief. So that could be replicated in other countries. We're looking at possibility of accelerating some of our potential cash tax refunds in the U.S. or internationally. So kind of as those opportunities are emerging particularly outside the U.S. to generate additional cash than we knew just a few weeks ago. We're also working a cash control approach where we're evaluating discretionary spend, capital and M&A. So all of this is part of the set of actions that we're considering to drive additional savings and cash generation.

And we will take our next question from Ian Zaffino with Oppenheimer.

Hi. Great. Thank you very much. Can we just talk about free cash flow maybe a little bit? What the plans are there? How we expect the cadence throughout the year? Maybe what revenues need to be to get to the cash flow you need to be at and we'd go from there? Thanks.

Well, I'll just give you the broad view and the strategy that we're undertaking in 2020 to get through this and then Andre can add some more color. Andre just spoke about the fact that we put a team very focused, very dedicated to managing cash flow versus managing typically taking out costs that will drive impact to earnings. And we had embarked upon a strategy the last couple of years to create more products whether we build them internally through capital expenditures or whether we do some M&A. And those are areas that clearly in 2020 we said we have to curtail our spend on M&A and we have to cut back our capital expenditures to preserve our cash. So we have a team that literally looks at wherever we're spending money, whether it's with a vendor, whether it's with a contractor — all of this discretionary spend. Things like the capital expenditures we were doing internally, the M&A, the share repurchase. And they track quarter-to-quarter how many dollars we are going to save versus where we would have spent against our original plan for the year. And then we match that against our expectations for reduction in revenues and reduction in cash flow from business impacts during 2020. Andre, I don't know if you want to add any color to what we're doing there.

Yes. Owen is leading a basic team that we call the cash control tower. So we're looking at not only cost reductions that result in cash savings, but also driving our AR like never before and have teams of people that are getting at the aging, because we've got to watch. And you saw in our prepared remarks, we had a little bit of an increase in reserves on our aged receivables. So we've got to just be on top of all of that. So we ensure that our DSO stays where it is if not improves. Same thing on the payable side, we're trying to drive in partnership with our vendors to drive terms, try to get discounts where possible. And so on both sides of working capital AR and AP and also looking at our inventory. So overall trying to make sure that our working capital is turning as quickly as possible. And then in addition to working capital and then just cost out is just driving other cash savings things like capital. Capital is going to be a big source of cash this year versus what we had planned. And then I think I mentioned some things just a few minutes ago about hopefully we get some pension relief. We've got some payroll tax relief, looking at some accelerated refunds. So we're driving cash every day. And again we don't — and also I think we're projecting cash now. We're managing cash day-to-day. So we're seeing what our daily inflows and outflows are. And we're projecting them out, trying to project them out with reasonable accuracy as far as 12 weeks out so we can see what our cash position is. So I think we feel pretty good how we're managing it and trying to ensure that the inflows match the outflows.

And we will take our next question from Dan Kurnos with The Benchmark Company.

Thanks. Good evening. Mike I know we're all probably going a little stir crazy trying to stay sane working from home. I'm just curious obviously other than the standard incentives what sales morale is in this environment, and how you're able to adapt quickly if you have to change go-to-market messaging with your guys given sort of this unique operating environment? And then just on the payment side, I know you talked about it before, but just sort of love to get a sense of based on what you're seeing now like today if you are sort of changing the way that you invest in payments, the speed you invest in it, and just sort of your thoughts on when that can start to sort of kick up when we get out of this thing.

