NCR Corporation
Q4 2019 Earnings Call Transcript

Published: 12 Feb 2020

[Operator:]

Please standby. Good day ladies and gentlemen, and welcome to the NCR Corporation Fourth Quarter Fiscal Year 2019 Earnings Conference Call. Please note, 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.

[Michael Nelson:]

Good afternoon and thank you for joining our fourth quarter and full year 2019 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. 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 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 February 11, 2020 and on the Investor Relations page of our website. A replay of this call will be available either today on our website ncr.com.With that, I would now like to turn the call over to Mike.

[Mike Hayford:]

Thanks Michael and thank you everyone for joining us today for our fourth quarter and full year 2019 earnings call. I will begin with a review of the fourth quarter and full year as well as provide an update on our shift to NCR becoming a software- and services-focused company with a higher level of recurring revenue. We call this NCR as-a-Service. Andre will then review our financial performance and 2020 guidance. And then Owen, Andre and I will take your questions. I'll begin on Slide 4 with some highlights from the past year.We ended the fourth quarter with momentum across our business and finished the year strong. In 2019, it was important for us to rebuild credibility with our customers around hardware delivery and service quality after a difficult 2018 and we delivered. For the year revenue increased 10% constant currency helped by strong ATM growth.In addition to a good ATM year, we experienced solid growth across all of our business lines. Excluding the revenue from ATMs, total revenue increased 6% on a constant currency basis in 2019.I'm proud of the work of our entire organization and as a team rallied around the concept of customer first. Simply stated, happy customers buy more products from NCR.We continue to work each and every day to improve customer service and satisfaction. We made notable progress over the past year prioritizing investments in our strategic growth platforms including Emerald, Aloha next-gen, digital connected services, digital banking and payment.For the year, we continued to grow our recurring revenues across all our business lines. Our recurring revenue totaled $3.145 billion in 2019, an increase of 8% on a constant currency basis over 2018. Lastly, today we introduced our full year 2020 guidance. Andre will discuss our outlook in greater detail during his comments.Now moving to Slide 5 and an overview of our full year 2019 financial performance. We generated strong sales growth for the full year with revenues exceeding $6.9 billion, up 8% on a reported basis and 10% on a constant currency basis. Adjusted EBITDA increased 11% year-over-year, while adjusted EBITDA margin expanded 40 basis points to 15.3%. Non-GAAP EPS was $2.81 per share up 7% as reported, and 14% on a constant currency basis. FX headwinds negatively impacted EPS by $0.16 during the year. Lastly, free cash flow was $275 million for the year which improved from $223 million in 2018.Let's move to Slide 6 and an update on our strategy to shift to NCR as-a-Service. The shift to a software- and services-led organization focuses on delivering bundles our recurring revenue solutions. These 24/7 solutions will provide the technology our customers need to run their stores their restaurants and the self-service banking.As we transition to NCR as-a-Service company, we are focused on the changes required in three critical areas of our organization

[Andre Fernandez:]

Thank you, Mike. I'll focus my comments on constant currency growth, which adjusts for the impact of foreign exchange.Slide 8 shows our consolidated financial results for the fourth quarter and full year 2019. As we see on the left, in the fourth quarter both revenue and non-GAAP EPS increased 6%. FX lowered non-GAAP EPS by approximately $0.04 in the fourth quarter though the negative impact of FX has moderated significantly in the second half of the year.On the right-hand side for the full year 2019, revenue increased a strong 10%, led by our banking segment and benefited from a 33% growth in ATM revenue. Even excluding ATMs, total company revenue was up a solid 6%.Full year non-GAAP EPS was $2.81, an increase of 14%, also led by our banking segment and driven by higher software and services revenue combined with improved profitability in our hardware business reversing the supply chain and capacity issues we experienced in 2018.Recall, we had a stated goal this year of reducing the operating loss in our hardware business by more than half. I'm pleased to report that we exceeded that goal and recorded only a small loss in our hardware business.Overall, we were pleased with our full year financial performance, particularly as we absorbed a number of earnings headwinds that we previewed on our third quarter call.Recall, we discussed $0.25 to $0.30 of unplanned EPS headwinds in 2019 related to three buckets

[Mike Hayford:]

Thanks Andre. In closing with Slide 18, we made significant strategic progress in 2019. And we did what we said we would

[Operator:]

Thank you. [Operator Instructions] And our first question today will come from Dan Perlin with RBC Capital Markets.

