Q1 2020 Earnings Call

Ladies and gentlemen, you were currently on hold for the NCR Corporation first quarter fiscal year 2020 earnings conference call. At this time, we are someone todays against them we plan to be under we shortly we appreciate your patience on please.

[music].

Ladies and gentlemen, good day.

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 Investor Relations. Please go ahead Sir.

Good afternoon. Thank you for joining our first quarter 2020 earnings call.

On the call today like he bird President and CEO Olin Sullivan.

Oh, Yeah, Andre Fernandez CFO before we get sold.

You know presentation and discussion will include forward looking statements meeting.

Section of the private Securities Litigation Reform Act.

In terms, what our current expectations and beliefs, but there are subject to risks and uncertainties that could cause actual results could differ materially from those expectations. These risks and uncertainties or describing our earnings release and out periodic filings with the FCC, including our annual reports on today's call.

We will also be disrupting certain non-GAAP financial measures. The non-GAAP measures are described and reconciled.

Counterparts in the presentation materials, our earnings release dated April Thirtyth 2020, and on the Investor Relations page of our website a replay of this call will be available later today on our website NCR dot com with that I would now like he joined the call over to Mike.

Thanks, Michael.

Thank you everyone for joining us today.

Well again some of my views on the business, including the impact from the turning to the damage After seven center near Nashville, Tennessee, any impacts on the Corona and data.

And then an overview of first quarter performance.

I agree with every do I first quarter financial numbers and Olin Andre Nice I will take your questions.

I'll begin on slide for an overview of our current operating fine.

Sure 2020 with momentum across our businesses.

In the first two month for the year.

<unk> increased global spread across the <unk> pandemic began to impact our business.

Also on much there actually native damaged some in center here in Nashville, Tennessee.

So much better operated by third party and together, we activated having savvy plan, we shipped shipments from other facilities increased another warehouse here yeah.

Sure I now back to normal capacity and we get caught up on the backlog assignment Angel.

I would each did adversely impacted first quarter format.

In terms of the chronic virus.

Yes of course in place in January which was originally put in place to focus on China and our supply chain.

We then expanded to include business continuity around the world in mid March implement a work from home around the world for our hospice based employees.

We continue to have employees in the field each day supporting a client as well as employees looking at production and distribution centers.

We have worked with government agencies around the world to ensure that NCR offering a designated as essential business.

Today, you had been successful in most jurisdictions.

Nevertheless, [laughter] Corona virus pandemic expanding globally in March we have experienced challenges in certain customer installation as well in fact, the certain customer groups.

We expect Pandemics, Ukraine headwinds to our customers in our business until close at 19 does contain.

Consumer confidence improves any kind of made begins to be down.

It's difficult to project, how deep and how long the tone of I was identical lab you do expect it will negatively impact our business for at least the remainder of 2020.

Let me shift should be summary of the impact to each of our business segment.

I banking business is primarily focused on self service and retail banking.

Sure and availability yourself sort of thinking its entirety across the CLO.

And selling them in Haiti him as well this year and availability of like digital banking platform.

All these critical functions of our bank customers are considered as hard as essential infrastructure.

Then are thinking segment, we experienced challenges that cut ATM shipments and installation delays.

But that's far had been large, but thus far they had been largely hardware and installation services related resulting in a decline in 18 hardware revenue and corresponding margin.

Overall, our ATM break fix services, which represents the largest for some of the banking segment revenues remained solid driven by the maintenance backlog both from a 29, he need him 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.

Well a limited amount of our order activity at the end of first quarter overall orders remained solid in the quarter with minimal cancellations.

In the first quarter. We also continued to positive momentum in our digital banking platform with eight customer signings.

The thing or retail segment that food drug mass merchandising bucket, which include personally source drugstores in big box retailers accounts for the majority of our retail segment revenues.

We have realigned our resource in support of customers as they respond to changing consumer demand, particularly with regard to self checkout and contactless checkout.

I professional services team has worked closely with our customers to meet shifts in demand, we expect preferences towards cost like contactless and self checkout to continue beyond that kind of average spend Danny.

Convenience and fuel retail customers, which include gas stations and convenience or are also considered a critical function. We are not affecting the thrown it I was pendennis have much of an impact Miss marketing.

Or customers in our department and special see retail market in in our small and medium.

Since market, which accounts for roughly 20% of our retail signals.

