Good day, everyone and welcome to the NCR Corporation First Quarter Fiscal Year 2021 Earnings Conference Call. Today’s call is being recorded. And now at this time, I would like to turn the call over to Mr. Michael Nelson, Vice President of Investor Relations. Please go ahead.

Good afternoon, and thank you for joining our first quarter 2021 earnings call. Joining me on the call today are Mike Hayford, President and CEO; Owen Sullivan, COO; and Tim Oliver, CFO. Before we get started, let me remind you that our presentation and discussions will include forward-looking statements. These statements reflect our current expectations and beliefs, but they are 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 report. On today’s call, we will also be discussing certain non-GAAP financial measures. These non-GAAP measures are described and reconciled to their GAAP counterparts in the presentation materials, the press release dated April 27, 2021, 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 for our first quarter 2021 earnings call. I will begin with some of my views on the business, including an update on our shift to NCR becoming a software and services focused company with a higher level of recurring revenue. Tim will then review our financial performance and an outlook into the second quarter. And then, Owen, Tim and I will take your questions. Let’s begin on Slide 4 with some highlights from the first quarter. NCR delivered solid performance that included accelerated recurring revenue growth, significant margin expansion and strong cash flow production. Although there remains uncertainty regarding when businesses return to pre-pandemic levels in certain geographies, we are starting to experience green shoots across parts of our business. A year ago, we were facing unprecedented uncertainty over the depth and length of the pandemic. We were focused on taking care of our employees. We asked our team to stay focused on taking care of our customers. I believe that relentless focus is starting to pay dividends in improved customer satisfaction and brand loyalty. Although we still haven’t fully recovered from the crisis, we are in a much stronger position today than we were a year ago. We are building momentum in our NCR as-a-Service strategy and improving execution. First, we expanded adjusted EBITDA margin to 16.7% in the first quarter, which represents an increase of 420 basis points from the first quarter of 2020. Second, we delivered 9% recurring revenue growth in the quarter. That brings recurring revenue to 57% of total revenue. We continue to make steady progress increasing our recurring revenue which is consistent with our 80/60/20 goals. Third, we delivered strong free cash flow. We generated $98 million of free cash flow in the quarter, which represents the first time in many years that NCR has generated positive free cash flow in the first quarter of the year. And finally, we are very excited about the opportunity combined with Cardtronics. The proposed transaction will accelerate the NCR as-a-Service strategy and further shift NCR’s revenue mix to software, services and recurring revenue. We have successfully completed the financing for the transaction and remain on track to close midyear 2021, subject, of course, to regulatory and shareholder approval. Now moving to Slide 5. We have continued to progress executing our strategy and remain focused on our transition to drive NCR as-a-Service and achieve our 80/60/20 strategic goals. We have made significant progress against these goals, particularly as we accelerate margin expansion towards our 20% adjusted EBITDA margin target. In Banking, we continue to have positive momentum in our digital banking platform, with 11 new deals signed in the first quarter. We also had cross-sell success with existing clients with new products, including three business banking deals done in the quarter. Banking software continues with strong growth as we continue to shift the business to a recurring model. The first quarter saw strong growth in our end-to-end multi-vendor ATM solutions as well as continued momentum with our Digital First strategy, integrating our physical assets into our digital banking solutions. In addition, we are beginning to shift to multiyear professional service engagements that are aligned with our software projects. We are receiving increased interest in our ATM as-a-Service solution and in the first quarter, signed Arka, one of the leading retail banks in France, to a 10-year ATM as-a-Service agreement. In Retail, we are gaining traction with our NCR Emerald offering, which is our next-generation cloud-based retail point-of-sale solution. The acceleration in digital transformation is being driven by consumer demand, and retailers will need to respond. We believe this is starting to drive an upgrade cycle for retail POS software. We recently signed a new NCR Emerald deal with Berkshire’s Grocer, a Texas-based super regional grocer with more than 180 stores across three states. We are also seeing increased adoption of our self-checkout solutions. We experienced demand across customers and geographies as consumer preferences accelerate. In Hospitality, momentum of Aloha Essentials, which bundles software, services, hardware and payments continued in the first quarter. This model is proving itself in our ability to attract new customers and better service existing customers. During the first quarter, over 90% of all Aloha sites sold through our direct offices were sold as subscription bundles. Payment attach rate is also strong at roughly 85% of sales into new sites. NCR and Steak 'n Shake recently entered into an agreement for NCR to support Steak 'n Shake for over 500 restaurants globally with subscription-based point-of-sale software, hardware and end-to-end IT services in support of their restaurants. As we focus on executing our NCR as-a-Service strategy and drive the transformation of our businesses, we will strive to become an even more efficient steward of our resources. We continue to focus on taking care of our customers, advancing our product capability with investments in our strategic growth platforms and improving our productivity. With that, let me pass over to Tim.