[Dan Perlin:]

Thanks. Good evening, guys. Thanks for detail on the transition. I just wanted to make sure I understood as we think about kind of what the pro forma guidance would be and what the results would be, I guess, two things. One are you planning on kind of updating it on a pro forma basis as you go along throughout the year? And then secondly, is it as simple as just saying you got $0.35 to $0.40 that you're absorbing here? I missed actually what you said was the additional $0.15 to $0.20. So if you could clarify that for me that'd be great.

[Mike Hayford:]

Yes. I mean Dan, first of all, we will -- I don't know that we'll give you a pro forma the way you just described it, but we will share is the impact like we said it last quarter showing the impact in revenue and EBITDA and EPS on a quarter-to-quarter basis that we're incurring. So as we go through the year we'll call out how much impact we have that quarter. And what we try to give you here is some headlights into the full year what our anticipated impact will be.

[Andre Fernandez:]

So, Dan this is Andre. So to clarify the $2.75 to $2.85 was the range. And then we said that that is -- that would have been $0.35 to $0.40 higher so just to put that in perspective. And then the additional $0.15 to $0.20 we just wanted to point that out as a headwind in that walk but we're offsetting that additional $0.15 to $0.20 through business growth as well as the cost savings I talked about.

[Dan Perlin:]

Okay. And then it was good to see on the banking side you guys are picking up a fair amount of business there. I was surprised quite frankly. But is that a function of -- are you doing something different in terms of bundling evolution already? I mean that seems to be the area where you've taken most of the brunt in terms of making this transition. That space seems increasingly competitive and yet you guys see continuing to win some of those deals. So any color there would be great. Thanks.

[Mike Hayford:]

Dan, I'm surprised that you're surprised. I think we've talked going back a year ago where we felt that our Series 80 in the marketplace was getting a lot of attention and a lot of demand. As you recall a year ago back in 2018, we were struggling with the supply side even though we had really strong demand. We've corrected that during 2019. And we met the market demand and that pulled through very, very strong for us as you can see by the numbers not only for the full year, but also a pretty good finish in the fourth quarter.We believe that the shift to focusing on delivering better service than what the marketplace is providing what our competitors are providing service aligned with our ATMs yields better ATM sales and so we've put money back into that channel. We put parts back into the channel. We've added resources and we've directed that team to deliver better service expiry rates than what they get from anybody else in the market.

[Dan Perlin:]

Great. Thank you, guys.

[Operator:]

Thank you. Our next question will be from Tim Willi with Wells Fargo.

[Tim Willi:]

Hey. Thanks, and good afternoon. I have three questions. The first one was just around the payment strategy. Understanding a lot of this is sort of just beginning to get rolled out. But is there any color that you could provide around your confidence in being successful here whether that be inbound client inquiries or just receptivity by sales? Or anything you could sort of point to just relative to where you were maybe six months ago nine months ago around the payment strategy?

[Mike Hayford:]

Yes. Tim so you pointed out it is -- we're still looking at some of the integrations and still on track but it's still early for us. I'll give you a couple of data points that help with a little bit of a color. So as we go up the market with Aloha Essentials we're bundling in payments as part of that. And the receptivity to that -- and we started -- we focused originally on our direct channel. So when we have access into the marketplace into the restaurants with our direct feet on The Street we're out bundling Aloha with hardware service and software and payments. We call that Aloha Essentials.And as Owen and I sit down and talk to the salespeople as they come in this year for our kickoff meeting that bundle is selling. They're very excited about having that to sell. I think it's a lot easier simpler sale than what we were doing in the past. And when we ask about payments they get no pushback that they -- so a new sale it just comes with an NCR payment product.We still have to demonstrate that we can go cross-sell and up-sell to somebody who's using a different provider which we're starting to do as you see the schedule that I outlined. And so that's in restaurants. And then in retail, we're just starting to integrate it to some of our retail products. We'll be doing that this year.We would anticipate similar where we're out installing a new product with a new client that the payment sale will be fairly straightforward. If we're out trying to displace somebody it's going to get a little more complicated, but we still feel pretty good about owning the front-end hardware and software footprint, and having the ability to go in and pitch our payment story.