Kind of significant adverse impacts in connection with and thrown a virus endemic including temporary closures and physical stores and reduced consumer spending.

We expect your hospitality segment will likely to get a segment that as most impacted by that from the virus pandemic within the segment. We have a quick favorite restaurants, which are large chains and represent the majority of our hospitality business. These customers remain busy with dry food and pick up services being in demand during the.

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These customers are better position than other customers within hospitality segment, but our business will be negligent packet from lower loose store openings unless remodeling activity during 2020.

We expect a cable service restaurant, which are hassan restaurants with more than 50 locations to experience negative impacts as a result of self and place orders and social distancing practices. Although many of these customers had experience and increasing their online ordering and take up business, which affect total rather than from his customers segments.

Adversely impacted until October 19th contained in customer confidence improves.

Oh summers in our small and medium business market, mainly restaurants, which represent roughly 3% of the total laughing and C.R. has experienced significant impact as a result of the Corona virus pandemic.

We are going to work closely with our customers to help them in this crisis and enabled over 600 restaurant locations with online ordering and hospitality business and we are working with another 500 restaurant locations in the small and medium business market.

We have no partnered with members to support in a small businesses impacted by by club that 19 with accessing small business administration Paycheck protection program loans.

<unk>, we have over 200 customers that have or in the process of being funded by that program.

We also continued to execute our strategy to shift or revenues to more recurring revenue streams until the curled up I was pandemic spread globally Mearns, we continue to have success with a little <unk> central which bundled software services hardware and payments.

During the first quarter, we added 372 incremental Aloha central <unk> bundles.

We also went lie they found your payment flew since the quick service on cable service restaurant as we had planned.

We are working with our customers to help and managed stupid crisis and maintain our position is evaluated supplier, which we think will pay dividends long term. We are also taking every measure we can't maintains and preserve our employee base since by doing so we believe in company will be in a stronger position once we emerge from this crisis.

In an effort to maintain a stronger position we have taken several steps to build our cash reserves to improve financial flexibility and provide a question of whether the impacts independently.

These steps include suspending our Sherry purchase programs.

Limiting our emanating activity.

Reducing salary from numbers of the leadership teens and certain salaried employees.

Reducing our plan.

Expenditures.

Eliminating most contractor.

Curtailing travel.

Freezing married increases and freeze in hiring.

Fully drawing down the remaining 630 million on our five year 1.1 billion dollar revolving credit facility.

<unk> $400 million, a five year senior unsecured notes.

We have taken his actions enter built a large catch reserved provided question to address potential impacts from the pandemic given uncertainty over the depth and like I'm just crisis.

No I'm moving to five five in an overview of our first quarter performance.

First we continue to actually managed to the club at 1910 Downing, including a daily executive meetings ever executive team of course, we have been doing those virtually Ah, but s. continued somebody at least every day and many times twice a day to manage the changes.

Our business as they occur.

Second although.

We're all Robbins declined slightly due to the impact from the damage to our national fulfillment center in the current a pandemic.

We did grow rubbing it in our banking segment in the first quarter.

Third we continue to increase a recurring revenue.

Up 7% on a constant currency basis over first quarter of last year for our software and services revenue group is 74% of total revenues in the first quarter up from 68% in the first quarter of 2019.

Lastly, we improved put any position to prepare for the uncertainty of covert 19.

Now moving to five six in an overview of other financial performance in the corridor.

Consolidated revenue was 1.5 billion dollar down 2% as reported in down 1% on a constant currency basis.

We estimate the combination of damage to our global fulfillment center in Nashville, and the Corona virus negatively impacted first quarter revenue, but approximately 70 580 million dollar.

It was primarily impacted in his hardware to test software.

However, the price of marketing interruption, we continue to execute a strategy to shifting recurring revenue streams with Mama your contract our efforts have accelerated to see <unk> sequentially from last year and then the first quarter, we shifted $90 million and revenue that previously would've been book up front two recurring revenue.

<unk>.

And even higher now than we had anticipated for the quarter.

Adjusted EBITDA decreed, 14% a year over year to $188 million.

Estimate the combination of damage to our Nashville fulfillment center and the current of marriage negatively impacted first quarter adjusted either by approximately $20 million to $25 million.

Q on 2029, getting P.S. was 31 cents a share.

Financial results are in line with the for you know expectations, we released.