Thank you, Mike, and thanks to all of you on the phone for tuning in today. As Mike just described, the execution of a strategy that was launched a little over two years ago is starting to be evident in both our competitive and financial results. Turning to Slide 6, which presents an overview of our first quarter financial performance. Starting on the top left, consolidated revenue was $1.54 billion, up $41 million or 3% versus the 2020 first quarter, driven by solid growth in our retail and hospitality segments. Revenue was down $87 million or 5% sequentially. Although there is still some seasonality in our business and the lumpiness that can result from major hardware orders, we are driving significantly improved linearity. This year’s Q1 sequential decline in revenue compares to an average step-down of over $300 million from Q4 to Q1 over the last four years. Importantly, our strategy to shift to recurring revenue streams again accelerated. Recurring revenue was up 9% and comprised 57% of our revenue in the quarter. In the top right, adjusted EBITDA increased $70 million or 37% year-over-year to $258 million. Adjusted EBITDA margin rate expanded 420 basis points to 16.7%. This improvement is almost ratably attributable to three things: direct cost productivity in our operations; significant cost reduction in our indirect and overhead layers; and revenue growth in the right, more profitable places. On our last call, we detailed the more permanent productivity improvements that accumulated to more than $150 million in recurring annual cost savings. While we will judiciously add cost back to businesses with particularly high growth rates, we intend to preserve the productivity we have already generated and to identify further efficiencies both in our current operations and those synergistic from acquisitions. Similar to the discussion of revenue, we are driving improved linearity in adjusted EBITDA. The flat performance from the fourth quarter of 2020 compares to an average Q1 sequential decline of roughly $90 million in the first quarters of each of the last four years. In the bottom left, non-GAAP EPS was $0.51, up $0.20 or over 65% from the prior year first quarter. The tax rate of 28.2% was higher than the 2020 Q1 tax rate of 13.5% and our full-year guidance of 26%, up in both cases due to higher income and a decrease in discrete tax benefits. And finally, and maybe most importantly, we generated $98 million of free cash flow in the quarter. This compares to a use of cash of $20 million in the first quarter of 2020 and represents the first time in many years that NCR has generated positive free cash flow in our first quarter. The $60 million decline from the fourth quarter of 2020 compares to an average Q1 sequential decline of roughly $425 million in the first quarters of the prior four years. Moving to Slide 7, which describes our banking segment results. Banking revenue decreased $7 million or 1% year-over-year, with more than all of that decline attributable to lower ATM hardware sales. Software and services revenues both increased despite the lower hardware pull-through and the shift to recurring revenue. This business extended its trend of replacing revenue that was traditionally recognized with the sale of ATM hardware with revenue streams and software and services that are more durable, predictable and valuable. Our banking sales funnel has improved to above pre-COVID levels, with close rates also starting to trend more positively. Our sales funnel mix now has a much larger and richer recurring and subscription component. Q1 2021 total contract value signed was more than twice the value from a year ago. Banking adjusted EBITDA increased $14 million or 10% year-over-year despite the lower revenue. As a result, adjusted EBITDA margin rate expanded by 210 basis points to 20.4%. On a sequential basis, revenue was down 5%, while adjusted EBITDA increased 17%, and the adjusted EBITDA margin rate expanded 380 basis points. The improved profitability both year-over-year and sequentially was driven by a favorable mix of revenue and lower expenses. The bottom of the slide shows our key metrics for the Banking segment. On the left, while the conversion of current quarter wins that Mike described will have a typical nine-month lag to conversion and eventual revenue generation, prior period wins at digital banking drove a 6% year-over-year growth rate in the first quarter. Digital banking registered users increased 13% compared to Q1 2020. And despite the decline in total banking revenue, we did grow in the right places. Recurring revenue in the Banking segment increased 8% year-over-year. Moving to Slide 8 shows our Retail segment results, which were uniformly strong. Retail revenue increased $60 million or 13% year-over-year, driven by strong self-checkout and services revenue. Retail adjusted EBITDA increased $36 million or 97% year-over-year, while adjusted EBITDA margin rate expanded by 590 basis points to 13.7%. This first quarter performance demonstrates the impact of double-digit revenue growth accompanied by cost discipline, with incremental EBITDA conversion of $0.60 on the dollar. Lower on the page, we depicted the three key metrics for retail. Self-checkout revenue increased 31% year-over-year, driven by broad-based demand, both by customer and by geography. Platform