[Tim Willi:]

Great. And then one more for you Mike, and then a housekeeping as well. But you've done a lot of work since you showed up I think around – you've referenced it a lot on this call around sales and people and service. Are there any types of statistics that you might have to just provide the color around the work you've done there whether that be Net Promoter Scores or employee retention or morale studies or anything that would really show where you're at in that journey around the people side of the business? Or is it just something more anecdotally that we have to reference from sort of the revenue and the generic financials of the company?

[Mike Hayford:]

Yeah. I'm just going to start with a 10% revenue increase year-over-year on a constant currency basis. And when I get a question around changing the culture, changing the focus of being more client customer service-centric how do we look at the metrics and my answer is always, they're going to eventually end up in better business success whether it's revenue or it's earnings. So we do track NPS internally. We haven't shared that externally. We have specific goals. And we still have a desire to improve that particularly in some of the business lines.The culture, we do employee surveys. We do a lot of – probably a lot more culture interaction by walking around. We've visited – I think I got to 23 different locations around the globe this year. Owen went to a lot of those with me and Deb Bronder went. Andre gets out in the field. So I think we touch both clients and our employees. And if they don't – if it doesn't end up reflecting in our sales, in our revenue, in our earnings it's all for naught. But we feel pretty good about the progress. We don't think we're done, but we've made a lot of progress in the last year and half.

[Tim Willi:]

Great. And then my housekeeping question for Andre was in your revenue guidance you referenced an expectation and decline in the ATM hardware revenue. Was that – is that number 8% to 10% decline in ATM hardware?

[Andre Fernandez:]

That's correct.

[Tim Willi:]

Okay. So if we exclude that there's probably a little bit stronger growth around the services and the software side of the business?

[Andre Fernandez:]

Yeah. And even – that's correct. And even – we used to report hardware as a segment so you could see some of the hardware to the ATM historical numbers. So even with an ATM decline of 8% to 10%, I think still compares very favorably to previous years.

[Tim Willi:]

Okay. That's all I have. Thanks very much.

[Andre Fernandez:]

Yep.

[Operator:]

Thank you. And next we'll hear from Katy Huberty with Morgan Stanley.

[Katy Huberty:]

Yes. Thank you. Good afternoon. When are you expecting to hit the NCR as-a-Service 80/60/20 targets? And Andre, should we think about 2020 as the year of the biggest headwind to revenue and earnings? Or does that headwind grow as you go into 2021?

[Mike Hayford:]

Yeah. I'll – this is Michael here. Well so we laid out our strategy to focus on a shift of revenue shift to software and service and our shift to recurring and then improvement in our EBITDA margin back on November 7 of 2018. And we said, it's a multiyear plan. We called it a five-year plan. So we would feel we're one year into that. 2019 was really the first year to get started. And when I think it's – we literally got started 2019 started to go out to the market with bundles with packages where we started shifting to recurring revenue streams and deferring revenue. And we gave those – the numbers a nice impact in 2019.So it's – we're one year into a five-year plan. I would – Andre can answer this too. But we're not – 2020, I don't believe is certainly the high watermark. I think we've got a couple of years, before we get a tailwind out of the deferrals that we've made. We look at that as when we price out each product slightly different, but we target between three to three and half year kind of catch-up. So, if you look at that over time in a couple of years these headwinds will flip to a tailwind.