On April 7th of this year in conjunction with our bond offering.

Lastly, free cash flow pre cast out flow with 15 million for the first quarter, 2020, which improved good which improved due to improvements and working capital from the free cash outflow of $87 million trying to first quarter of 2019.

Free cash flow was also how high is 25 million dollar instruments. The band we receive late in the quarter from the lots of the Nashville facility.

As a reminder are a strip of free cash flow is typically negative early in the year.

With Fat, let me pass the color to Andre.

Okay. That's my.

I'll focus my comments today on constant currency growth worked for jobs for the impact of farm strange.

<unk> seven Showboat banking segment results.

My grandson banking rubbing your increase to 3% despite 5% decline in H.T.M. revenue.

<unk> logistical challenges on the spot approximately $14 million <unk> software robbing you to recalling wherever they don't.

We are virtually no cancellations in a quarter related to the damage of all global fulfillment center or to call that 19, but we didn't have several hardware of course drops to subsequent quarters.

Stronger software and services rubbing your course total running were higher help choir acquisition of D., three last year and digital banking.

<unk> service revenue both on installations on last year, a strong A.T. I'm sales as well ours from a number of significance syllabus win last year.

Operating income increased driven by favorable mixer revenue, including higher margin on our H.T.M. sales offset by lower initial gross margin on several new service contracts World increased investment in service level agreements, what's negatively impacted margin.

<unk>, which shows all retail second results.

Retail rubbing your decrease 7% and Bertoldi Empire revenue decline was on the hardware sod boats on the corolla virus as well as down at the store Global Filming center, what's portrayed revenue into two two and stuff from half.

As well as the top and pilots into 2019 on account of a large cost them or hardware store last year was already planned.

Fortunately order activity in the quarter wouldn't in line with expectations and would last year and what particular sprang from several large retailers in Europe and with little cancellation activity.

The the calling and hardware revenue was partially offset by higher software and services revenue, what's where broader across products and geography is.

Operating income with down due to several factors.

First covert 19 in Nashville tornado impact on revenue, while primarily hardware related how to blow through a practical income.

Next margin was impacted by the large hardware costs for Marcel last year that I previously mentioned that they're not recruit.

So the operating expenses while plan, we're off due to start stop yours as our December acquisition of scroll as well as investments in the business including payments.

And finally operating margin with negatively impacted by increased investments among several large service contracts, including a lower missile margin on a significant contract with one last year as well as hard as bachelors.

Well, we have applied nine which shows or hospitality second results.

Fatality revenue decrease 12% also driven primarily by lower hardware sales.

No online banking and retail or hospitality segment was most impacted bothered disrupts into our Nashville facility in early March since the facility with both a warehouse and final staging area for that business.

As might mention while we were able to stand up additional facilities with the help of all logistics partner most of the revenue drop this quarter can be attributed to this event and the shift of that rather than here to the future.

Although to a lesser extent that's drop was then further exacerbated by covert 19.

Similar to our other segments, we grew services rather than in the corner on the hardware maintenance.

First quarter operating income declined due to several factors.

First the loss of the Nashville facility negatively impacted hardware and attach software margin, while coded related to ways further impacted hardware and installation rubbing your margin.

Stockton operating expenses increase versus.

Versus last year due to increased investment on a business with weak signal the beginning of this year.

Since a higher reserved on accounts receivable as <unk> operating expenses from a acquisitions last year.

Finally, we also signal earlier this year the ship from prepared for all to recurring revenue would be our Aloha Central's bundle also contributed to the decline and operating income.

<unk>, we provide our first quarter rubbing your results under our previous operating segments.

Software revenue increase 3% driven bar Harbor software lights on sale in banking and retail despite the ship for recurring revenue.

Bond with higher cloud revenue driven by our acquisition update three.

So this is revenue increase term presented with broke across all segments driven by an increase m. installation revenue strong hardware sales in previous periods.

Increased recording rather than you and hardware maintenance.

And probably more as I mentioned previously hardware rubbing your was the most popular in the quarter by both the current a virus and our Nashville facility, following 18% and what the coupons across all segments.

T I'm running your declined 5%, while the combination of self truck out and point of sale declined 29%. The water also impacted by the tough par you're period calm and retail that I mentioned previously.

Recording rather than yours increase 7% driven by growth in hardware maintenance professional services activity and cloud revenue the water from our D. three acquisition.