So I'll address the payments first. Payments is obviously tied to merchant acquirers across the board and many are impacted by the reduction of payments at physical locations, i.e., restaurants. Conversely, grocery stores and big box stores are busy. Our payment business is a fairly diverse portfolio that we acquired and have grown organically, and it is attached to a broad set of clients — small merchants, restaurants, and small retailers. It will have a negative impact in 2020 given the reduction of foot traffic into restaurants and small retailers. What we're doing in payments will be similar to our approach on sales: we're taking it as an opportunity to help customers. For restaurants, we're helping them access government relief like PPP loans, enabling online ordering and working terms with them. In exchange, we bundle up more products and we've urged our salespeople to use this period to sell a whole bundle such as Aloha Essentials including payments, or to go in and provide touchless payment integrations, mobile ordering integrations tied back to the POS. We recognize that we won't drive a lot of payments volume this year, but we can sign a lot of customers for the future. On sales, our salespeople typically work remotely on the phone already, though they don't travel. We've implemented focused calling programs and asked our account teams to reach out proactively to customers. We've gotten feedback from our clients who appreciate NCR's outreach and assistance. Other vendors haven't reached out as much. So we've been actively helping customers and identifying ways to expand relationships for the future. And on a lighter note, our executive team is spending more time together virtually now than we did in the office, so they're eager to get back to the office because there's actually more frequent interaction now.

And we will take our next question from Kartik Mehta with Northcoast Research.

Hey, good evening gentlemen. Two questions. So Mike, I think or Owen you talked a little bit about banking orders and just impact on both banking and retail. I'm wondering in 2020 the negative impact you're anticipating, is that cancellation of orders? Or is that just delay of orders? And I understand the answer for each segment could be different.

Yes. I mean it really varies by segment. So I'll give a brief philosophy Kartik and then Owen can add. On the banking and ATM side, what we've seen so far in the first quarter was really the timing of implementations. We had come into the year saying with such a strong 2019, we had anticipated a little lower numbers in 2020. And then you'd see corresponding lower order numbers coming through because if you remember 2019, we had the pull-through from 2018 where we had manufacturing issues, but we had really strong sales at the back end of the year. So I'd say 2020 on the banking side it's really just banks having the time — branches aren't open and being able to install ATMs. So a little bit of that has really been impacting the ATM hardware and then maybe some of the installation service revenues. In retail, it's the big grocery stores and the big box stores that are so busy. It's like peak season for them; they just pushed things out to the right. We expect that to be there. The smaller end, small biz retailers and specialty retailers and retailers in malls — many are shut down. And so what happens and how fast they reopen and whether they spend money in capital, I think we would view some of those as maybe not necessarily timing issues, but may be more of an impact in 2020. Restaurants are similar. The large quick service restaurants are busy with drive-thru and keeping volumes going; in some cases they're doing more than 100% of normal volume because there are fewer choices to eat out. So they're quite busy — those are timing issues: ability to refresh a store, open a new store, implement a new POS. On the lower-end table service restaurants, right now they're trying to figure out how to survive. So I don't know that those will all be timing — some of those may be lost business to us for the entire year of 2020. Owen, do you have any color you want to add to that?

No. No. I think that's fair.

And we will take our next question from Brett Huff with Stephens.

Good afternoon guys. I hope you guys are all safe and healthy. Thanks for the call. First question is Mike or Andre — not sure which person is the right person to address this to. Any thoughts on April trends where you can give them to us whether that's volumes or even just sort of sales or revenue? One of the things that we found really helpful is any insight into current or most recent trends helps us model things better going forward given the quick changes that are going on. So any insights there?

Yes. In terms of transaction trends I think we talked about payments. And obviously payments are impacted depending on merchant mix, with restaurants down and grocery busy. Our payments business is still relatively small overall so we are focused on using this time to grow account relationships. We have sales plans and commission plans and our sales teams are active. Going to everyone work-from-home hasn't reduced interaction — if anything the frequency and amount of interaction between management groups has increased. I haven't heard anything alarming in terms of April versus what we had planned. We've seen order activity continue to come in. I don't have specific April revenue numbers for you on this call, but I don't think we've heard anything that would alarm us compared to the end of the first quarter.

Right. As we said at the end of March we were seeing a level of activity that suggested we were seeing more push to the right as opposed to cancellation. We did not see big cancellations. We did see a move to the right in both banking and retail. The hospitality business is more of a real-time backlog. We do a lot of sell-and-deliver within the quarter. So we've clearly seen a slowdown on the hospitality side. The retail and the banking has maintained where we saw it at the end of the first quarter. I will say interestingly enough we're seeing a lot more conversation coming from Europe right now on the retailers. As they're starting to reopen the countries they're starting to reassess and talk about wanting to be positioned to take on some of the backlog and the projects that they had in place. Those conversations are taking place and clients are qualifying them, but they want to get in position to respond if reopening continues. We're going to experience reopening on a rolling basis across the globe, and that's the change we've seen in the last 30 days. It's not negative; it's continuing to percolate.