[Andre Fernandez:]

Yeah. Katy, I agree with that. I think the difference – for us to go to 60% now we probably have to add about $1 billion more of recurring revenue. So I think this year is a very meaningful acceleration in 2020 versus 2019. But I think as Mike said, it's certainly not the high watermark. So – and we're moving maybe $100 million. And if you recall in the past, I think we said we had about $300 million of software licenses. So we're moving a good portion of that, but you'll likely see some acceleration of that in the future beyond 2020. We're also looking at contracting differently too.So we're also looking at some of our professional services revenue too, how can we contract differently there so we could take that on a recurring basis, which is largely or almost exclusively upfront revenue today, including looking at a portion of our hardware too. So I think you can get some acceleration, we'll have beyond 2020. And then in the future, we think the big driver of recurring revenue will not so much be shifting existing licenses, but rather the new products that we're investing in that will start to come to market here, and then selling those right out of the gate on a recurring basis.

[Katy Huberty:]

That's helpful color. Can you also address how you have evolved the commission structure to drive bundling and the transition to subscription?

[Mike Hayford:]

Yeah. I'll kind of give you a little bit, and then Owen can add some more to that. So, we actually said that last year recognizing that in our prior years, prior to 2019, our commissions were predominantly focused on in-year revenue or in-year sales and did not reward people for doing multiyear contracts and did not reward what we would call bundles or full packages of solutions. We started that shift last year. And then I can have Owen talk -- we're continuing to push that even further this year and incent those behaviors.

[Owen Sullivan:]

Yeah. What I'd add to that Katy is that as part of our whole pricing initiative last year, as we looked at the transition of license from perpetual to subscription as we looked at the bundling of Aloha Essentials, et cetera. We have done a -- put in place a pricing discipline of deal scoring that every deal goes into the deal scoring system. It shows the sales rep the competitiveness of that pricing and it shows the impact on commissions.So, we're reinforcing the incentive plan, which as Mike has said has shifted to rewarding multiyear contracts and deals. But it's also reinforced with the pricing discipline and clear path to the benefit of pricing both competitively and to our benefit. And we're starting to see really nice feedback on that.

[Katy Huberty:]

That's great. And then just one last question from me. Can you talk about the progress around the payments processing solution? Which products have you integrated that solution? Where are you seeing the most adoption? And is there any notable impact in terms of revenue in 2020?

[Mike Hayford:]

Yeah. So again, we started with -- we've got Silver, which is our small business -- small medium business product integrated with the payment. We're rolling that out into the restaurant suite to the Aloha suite both focused on quick-service as well as table-service customers and that will come out in the first and second quarter GA. So, we're starting to already sell into that -- into the marketplace. And then second half of the year, we will start attaching it to some of the retail products including Emerald, which is our next-gen cloud product in the retail marketplace.The numbers -- I would say the numbers in 2020, we'll start to see an impact. What we're really looking for is the run rate at the end of the year and what kind of adoption and pickup we get. I think Tim asked an earlier question how do we know when we go out to sell that our series around somebody wanting to kind of straight-through offering with the hardest software service, and then the payment attached is working. So, that's the metrics that we're going to watch when we go and sell, are we getting the uptick and then what is our run rate at the end of the year. The numbers in 2020 won't be dramatically impacted in terms of a $7 billion company.

[Katy Huberty:]

Thank you.

[Operator:]

And next we'll hear from Paul Coster with JPMorgan.

[Paul Coster:]

Yeah. Thank you taking the question. I'd like to focus a little bit on the first quarter commentary. I think you said that the EPS would be 12% to 14% of the year versus typical 16% to 17%. Is that also a proxy for revenue? And I just need an explanation too. I think I heard it was something to do with the transition, but I can't see why it would be concentrated in the first quarter and not -- and so that should accumulate as a service transition over the course of the year.

[Andre Fernandez:]

Yeah. Paul, it's Andre. I'll start. So we said the EPS was going to be a little bit lower than the historical linearity whereas the revenue we think will be in line. And I think why that discrepancy, and I said in my prepared remarks, there are a few reasons. One is the impact of a shift to recurring. So, that's been accelerating over the course of 2019, and we think on a quarterly basis will continue to accelerate. So that's an EPS drag if you like in the first quarter that we didn't have in the first quarter of last year. And then, I also cited the continued investment that we're making in our Hospitality business.

[Paul Coster:]

But if the acceleration is still ongoing, and it will continue through the year why wouldn't the EPS drag continue into the second third and fourth quarters?

[Andre Fernandez:]

Yeah. Well, it will be ongoing here over the course of the year.