lanes increased 51% compared to the prior year first quarter. We continue to see accelerating adoption and implementation rates of our next-generation retail POS software solutions. And importantly, recurring revenue in this business increased 14% versus the first quarter of 2020. Slide 9 shows our Hospitality segment results, which returned to year-over-year growth. Hospitality revenue increased $10 million or 6% as we are beginning to see restaurants reopen, rework existing locations and expand. Our signed total contract value more than doubled from the year-ago first quarter. Our sales pipeline is getting stronger, and we are adding resources to our selling effort to catalyze this improving trend. First quarter adjusted EBITDA increased $18 million or more than tripled from the first quarter of 2020 due to higher revenue and lower operating expenses. Hospitality’s key metrics include Aloha Essential sites and recurring revenue. Aloha Essentials sites, which bundle software, services, hardware and payments into a single offering grew 61% when compared to the prior year first quarter and grew 21% sequentially. Recurring revenue in the graph at the bottom right has stabilized as the attrition rate caused by restaurant closure has abated. Recurring revenue in this business was down 1% from last year and was flat sequentially. Turning to Slide 10. We provide our first quarter results for 80/60/20 strategic targets that are now very familiar to you. We strive to generate 80% of our revenue from software and services or, described as the inverse, less than 20% of our revenue from discrete hardware sales. In the first quarter, software and services represented 72% of our revenue, which is an increase from 71% in the fourth quarter. The decline from 74% in the first quarter of 2020 was driven by higher self-checkout revenue this year. We aim for 60% of our revenue to be recurring, to drive more resilient, more predictable and more valuable revenue. Recurring revenue represented 57% of total revenue compared to 54% in the fourth quarter and 53% in the first quarter of 2020. And we aspire to a 20% adjusted EBITDA margin rate. As I’ve already emphasized, we made significant progress in this metric, with an adjusted EBITDA margin rate of 16.7% compared to 12.5% in the first quarter of 2020 and 15.8% in the fourth quarter. On Slide 11, we present free cash flow, net debt and adjusted EBITDA metrics to facilitate leverage calculations. As I described earlier, we extended the trend of strong, more linear free cash flow through the traditionally challenged first quarter of the year. Free cash flow of $98 million in this quarter compared to free cash outflow in last year’s same quarter of $20 million. Versus Q1 of 2020, all categories of inventory were down an aggregate 17%, with days on hand down 7 days operationally. Receivables were down 11%, with a nine-point improvement in those longer than 90 days, and days sales outstanding improved by nine full days. This slide also shows our net-debt-to-adjusted-EBITDA metric, with a leverage ratio of 3.2x. We ended the first quarter with $319 million of cash and remain well within our debt covenants. We ended the first quarter with credit facility leverage of approximately 3.3x, well under our debt covenant maximum of 4.6x. In anticipation of the Cardtronics transaction, we have augmented our financial position with two important debt transactions. We amended and extended our senior secured credit facility which provided an incremental $1.3 billion of new Term Loan A and issued new $1.2 billion in the eight-year senior notes. The weighted average interest of these transactions is about 3.7%, which is significantly lower than our original model. At the eventual close of the transaction, these funds will all become available, and our total leverage covenant will widen to 5.5 times to allow us to execute our plan to delever rapidly from a forecasted post-close level of 4.5 times. These borrowings are structured so that in the absence of a close, NCR would not be left with excess borrowing. We greatly appreciate the partnership and strong support from our lending group. And my last slide is Slide 12, which provides an outlook for Q2 of 2021 for NCR on a standalone basis. While the successful completion of our proposed Cardtronics transaction at midyear would complicate both your modeling efforts and our reported results, we intend to report the second quarter in our current format to facilitate that analysis. So for Q2, NCR is currently expected, relative to 2020’s results, to have revenue growth of 9% to 10%. Strengthening demand signals from our end markets and improving competitive position will both support that growth. We expect particularly strong growth in our Retail and Hospitality businesses and a growth rate in our recurring revenue streams that is similar to Q1. On profitability, we expect adjusted EBITDA margin rate to expand by 250 to 300 basis points to more than 16%. And finally, we also expect free cash flow to be similar to Q1 of 2021 as we continue to drive improved cash generation linearity. I expect our second quarter performance to be another proof point that NCR is emerging from the pandemic in a more productive, more competitive and more valuable company. With that, I will turn it back to Mike for his closing comments.