And we will take our next question from Paul Coster with JPMorgan.

Yes, thanks for taking my question. Mike there's a little bit of a disconnect here because on the one hand listening to the narrative here it sounds actually pretty encouraging. It feels like controlled in the sense that things are moving to the right. There's a couple of scary areas that are outside of your control in hospitality and so on. But the rest of it feels quite good. And it sounds pretty encouraging really. And yet at the same time you've taken maybe — it's excess prudence — but companies move so quickly to build up cash reserves and take other actions to protect against the downside here. It sort of feels like you could easily maintain some kind of guidance here let alone sort of doing all of these other actions. So I'm just wondering how do we reconcile those two things?

Mike you might be on mute.

Sorry. Paul, just trying to give a balance to where our company is and where we have risk in our customer base and then where parts of our customer base are holding up relatively well. We are definitely going to have impacts in 2020. We went through that on our March 31st call. As we walked through the pieces of our business that were at higher risk — the small businesses both in retail and hospitality, table service restaurants, specialty department stores — we outlined what percent of our revenue stream is at risk in 2020. That's very much the same today. I think other parts of the business are continuing to be strong. And if anything we're having impacts because customers are too busy or they've got other activities going on. We're seeing that push to the right, which means pushing out of the second quarter some of the business into the second half of 2020. But that's clearly going to happen. So why did we reach out and load up on liquidity? We did that a month ago and started pursuing additional liquidity because in mid-March we began to see the global spread and we didn't know how long or how deep it would be. We watch daily the developments — whether it's U-shaped, V-shaped, W-shaped — different inputs suggest different trajectories. While I think our near-term view is consistent to what it was 30 days ago, we wanted to prudently position the company for downside scenarios. That's why we built a cash cushion — we put about $1.6 billion total of cash on the balance sheet — which we believe will help us get through even worse scenarios and leave us well positioned coming out of the back end. We believe this gives us options that other companies might not have, particularly in restaurant and retail markets where some competitors may be forced to cut back more drastically. We think our actions will allow us to support customers through the crisis and position NCR to take share as markets recover.

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

Great. Thank you. This is Kieran Kenny on for Katy. Just one question on my end. I understand visibility is incredibly limited right now, but could you comment on your expectations for the shape of the recovery? I know on the investor call last month you mentioned that we could see Q3 flat to down sequentially from Q2. It sounds like that may be a little better now. But just curious is that still your expectation? And then I know it's difficult to predict but then how much recovery if any do you expect in Q4? Thank you.

Yes. I'll answer. We don't have perfect visibility. We planned the year assuming uncertainty. We don't know if the recovery is V-shaped, U-shaped or has multiple waves. Our planning assumes that the second quarter will be challenging. For the third quarter, our business leaders are telling us third quarter looks better than second quarter but we will derisk that and plan third quarter similar to second quarter for prudence. We believe the fourth quarter will start to pick up more meaningfully as reopening continues and consumer confidence improves. Regions like Europe and parts of Asia may reopen earlier and show stronger recovery, with the U.S. potentially lagging a bit. Overall, we expect impacts to last through 2020, with the third quarter similar to the second and the fourth quarter improving versus the first half, but not fully recovering to pre-COVID levels within 2020. If there is a significant second wave, that would obviously lengthen the timeline, and we've built our liquidity to plan for such downside scenarios.

And at this time, I would like to turn the conference back to Mike Hayford for any additional or closing remarks.

Thank you. I just want to thank everyone for joining us today on our first quarter call. The coronavirus pandemic has created unique challenges for NCR, for the NCR team as well as all of our customers. We do believe the actions that we are taking to take care of our employees and take care of our customers will put NCR in a stronger competitive position coming out of this crisis. We look forward to speaking with you again at the end of the second quarter and giving you an update on our 2020 progress. Thank you.

Ladies and gentlemen, this concludes today's call. We thank you for your participation. You may now disconnect.