[Paul Coster:]

Okay. As you move towards as-a-Service business model, you're going to start showing backlog and future contracted revenue. Are you in a position to do so already?

[Mike Hayford:]

Yeah. Paul, so we're -- what we're doing right now is getting a little guidance into the impact on revenue and on EBITDA and on EPS that we expect to have in 2020 based on the shift to recurring, and then we do plan to report on that. We'll start laying out more and more metrics as we go through and have a little bit more experience and have a little bit more headlight into what those things look like. And I know we've had dividend puts in terms of better backlog TCV, ARR et cetera. So we're going to look at that. We'll share a little bit more in May about what we're thinking about in terms of metrics and kind of the timing of when we would come out with those but we do anticipate we will share more metrics as we get further on this pathway.

[Paul Coster:]

Understood. I think that’s it for now. Thank you.

[Mike Hayford:]

Thanks.

[Andre Fernandez:]

Thanks.

[Operator:]

Thank you. And next we'll hear from Matt Summerville with D.A. Davidson.

[Matt Summerville:]

Thanks. A couple of questions. First Andre, I want to be clear on the fourth bucket of headwinds you encountered the $0.10 of incremental compensation related hits in the P&L. Was that incurred in the fourth quarter in its entirety? Or what's the right way to think about that?

[Andre Fernandez:]

No. It's both. I mean we have been incurring it throughout the course of the year so that it was implied in the numbers. And then obviously we had a very good fourth quarter as well. So that was really over the course of the full year.

[Matt Summerville:]

And then with respect to hardware profitability it sounds like it's hovering just shy of breakeven at this point. What sort of is the right way to think about how that evolves in 2020? Should we think about that business as being permanently in the black on a go-forward basis given the progress you made over the last year? And in the same sort of context are you contemplating any additional manufacturing outsourcing or other shifts at this point?

[Owen Sullivan:]

Matt, it's Owen. I would say that you're hovering description is about right. We expect to be in the black this year on the manufacturing. I'm not sure I'm going to permanent but that's the hope and the objective. But certainly in 2020 we think we will be in the black. We are constantly looking at the manufacturing what we refer to as the ecosystem. As you know we made a lot of changes 18 months ago. We settled through those. I think we have a pretty good grasp of the business right now. And we see -- there's always some opportunity that we will continue to evaluate including if more outsourcing makes sense then that's what we'll do. We will continue to look at where the leverage is for bringing costs down from a manufacturing standpoint.

[Matt Summerville:]

And then with respect to the $90 million of anticipated cost savings associated with the latest round of expense-related initiatives can you maybe parse that out a little bit give a little bit more granularity in terms of what the major buckets are to sort of underpin that $90 million target?

[Mike Hayford:]

Yes. And again so the $90 million we laid out and how much actually drops in 2020 so we're saying $40 million will be impacted in 2020. And so you can see that we're not this is not an action we're taking to -- this is really part of the plan to shift our organization around our strategy to become as-a-Service company. So there's a lot of moving parts behind the scenes how do we align our sales team how do we align our go-to-market. We kind of put in the context of our offerings our go-to-market and then the delivery.We know that when it comes to delivery the service that we offer the support that we have the 24/7 in terms of the product support that we have to do. So we've got a lot of things we have to change and move forward. And as part of that we know we have some things we're doing now we're going to stop spending money on and then we'll have to reallocate. So it's actually a little more complicated than just looking at specific areas.I will say the one thing we'll continue to do is look for inefficiencies as opposed to cutting up dollars that are out in the field with customers or product or delivery. So we'll look for areas that we believe we can take out inefficiencies as opposed to cutting back on customer-focused spending.

[Matt Summerville:]

Thank you, guys.

[Operator:]

And next we'll hear from Brett Huff with Stephens.

[Brett Huff:]

Good afternoon, guys. Congrats on the progress on the strategic initiatives.

[Mike Hayford:]

Thanks, Brett.

[Andre Fernandez:]

Thanks, Brett.