In addition, we were able to increase recurring revenue in our professional services business by $23 million in a quarter via contracts that are at least 12 months in life and where the majority of those in our retail segment.

Recurring revenue as a percentage of total company revenue increase to 53% from 49% into one 2019 in part due to the lower hardware sales.

Onslaught 11, you can see free cash flow met that and a drop it either got metrics.

First we are pleased with our performance on the cash side, that's free cash outflow, what's $15 million for the quarter, which improved from free pass outlaw $87 billion into 120 19 geared to your over your improvements in working capital offset load on names hard task interest.

Capital attached office.

Free cash flow was also helped by 25 million dollar insurance events, we receive late in the quarter from the loss of our natural facility.

Recall, the historical reality of our cash flows and not the first quarter is typically free cash flow negative being a low running quarter as well as a quarter and what we have sizable <unk> outflows, including the payment of annual performance bonuses to employees. The company for one to match uncomfortable H. I say contributions to employees.

Accounts.

Also recall that we have already taken a significant number of options to preserve passed during the crisis.

Bought 11 also shows on that get to adjusted either got metric within that that 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 along with our customers.

Naturally are not that the either 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 got refinancing we completed last summer we have no significant maturities until July 2022.

And as you know at the end of March we drew down over $600 million on a revolver.

Also a quarter end, we repatriated more attached to the U.S. then we have in recent years.

Present, a lot of liquidity position.

Overall, we ended the first quarter with over 1.2 billion dollar to pass on the balance sheet.

And on April 13th we successfully issue $400 million in five years senior on secured knows.

Precautionary measure in order to increase our cash position and improve our financial flexibility in an offering that with several times oversubscribed and placed I'm on a deep of diverse investor those.

We remain within our dot covenants, but ended the first quarter, what credit facility leverage of approximately 3.3 times in relation to the current covenant maximum of 4.75 times.

They'll finally, a quick word with respect to the impact from the damage to our global for someone center near Nashville.

We maintain substantial property damage insurance, but it's horrible performance center and continue to work closely with our insurance carrier and claims adjuster to ascertain expanded the damage to our inventory.

At the end of the first quarter.

They described in our form tend to we determined that over $100 million it'd be inventory with a total loss and was written off within offsetting insurance receivable recorded in other current assets in our balance sheet.

We're still evaluating additional inventory as to its recoverability.

I've previously mentioned in the first quarter, we receive the cash advance at $25 million from our insurance carrier and just last week, we received a second events $40 million.

What's that all trying to got the Mike for causing problems.

Thanks Andre.

So in summary in front of ours pandemic, it's pretty fun fit in time.

We expect a crisis will continue to in fact, there 2020, performing as our customer base is facing challenging times, particularly our retail and hospitality customers.

However, we believe proactive actions we are facing.

Including taking care of employees.

Jumping our customers managed to the endemic we'll put into here and and stronger competitive positioning coming out of this crisis.

We are actually managing our business through difficult times in it.

Genocide additional drivers that we could pull cross the business if <unk>, if if they were needed to adjust.

To the current operating climate.

We ability cash reserve true maintain strongest entity increase our financial flexibility to address the uncertainties under business.

Overall, our long term strategy remains intact, and we will continue to shift revenue mixed towards more software and services.

More recurring revenue streams, we easily and shares on solid footing to whether the current crisis How's our customers survive and press prosper in coming up the other end and it's stronger competitive position.

And with that.

I'm going to.

Up for questions I've rates and you open up the line.

[noise] you.

If you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off kind of like you're supposed to return like meant.

It is to start wonder if he would like to ask a question.

And we will take our first question from Dan Carlin with our B.C. capital markets.

Yeah, that's not similar onto them.

Oh really oh.

Oh right Yep right creates a picnic wasn't all that both of them. Upon first from the end them. Your end of March update you indicated that about 44% of your business.

Sitting near term impact would put lipstick.

I'm wondering if you could provide an update on that percentage and your ability bit product across borders to where it needs to be.

And then my second question was as it pertains to doing business Virtualized world. It sounds like it hasn't really affected finding the business you did not come from traveling through with customer relations.

You can just elaborate on that point a bit more across you were pregnant.

Although conversation pepper going with your customers. Thanks.

Yeah.

Yeah, [laughter], sorry, and and then I'll probably.

Oh and to animal color, but just you know you referenced a holiday you had <unk>.