Thanks, Tim. Now turning to Slide 13. I want to provide an update on the proposed transaction with Cardtronics. Cardtronics shareholders will vote on the transaction at their shareholder meeting scheduled for May 7th. From a regulatory perspective, the Hart-Scott-Rodino waiting period expired on March 11, and the transaction is still under review in South Africa and the United Kingdom. We anticipate the transaction to close midyear, subject to shareholder and regulatory approval. We remain very excited about the transaction as the addition of Cardtronics will accelerate our NCR as-a-Service strategy and is expected to be accretive to non-GAAP EPS for the first year by 20% to 25%. It will enhance our scale and cash flow generation while advancing our 80/60/20 strategic targets by roughly two years. We believe the combination of NCR and Cardtronics will drive significant value for our customers and our shareholders. It is a unique opportunity that is both strategically consistent and financially accretive to NCR. Now turning to Slide 14. Looking forward, our key priorities are clear. First, we will continue to accelerate our NCR as-a-Service and 80/60/20 strategy. We have made notable progress and strive to build on the positive momentum. Second, we have momentum in the business and are well positioned to drive accelerated growth while improving revenue and cash flow linearity as we shift more of our revenue to a recurring revenue stream. Third, we expect the combination of a lower cost structure along with positive operating leverage will continue to drive margin expansion. Fourth, we will continue to allocate capital to the highest growth and return opportunities with the goal of driving free cash flow and increasing returns for our shareholders. And finally, we are preparing to hit the ground running and executing on the opportunities that Cardtronics will bring us once the transaction closes. That concludes our prepared remarks for today. With that, we will open up the call for questions. Thank you for your time. And operator, please open the line.