[Brett Huff:]

Three questions. First one is finance and banking product line. Andre, I just want to make sure that I'm doing the math right. If I take the midpoint of your 0% to 1% cost inflation there add the 1.5% of I think FX and then add the 100 basis points of shift to recurring that gets me to about 3%. And that's sort of setting aside the headwind from the slowdown in ATM hardware. But I just take that 3% that's apples-to-apples to your kind of near-term growth targets of 1% to 3%? Is that what I should be comparing that to?

[Andre Fernandez:]

Yes. That's right. Because that's -- what you just calculated would be a rough estimate of what revenue would be had we taken that revenue all upfront. And instead we're taking it over time. So that's correct.

[Brett Huff:]

Okay. I just want to make sure. That's helpful.

[Andre Fernandez:]

Yeah.

[Brett Huff:]

And then number two you talked a little bit about color -- some color Mike I think you did early on about 45 wins in digital banking and 80% Aloha sales with Essentials and things like that. Can you talk about win rates? I know we get a lot of questions on -- there's some new competitors out there some strong competitors out there in the restaurant POS, the Toast, the Micros of the world et cetera. And then also in digital banking obviously there's a whole lot of new important competitors. What can you say any other color about win rates? Or what you're hearing from clients when you're due in? Or if you're losing why you're moving sort of one field for that?

[Mike Hayford:]

Yes. So let me parse that up a little bit. So obviously in banking in total we felt really good about the year. ATMs, ATM service as a support platform had some wins outside of even selling hardware. The software in the banking side had a very strong year as well with our software stack on top ATMs and our authentic product.Digital Insight as you pointed out has some competitors in the digital banking side Digital Insight and D3 our two digital banking products. We had -- what we feel is a great 2019 in digital banking. And when I say that that's coming off of some challenging years where we were losing customers. So our focus was to stabilize the product, stabilize the customer base. We did that in 2019 and we added a number of new flags and we added a number of new contracts. So we anticipate our digital banking footprint to get back into growth mode in 2020.We actually feel pretty good about where we stand with our competitiveness in digital banking vis-à-vis some of those new entrants. So, now it's just getting back to execution where I would say three or four years ago we maybe took our eye off the ball. I think we've put that back together and feel good about the future there.Retail. Retail, we think we're actually ahead of the pack a little bit with our Emerald product. We think our hardware stack our SCO products are really solid there. And now with our Emerald software product, hardware product we're pretty excited about it. We don't see anybody out there claiming the mantle. We went to NRF. We laid out our vision our strategy for our platform our architecture with virtualization. We acquired with Zynstra as well Emerald product and I think our booth really stood out at that show.And then lastly, the restaurant space is probably the most competitive as you pointed out. It's pretty easy to ride a little restaurant product in the garage and get it back. I think it's much harder to sustain the growth. I think it's much harder to get the profitability. Our focus there and you can see our numbers have been impacted.We have a lot of competitors that are focused on market share gain and that's focused on profitability. And we've decided we're going to stand and compete and hold on to our customers, hold on to our market share start to cross-sell them and add a payment. And we're going to spend the money to maintain that position.

[Brett Huff:]

Okay. That's really helpful. And then last product one and I don't know quite how to -- I'm not sure what you kind of call this product within services, but it's sort of the value-added product that's going beyond the break/fix and kind of the monitoring within the four walls of the store. I think you've had big -- some big changes you did that for. How big is that business? And how did it fare this year? Did we start to see some of the wins and get some of those higher-margin higher value-added services contracts again?

[Mike Hayford:]

Yeah. I mean, the overall services actually did very well this year solid growth. We talked about adding clients on the ATM side the traditional break/fix side, who were not necessarily our hardware footprint. So we had a fair amount of success with that. Part of our story and actually on the retail side we had some win-back with a client who had left us so we went back in with we call it DCS, our Digital Connected Services which is the ability to manage remotely monitor information correct, a situation remotely as opposed to rolling a truck whenever we can. And then if we have to roll a truck, we actually have a little headlight into what actually needs to be fixed at the store or the bank in this case it's an ATM.So we start to get the momentum. We still -- we're going to continue to invest in that, because we think that will differentiate our footprint. We think that with the scope that we have of our feet on The Street coupled with that technology, we will have a differentiated product. And again, our growth in our sales and services is extremely important to us going forward as part of our shift to recurring both the global services and managed services as well as professional services. So, we'll continue to push that, but it's a great differentiator for us right now.