31st so that's actually a month ago and.

As we look at the business today a month later, we we really haven't changed our view our opinion of how our business of continuing to hold up you know, including familiar areas that are in Texas invest also areas that as we identified.

Had been have been doing while in our view of the year of you know 20 funny.

It's very consistent today as to whether it was mikes 31st our views second quarter is a is quite frankly, the same as well. So I think the fact that we we are able to to looking for cats, so fairly early and take some actions and that seems to be.

Oh and then it's only for 30 days holding two incomes are outlook I think the logistics I'll have own stinks logistics you know we had it's literally I I'd call. It the shock wave of the clone a virus pandemic that really if you think about it hits all of the around the globe in a in mid March.

So almost five six weeks ago now where.

We like another company shifted from looking 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 wage with that and and and dimensions 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 are.

Around our our manufacturing.

In our suppliers keep our plans operating a super supplied from you mean, he has to work everyday.

To keep getting you know getting people to the plants getting supplies the plan.

<unk> services platform has to get our employees out and get two locations. We had examples of uncovered on one of our we can cause with their employees. When we had somebody in the Philippines, who actually.

His equipment, putting on a bike and to have sex again.

And to make the repair so we'd have to work through those issues that a lot of success with.

Having hire workers our employees in the field in our products declared essential products in in jurisdictions around the globe. So we've continued to.

Addressing things and.

If anything else I don't think of any worse.

And we did that call 30 days ago, but I'll I'll look I wonder if you want to add a little color to that.

Yeah.

I I would say two pence, one from 30 days ago, our view of the market those the customer outlook hasn't changed.

We saw order flow come through the than the first quarter and into the second quarter.

Because you asked about huge effort on the part of Adrian and his team for those of you that or whether it be 18 months ago 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.

The logistics and when I refer to the rolling Thunder across the globe pandemic managing through the supply train their shoes managing through the covert impact on various locations around the globe they'd done a great job keeping manufacturing go going keeping production going the logistics are clear.

Only about moving product words raw materials, we're finished goods across borders and then once giving them to the customer. So we'll just picks up customers, having resources available, especially in the.

Retail segment those folks are really understand you use there.

Way active so we've seen some pushouts I think in the.

Comments, the reference was that we didn't do cancellations, but we do see a sliding to the right due to some of the logistical challenges both getting equipment, there and then getting installed but again in 30 days ago. When we spoke with you at the end of March we have not seen any shift and either.

Ones that or intent on the part of the customer.

Oh.

That's great. Thank you very much.

<unk>.

We will take on next question from Tim really with Wells Fargo.

Hi, Thanks sounds good afternoon, I had a couple of questions here first one sort of from the financial side <unk> is there any way to think about how to go 28 coded impact when you called out in a couple of the areas around revenue in operating income versus Nashville. This one we can sort of.

I understand that Nashville, probably a little bit more.

I guess temporary nature Kobe at at least understanding what that impacted since sort of what the journey back trip to recapture that would be.

Yeah, Mike I'll take that so yeah, I think tend to be it's always at 75 to 80 or who Avenue and 20 to 25 of either that it's about three quarters related to covert.

And a quarter related to Nashville, and the and the Nashville impact that thinking my prepared remarks were most mostly impacted hospitality because the natural facility was a is primarily hospitality facilities. So so that's how I think about the breakdown both on revenue as well.

Great and then two more quick one so you're on the bank side I, obviously, you really changed the trajectory of the digital banking business.

I asked you know 24 months her so.

Going from you know I guess, losing customers now on that basis, no starting to see gross.

There's been a lot of talk obviously about a big shift.

Oh, and all aspects of the consumers life over at the last month I would assume that holds true and banks as well and I'm just curious.

You know records in color and you could provide around sales discussions.

Type lines up so activity.

Around the digital banking platform, even if maybe there's a law just because of the current environment is there any sense on your end with that move up the priority scale with banks <unk> well at some point.

Pipelines and signings in that business versus what you might have thought when we kick off a year and everything seemed a little bit more normal.

Yeah.

Value there there's no question that you.

<unk> you go back and some of these and some of these areas that coming out of the.

1980, whenever whenever it ends things like self service or digital thinking you know or or self service and you know retailer or a touch themselves and it's going to be important certainly digital banking, we've seen the volumes as some of the relief sexism in coming out from the government the volume.