Thank you. And we will take our first question from Katy Huberty of Morgan Stanley.

Yes, thank you, a couple of questions. First, Q2 revenue guidance is strong. But if you look at it on a sequential basis, up 5% is below pre-COVID seasonality of about 8% in Q2. Is that just a function of increasing recurring revenue mix? Or is there something having to do with the timing of when you see hardware deals coming through this year? Then I have a follow-up.

Katy, this is Tim. You are exactly right. As we have gotten more linear in our revenue streams, we had a much better first quarter than would have typically happened historically when shifting from Q4 to Q1. And so the sequential growth is there, but the trend of modest sequential growth that we have talked about for the last several quarters continues into Q2. I would expect the growth in that quarter to be a little bit more hardware heavy in Q2, particularly when it comes to self-checkout and point-of-sale at the Hospitality business.

Okay. And Tim, I assume that is why EBITDA expansion is up year-over-year, but it is down sequentially in Q2, is that because of the hardware mix?

Yes. So as we sit here now, I’m not certain it will be lower. I think we did demonstrate some pretty significant growth in Q1. I do see a little bit higher cost in the second quarter, and my revenue mix is a little less advantageous in Q2. So now look, if we are able to hit the high end of that growth range, there is some opportunity that will come in the right places. But yes, for now, I would expect margin rate to be just modestly below where it was in this quarter.

Okay. And then lastly, you commented on TCV and pipeline for the Banking and Hospitality segments. Can you just comment on what you are seeing around the pipeline in retail in particular?

Yes. Go ahead, Owen.

Yes, Katy, this is Owen. The retail business is both on the software side of the house which is what is driving the total contract value. We are seeing some really good momentum there. We have talked about the refresh cycle that we were forecasting or talking about back in December. We are seeing that come to fruition. And the activity level is really strong, so the TCV number is a reflection of that. And coming along with that is the self-checkout as we convert the number of lanes that are available to us. So it is a little bit hand in glove. But what we really like—and goes back to Tim’s comment about the mix—we are getting the right mix out of the retail business, along with the others, but they are going to drive a big hardware number. They did in the first quarter. We probably will see that in the second quarter, but I think we are more energized about the software momentum there.

Okay, great. Congrats on the quarter. Thank you.

Thank you.

Thanks.

Next, we will hear from Tim Willi of Wells Fargo.

Thank you and good afternoon everybody. My first question and then a follow-up, Mike, and Tim, I think you both referenced numerous times through your comments talking about your improved competitive position. And I know that product and people has been a focus of investment since you arrived, Mike. I’m wondering if you could just sort of—is there a business line more so than others where you feel like there have been substantial improvements in your competitive position, any way to sort of think about one standout versus the other, appreciating that probably all of them are better?

Yes, Tim, thanks for the question. I would say a little bit across the board; we have been focused on all three lines of business and some very specific initiatives. I think you see a little bit in the numbers. If you start with Hospitality and what we have done in the SMB market with Aloha Essentials—and we give you those metrics—we are starting to have good success there. We are starting to have really good success in attaching payments to those bundled Aloha sales in the SMB market. The enterprise side of Hospitality is starting to pick up. A little bit of that is the challenges at the large end of the market last year. This year, we are starting to get refreshes and upgrades, and they are opening up new stores and new restaurants. Retail: we have had a number of years now reinvesting back in our Emerald cloud-based retail POS. We believe, and we are starting to see that again with the pandemic, it is driving the need to have multiple channels available and to upgrade POS to a more current architecture. So we are starting to see success in that. I want to mention that is going quite well. You are seeing some self-checkout coming out of the pandemic that drives self-service. It started with the pandemic, now it is driven by the ability to get labor and the labor cost that all of our clients are seeing, which is driving a lot of conversation around self-checkout. We have improved across the board, not only on product investment, but also on our service. Our Net Promoter Scores went up last year quite well. And as a result, in the business that we are in, when customer satisfaction improves because we do better service, we get more sales. So we are starting to see that. Then lastly, digital banking came back last year, had a good 2020, and it is continuing to show very well into 2021. So across the board—Retail, Hospitality, Banking—digital banking has had a really good start to the year.

Thank you. And then my follow-up was just on hospitality and restaurants. We hear a lot about labor shortages and people not being able to hire. I’m curious if within your product suite there are definitive revenue opportunities that are really built for this environment where you can walk into that restaurant and help them manage even if they are understaffed, whether it is checkout at the table or other products and services in the POS system that there is a real opportunity given this labor market to really get some cross-selling into the customer base around labor-type products?