[Operator:]

And thank you. Our next question will come from Dan Kurnos with The Benchmark Company.

[Dan Kurnos:]

Okay. Good evening. I’m hopeful this is the last question, because it’s been lengthy here, I’ll try to keep it brief for you guys. Andre, you made some quick comments just about SCO's strength. Just curious. And I think Mike you just kind of talked about it a little bit. And so any color on kind of what's driving that and sort of what momentum you're seeing there?And then Mike just kind of as you continue to add here on the tuck-in side just kind of what areas you might be looking at to sort of to fill in where you need to go next?

[Mike Hayford:]

Well, I'll just hit SCO first. So 2018, we rolled out a product called SCO 6 both in the States and in Europe and we struggled with some of the capabilities. We brought that product back in the end of 2018 and then did some fixing up both on the hardware and the software around that put that back out in the market. And we had a really good 2019 across the board.So the product is out there. It's having success. It's starting to go down market. We've added the StopLift product, which is a fraud detection product, which is really what drives adoption if we can reduce the fraud on self-checkout. So I think that's helping as we go down market with the value proposition in SCO.So tuck-in on M&A, and you can kind of see what we do. We've continued to look at marketing in channels where we can improve our connection with our customers. We've done that with the hospitality channels in the state.We'll look at that globally where we can get better access, via channel. We've got some services deals. We did the pickup of the service platform in Brazil, which increases our reach down in Brazil.And then, we've done a couple of deals this year that are very software technology-focused. Last year, we did Zynstra, which is the software virtualization, hardware virtualization, that's software-driven. And we did D3 in the digital banking arena.We did a payments deal the year before, we did Southwest. So you should expect that we'll add some product tuck-ins every year. Where we have an opportunity to expand our market reach, in the channel side, we'll do that.And then, we actually think we have a pretty good service footprint around the globe. If we can pick up services in market and get some leverage, we will do that as well, because we think those deals are fairly accretive.So, you've seen us -- we don't chase a lot of deals. We stay very focused on the footprint in terms of our three industries and the geographies that we're already in market. And that's what we continue to do.

[Operator:]

And next we'll hear from Kartik Mehta with Northcoast Research.

[Kartik Mehta:]

Hey! good evening. Mike, you talked a lot about payments. I'm wondering as the salespeople for NCR going to market selling payments. What are they referring to the value-add, that NCR can provide on the payment side? And what's allowing them to win business?

[Mike Hayford:]

Yeah. Again the most experience, we've had so far as we go out with Aloha and Silver. And we're selling into businesses or either SMB or a small chain of restaurants table-service restaurants. And we actually -- we sell them the package. So we don't pull out payments.I think in the past, when we went in and sold them everything by payment. And then they had to find payments on their own for them that was, what was a half -- it made it more difficult.So again, we talked to our salespeople that were in town for the sales kickoff. And they all reported a very, very high conversion rate, when they walked in with a bundle and talked about it included payment. They don't receive pushback.So, that's the experience, we've had so far. I think as we go and look at larger customers. And competing by integrating our payment product with our point of sale, we will continue to look at ways, where we can tighten that alignment.We can help with reporting. We can help with the adjudication of the chargebacks. And make that smoother for that client. But it's all about integration. And ease of use in terms of our value prop.

[Operator:]

And that does conclude today's question-and-answer session. Mr. Mike Hayford, I would like to turn the conference back over to you for any additional or closing remarks.

[Mike Hayford:]

I just wanted to thank you everyone for joining us today, on our fourth quarter and full year 2019 earnings call. We ended up the year -- as you can probably tell we are very pleased with our performance in 2019 meeting our -- meeting and in some cases exceeding our financial goals for the year and then beginning the shift to NCR as-a-Service.We'd like to invite everybody to join us, in Atlanta on May 14, for an update on our strategic plans. Thank you again for joining us today.

[Operator:]

And again, ladies and gentlemen, that does conclude our conference for today. We thank you for your participation.