<unk> I don't know if you read about stuff. It's designed for all all online banking platforms, such as as consumers as users get on and look for for the money. So we've seen I'm see <unk> and that's one of the branches right. So they're going using online banking, we didn't seem to be combined.

But if you look at within a bank degree to San Francisco needs. Most things have an offering today not oh customers into latest status I was it 50 per cent penetrated across the board. So we we <unk> accounts and I think the greatest opportunity for US is a big selling more customers sign up for online banking again haven't seen the stats for that yet.

I would say as well as we look at a food funny funny fig.

Spending the time, you're missing dollar capital and team I'd say, if anything we look at them say that it might get pushed out a little bit some of the decision to shift or add no. Thanks make a decision to change to new platform. So he's a real strong mentioned when the first quarter when it's really good wins against them.

Under named competitors. So we were very excited about you said the men from the last two years in the in digital making so we there might be a little floating around in the attic new names this year.

Nine will go up as you reference and certainly went forward it will be very important product.

I'll take our next question from that summer.

Mixing.

So cool combed questions first I was wondering if you could probably just.

If I heard you credit boundary implemented orders and retail we're sort of widest relative to the prior year. If you could provide some additional color into what you saw it embedded team as well as hospitality and any comments color you can provide in terms of a page of business in in April relative to maybe.

Oh, you know orders looked over on the fourth quarter.

On you want to do want to give a little color on the on the order order backlog that we were yeah <unk>.

Yeah. So detail, we <unk> has a little different flavor to it than hospitality clearly we saw a.

Slowed down this could slow down on the hospitality side, especially miss the market on.

Large chains, we saw a more of a push out as base slow there needs store openings and remodeling activities. So hospitality clearly had between the three industry. The most significant follow up momentum on the retail side as we commented in the.

Upfront, we saw ice shift right a lot of those self checkout and they've been retail pause was more movement to the right that cancellation of activity. We actually have seen work order activity couldn't study from the retail segment, albeit.

They're looking though more to the second later in the second half of the year as they balance the the work load activity with resource requirements and I think they continued to gauge the expense in depth of Corona, but as you recognize on the banking inside pretty flat.

And then on the retail side, you know, we saw that kind of a study, albeit down year over year slightly.

Thank you and I'm just is a follow up what would you have to see in your business bike in order to sort of look at kind of too as far as cost reduction.

Everything changed Clippers, but to what you're targeting for 2020 versus what you record it out a month ago undercoat them like put up they call. Thank you.

Yeah.

And where we can today in our outlet.

You know, where where I'd say, if anything accelerating obviously the cycle time, getting information and and jumping outlooks and our forecasts and then going through very fun a process every month, but as we do that today.

Yeah, Yeah at the end of April we.

Has no yeah, I I wouldn't.

But any last any change to where we felt we were at the end of Mark's for the full your outlook you know anything.

The business units are probably a little more.

Optimistic about the third quarter.

And and I think only making Andre nice takes me to optimism and put a little heads on insurance are highly probably playing a year ago, but right now it looks very consistent today's lesson 30.

30 days ago, if if things continue into way, we sat on the way we seem to anybody from 30 days you know the accent that we've taken action who've taken to really manage to cash flow very aggressively <unk>.

Aggressively I think that you didn't really get shape, we built that that I think we use the word a cushion the large cast file I really to address uncertainty. So we think now you know looking at each month looking at April and looking at me and clearly looking at the second quarter, if we get to the second quarter second could've played enough.

The way, we expect to play out in the third quarter still looks like it looks to US a day I think we'll we'll feel pretty good about the full year, we're going to make it infects for the year, but based on what we plan when activities and played I think if it executes away it's going to.

In good shape, if it gets to the second quarter end to end the job.

T.V. 19 ended duration looks a little longer I think that's when we would evaluate.

Thing familiar lovers can we do some additional club.

I can I add to your were you know that that saving talk on the earnings started mccaf side or you know, we're working at heart everyday and I would say, we've we've got even more identified and we did four weeks ago, particularly on the cash sorry, because when you.

And the cats are particularly international you, because you're you're saying certain countries get <unk> relief you know part of the Karabakh was payroll tax relief, so that that could be replicated in other countries. We're looking at possibility of.

Celebrating some of our potential cash tax refunds in the U.S. or internationally, so kind of the opportunities are emerging particularly outside the U.S. to generate additional cash them when you're just a just a few weeks ago.