Those are the two areas: the ability to pay at the table and the ability to order at the table and drive it straight through to the kitchen. Most times when you place an order at a table, you wait for the wait staff. Our system, because it is integrated with Aloha, sends orders straight through to the kitchen. If you are an Aloha client, your customers can order at a table and then you can have runners taking out drinks and food. Integrated with the front end, we put investment into our front-end online ordering system. That goes through our Business Service Platform and right through the kitchen. So you don’t have to reenter orders, which many platforms require when using third-party aggregators like Grubhub or Uber Eats. If you receive the order in the restaurant, you are reentering it into the POS; Aloha sends it straight through into the kitchen. So we have some technology in the enterprise accounts and a lot of interest in having that integration and the capability to minimize staff interactions. We think we are positioned pretty well for that trend in self-service.

Excellent. I appreciate the thoughts and all the details on the call. Thank you.

Joel Hoeffler of Stephens has our next question.

Great. I might have missed this earlier, but I was hoping if you could talk more about payment attach rates for the existing Hospitality customer base and if you were starting to win some of the acquiring business as that is coming up for renewal. And then I have a follow-up.

So when we put in new Aloha central sites, Aloha Essentials could be to a new client, a greenfield client, or it could be upgrading an existing Aloha client. In those situations, you can see the attach rates are very strong. We have gone out and started to sell into larger accounts, whether it is still SMB with 10 restaurants or a larger enterprise, and are starting to build a nice pipeline with that. I think we will start to see some of those convert into customers over time. We have actually had payments traction; Hospitality is ahead of Retail, though Retail is starting to get some momentum as well with StorePoint and Emerald. Across the board, payments are starting to get traction. I would say this on every call: payments are a long game. We are going to attach payments to our point of sale when we start a transaction. We want to complete the transaction and collect the fee for that. We will keep integrating and adding functionality that we can differentiate with the integrated POS to the merchant payment.

The only thing I would add is that Dirk and his team, as they have gone to market here, are focused on two things. They are on the path to double the number of feet on the street in the hospitality space. So when we look at our product functionality and features, we think we are very competitive. This is about a feet-on-the-street battle in the SMB market in particular, so we are on the path to double the number of salespeople. The other thing is that they have really built a strategy to lead as a payment-first approach in the SMB marketplace. In fact, what we have done is we have bundled the pricing to do a net settlement on payments. At the end of the day, we are bringing Aloha Essentials with payments to the table, and it is all on a net settlement basis against the payments volume. The message is loud and clear, and the receptivity has been strong. On Aloha Essentials, we are overachieving on attach rates and on activity versus what we had planned.

That is super helpful. I appreciate that. My follow-up question is, to the extent that you guys can, any update on how customers or partners are thinking about the Cardtronics acquisition?

We obviously can’t go to market together or jointly market Cardtronics as an offering in detail, but we do get inbound messages and calls from clients and executives. Anecdotally, the vast majority of feedback has been very positive. Some retail clients use our products and also Cardtronics; some banks have relationships with us and use network services from Cardtronics. They come to us and say, 'Together, here are some things you could do that would really help us.' Again, anecdotal so far, but the reception has been very positive.

Next, we will hear from Dan Kurnos of The Benchmark Company.

Thanks. Owen, can we just go back for a second on the Hospitality doubling feet on the street. Is there any way to parse out what you guys are seeing between existing logos that were struggling and are reopening their doors versus new logos that have cropped up? Obviously the pandemic impacted hospitality deeply. Just the conversations you are having there so we can get a sense of the trajectory. And Mike, any additional granularity on digital banking—nice uptick this quarter—how you see that trajectory improving over the balance of this year would be helpful.

On hospitality, we absorbed a lot with our customer base. The most material movement has been in hospitality. With our existing customers, we really collaborated with them to help them through the most difficult periods, such as suspending payments and stretching timelines. That loyalty has been very strong. The attrition came from those that couldn’t survive and stepped out, but the loyalty from surviving customers has been really good. The vast majority of the step-up in Aloha sites are new footprints. Some of those are existing customers who moved down the street or reopened their shop, but we are seeing a good pickup. The bundle approach—Aloha Essentials with minimal upfront capital and net settlement on payments—has made this tolerable because volume is still recovering. The pricing structure being volume-sensitive is what these new operators are looking for. So we are seeing strong performance in new footprints opening up, and customer loyalty has been strong.

On digital banking, at our Investor Day in December we described rebuilding the digital banking product set, including product features, investment and go-to-market. We aspire to get double-digit growth in digital banking over time. I don’t think that will happen in 2021, but we believe by 2023 we can approach double digits. The acquisition of D3 is paying dividends and we announced a couple of large deals: Associated Bank and Interest Bank. Both of those banks are in the $50 billion range, so some very large-scale wins. We also integrated Terrafina, which does omnichannel account opening across mobile and digital and can put it in front of ATM or ITM channels and into branches or call centers. We believe our suite addresses multichannel account opening and is competitive against other providers. The cores for some banks have legacy platforms that are not up to date on mobile, and banks are focused on digital. We believe our product is as good as anyone in the market today.

Paul Chung of JPMorgan has our next question.

Hi, thanks for taking my question. On free cash flow, very strong generation this quarter—typically usage in Q1—so anything on working capital you want to call out? It looks like payables is a bit lighter, so anything structural going on there? You are going to smooth that out across the year? Q2 looks pretty strong as well, so how do we think about Q4? Are you going to see a bump there?

Yes, we had a great quarter on receivables again, and receivables have been the story over the last several quarters. While those improvements to our processes aren’t completely institutionalized yet, they are becoming more common across the organization. We will continue to work on that. We still have too much in receivables that are longer than 90 days; we will work on that. In the quarter, our days sales outstanding are around 71 to 72 days. We have been as low as 63 or 64 days at year-end, and we'll work that down as we go through the year. On the inventory side, really great performance: typically the company ramps up inventory buys in Q1 and then draws down that inventory over the next several quarters. We are buying in a more linear fashion to be more just-in-time, and you are seeing that in our raw inventory. We finished the quarter a little higher than we would have liked on finished goods because of some shipping issues as we closed out the quarter globally. I think we will clean that up a bit going into Q2. There is every reason to believe that as the year plays out our free cash flow should continue to be in the $450 million range for the full year, which, if you play that out linearly across the year, gives a little bit better performance in each quarter as we go. We tend to have a little higher second-half free cash flow than the first, but I still expect north of $200 million of free cash flow in the first half of the year.

Okay. That is great. And then just a follow-up on Terrafina: what is the respective contribution there? What attracted you to that asset? And given the more expansive capabilities and full solution, are you seeing more interest from fintechs and community banks?

Terrafina fits our strategy of multichannel account opening. They do digital and mobile account opening and can extend that into ATM or ITM channels, branches, or call centers. It supports deposits, installment accounts, and can scale to mortgages. It is built front-office-first for the customer, which aligns with our emphasis on self-service and self-directed retail banking. It integrates well and is helping to drive sales for both Terrafina and our digital banking products.

Next, we will hear from Matt Summerville of D.A. Davidson.

Just a couple of questions. First, has your business been impacted in any way by all of the supply chain and logistical challenges that you can read about every day, whether it has to do with microprocessors or challenges with freight, etc.?

Matt, to date, we have been comfortable with our position. Over the last year, we reevaluated our supply chain and reestablished our manufacturing footprint around the globe, moving more local and creating redundancies. Over the last year, those redundancies were tested as COVID hit certain geographies like Brazil and Chennai. We were able to put the supply chain infrastructure to the test and remain confident we have what we need. We have certainly looked at microprocessor issues, but we believe we have supply chain redundancy and alternatives in place. Given current conditions, if things move in a materially worse way, we would reassess. But right now, Adrian and his team have done a very good job getting us well positioned.