[noise] I'll take our next question from.

You know.

Mmm.

Hi, great. Thank you very much.

Greatness October I frequent swelled, maybe a little bit.

But the plants aren't there how we expect to cater.

Throughout the year, maybe <unk> revenues moved to be to to get to the can't smell you need to be and you know go from there. Thanks.

Well I'll, just I'll kind of give me the the bride.

Do you in in the strategy that were.

We're undertaking 2020 to get to this I mean under can't smoke, probably you know I do something with the fact that we put it in a team.

Very focused very dedicated to managing and we think national versus managing typically manage taken off that'll get infected, earning a and we had we embark upon a Spanish in the last couple of years to create more products, whether we built some internally to <unk>.

<unk>.

And no other areas that are clearly and 20 funny. We said, we if we get the potato look if Taylor and.

We have to cut back or capital expenditures.

To preserve our cat. So we had a team it literally looks wherever we're spending money, whether it's with the vendor whether it's one for the contractor.

Oh discretionary and.

Things like the.

We were doing internally, the emanating share repurchase and they track quarter to quarter.

How many dollars we are going to see versus where we would have been.

<unk> original plan for the year, and then we maxed out against our expectations for.

<unk> revenues reduction in cash flow from business and pack hearing.

During 2020 so.

<unk> add any any color to what we're doing there yeah. You know all in all in their deleting Ah a bad 15 that is you know we call. The cast control tower. So we're looking at you know not not only cost reductions that result in cost savings, but also you know driving R.R.A.R. like never before and have team to people.

You know getting getting at the aging because we got we've got to watch and then you sort of prepared remarks, you know we had a little bit of an increase in reserves on our on our aged receivable. So we've got to just be on top of all that so so are we we don't we sure that are so stays stays where it is if not improves.

Payable soggy now we're trying we're trying to drive Ah you know in partnership with our vendors drive terms try to get discounts about where possible and it's on both sides of of working capital A.R., an A.T. and also looking at our our inventory to overall trying to make sure that are working capital is turning as quickly as possible and then.

Then you know in addition to working capital and I'm, just just cost. It was just driving other cats savings things like like capital capital is going to be a big source of cash this year versus what we get plans.

Like I mentioned, something just a few minutes ago about hopefully we got some pension really if we've got some payroll tax relief looking at some accelerated we found so so we're we're driving calf every day and again, we don't you know and also thing where where we're projecting calf now yeah. We're managing cast day to day. So we're we're.

Seeing what our daily and blows and outflows R.M., we're projecting them out trying to projecting and out with reasonable accuracy as far as 12 weeks out. So we can we can see what our cash position is so so I think we feel pretty good how we manage again and and you know try try to ensure that the employer's matching outlaws.

And we will take our next question.

Current elsewhere.

<unk>.

[noise] Thanksgiving evening, I I migrate I know, we're all probably going a little stir crazy trying to stay sane working from home I'm. Just curious you know obviously other than but the standard incentives just.

You know kind of 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. You know given sort of this unique operating environment and then just on the payment side you know 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 where did you invest in payments to speed you invest it in its and just sort of your your thoughts on you know when Mac and start to sort of kick up when we get out of this thing.

Mm.

So I'll I'll, let me address the payments for so so you know payments was obviously other <unk>.

Oh, the mentioned requires a across the board are impacted by.

The payment.

Locations I eat restaurant.

And and witness you'd have <unk> in grocery stores and big Bucks a year out to see very busy.

As you're aware of any business is really.

So it's a fairly diverse portfolio that we hired but then as we've grown organically, it's really attached to our clients and it's attached to smaller clients to censor restaurants, it's attached to smile retailers and so it has a negative impact.

Anticipated in in the full year in Florida throughout in into a 2020, just based on maybe next one for traffic into restaurants, and small retailers, but what we're what we're doing in payments will actually be similar into everything on the on the sales side, we're really taking it as an opportunity as we go in.

I'll I'll choose restaurants, as an example table service restaurant as we helped him how some good some of the incentive dollars from the government small business loan and we helped them do online ordering we've we've worked with him on terms when it comes to us for terms to to help them get to the crisis.

And in exchange, we bundle up more and more problems and we've really gone on he told our sales people go out and you just as an opportunity to sell a whole bundle Aloha central's, including painting.