You raised an important point: shipping and logistics remain a daily battle. Our team has to continuously scramble to find materials and routes. Over the last year, we have faced challenges with China and now India where the pandemic has been severe. We have been addressing these issues for over a year and our team manages these risks daily, but it remains a potential risk going forward.

And then lastly, can you talk, Tim, about the impact in the quarter on the top and bottom line with respect to the ongoing shift towards more of a recurring revenue model?

About one point of growth was cost to us this quarter, predominantly in Banking for one more quarter, but probably two thirds in Banking and a third in Retail.

We will now hear from Kartik Mehta of NCR.

Good afternoon Mike. You talked a lot about ATM as-a-Service. I’m wondering what type of financial institutions you are seeing interest from in size-wise, asset size-wise, and is it just domestic or are you seeing demand internationally as well?

We just announced a deal in Europe last week. We are seeing interest from community banks and credit unions domestically, and a bit larger institutions overseas. Over the last 18 months, we expected smaller banks and midsize banks to be the early adopters, but we have had larger banks interested in dialogue. In some cases they are interested in off-premise fleets; in other cases broader opportunities where we can bring value. We are still early stage in rolling out ATM as-a-Service and currently focusing on smaller-scale deployments. If we complete the Cardtronics merger, we would have a compelling offering and operational experience, and that capability will scale quickly.

And Mike, as you look at the Aloha offering, how do you think you are comparing in terms of competition? Are you maintaining, gaining, or losing market share? How would you characterize what is happening on that side of the business?

Aloha serves two markets and we also have a product called Silver, which is pure cloud-based. Aloha has cloud components. It is not just about being cloud-native; it is about the ability to install, support, and drive upgrades. Our products have that capability. On the enterprise side, we still believe Aloha is one of the best products out there; it continues to be validated. On the SMB side, we have rebuilt our channel and added feet on the street over the last 18 months to drive success. You can see that in our Aloha Essentials numbers. We face stronger competition in the SMB space from one competitor in particular, but customers who use our product like it. Many servers and staff know Aloha. With labor challenges and the need for systems that are easy to use, Aloha performs well. The biggest challenge is distribution and installation capacity, which we have been addressing over the last 18 months.

And we will now hear from Ian Zaffino of Oppenheimer. An analyst is on for Ian.

Hey guys, this is Mark on for Ian. On Aloha, can you give us a sense of where the attrition rate is? It seems like attrition was largely caused by restaurant closures—if so, was that the majority of the driver? If not, is there anything else driving attrition and where do you see it going forward? Thanks.

We track attrition closely. It was a bit hard to parse in 2020, especially in the SMB space, because many sites simply stopped trading or stopped connecting. It is dramatically better now and we track it quarter-to-quarter. Industry estimates suggested 25% to 30% of restaurants closed and did not reopen, but many locations have reopened or will be occupied again because demand for dining out has increased. Our goal is to win back or win new entities opening in the same locations. We think our net adds will continue to improve throughout 2021 as reopening continues.

Thank you very much.

And it appears there are no further questions at this time. I will turn the call over to Mike Hayford for any additional closing comments.

Thanks. Thanks to all of you for joining us again today. We don’t think we are fully out of the global pandemic yet; its impact varies by geography. Our colleagues in India and Brazil are still feeling the brunt of it. We do feel really good about the progress in the first quarter. In 2020, during a difficult year in the pandemic, we asked our team to stay very focused on the customer. Our goal was to help customers in a difficult year so that as we came out of it they would look at NCR as a partner and buy more from us. We believe we are starting to see that. Customers are buying our strategic investments and initiatives. The work we have been doing over the last 2.5 years is starting to pay dividends. These green shoots of success that we started to see in the first quarter give us optimism. The strategy is working, our execution is starting to come through, and that makes us feel better about 2021. Thanks for joining us today. We will see you in three months.

That does conclude today’s conference. Thank you all for your participation. You may now disconnect.