Or go in and where we can now do tussles payment entertainment her mother laugh integrated back to the point of sale differentiate what we can do and recognize that we're not gonna drive a lot of volume and payments this year, but less than a lot of customers signed up for the future.

So the question of sales I don't know who the person I think the sales you'll still have typically worked into you know from home on the phone obviously don't do the travel on airplanes that they used to that there. We've got very specific focus calling programs on the income side sweet.

Family have them go out and called and customers, we'd get feedback from our client base, which references well you see I mean cause <unk> asking what would you do how they can help.

Other vendors, who haven't called me for weeks or months. So we've we've really been out there trying to make sure that we can do everything we tend to help our customers and our sales people are come people. That's really to number one objective came up our customers happen get through and then obviously find ways we can expand.

She's going forward.

Asked about the executive team being all isolated work from home and how they got along and I was going to tell you, they're they're getting they want to get back in the office because we spend so much more time together.

On her phone calls and we didn't we were in the office sitting next to each other that they're they're jumping ecevit you get back to to the office.

[noise], we'll take our next question.

North Coast research.

Good evening gentlemen onto question, so like I think or when you talked about a little bit about banking workers and just impact on both banking in retail I'm wondering.

2020, you could make an impact or you're anticipating is that cancellation of orders afforded that just delay of borders and.

I understand the answer for each segment could be different.

[noise], Yeah, it's really really very site segments. So so I'll I'll kind of get a brief blocks in fairness and then Oh and can so you know again and and basically what.

What we've seen so far we kind of the first.

It's really the timing implementation and again, we had come into the you're saying, it's such a such a strong 2019, we had its dissipated a little lower numbers and fun 2020, and and then you know you see correspond lower order numbers coming foods, because if you remember 19, we had.

The pull through from 2018, where we have manufacturing issues that we had really strong sales at the back into the year. So I think funny 20 funny on the banking side. It's really just you know banks, having a time on Thanksgiving break you know ranges aren't open in in being able to install A.T.M., so little bit of that which is really been in fact.

18 hardware and then maybe somebody installations serve as a a revenues.

And then it really Verizon in retail, it's just that big reach a grocery stores in the big Bucks shores are so busy Ah, it's like peak season for them it's like.

Ended events or into the sampras season for them in terms of volumes and they they just push things up right.

Expect that to be there the smaller n.

Huh.

<unk> retailers and you know, especially retailers because in malls you know there a lot of them are sent down. So you know what happens in how fast they grow up and went to defend money <unk> capital I think we would it be some of those is.

Not necessarily timing issues that maybe more of an impact 2020, and I think restaurants are the same way to learn.

Quick service restaurants are so busy with dry food, keeping keeping volume's going as much as they cans and in the dressing or in some cases as we talk to our clients are doing more than 100 per cent of a normal volume just because there's fewer and fewer choices to eat out and so they're quite busy and that is timing.

And the ability to refresh your store opened a new store implementing new technology P.L.S. system. So those are timing and then again on the low end table service restaurant right now, they're trying to figure out how to survive. So.

I don't I don't know that those a little be tiny like some of those would just be lost.

It was for the entire 2020.

Did you have any color you wouldn't have that no.

I think that's that's fair.

I'll take our next question right.

Yeah.

Afternoon, guys I hope, you're they're all safe and healthy thanks to the call.

First question.

My ground grade not sure, which person is the right place to be dresses too and thoughts on April trends, where you can give them to us whether that's volumes or even just sort of sale. Their revenue one of the things. We've found really helpful as any insight into kind of current.

The most recent trends hopes is modeled things better known poor given a quick changes that are going on so many insights there.

Yeah, you know I I would in terms of you know transaction translated we talked about payments and honesty payments are you know armored comparing payments are gonna be like I'm sure you've seen some of the numbers that have been coming out.

So those are.

Again, it's it's a small businesses is very tiny in terms of overall size at this point so.

We're going to try to use this time periods enough for me to grower home base in the payment business.

I would say you know so we were in order business or are you forever knocking on doors, taking orders and we sales plans pension plan ordered plane.

And it's probably more of a no. One question I just had an as we we you know we went into everybody's work from home.

The frequency and the amount of interaction is actually increased between management between management and each other in between management sales between management and execution people, you know building products and delivering I <unk> I I haven't heard screaming I'll ask someone in terms of people.

Saying well the numbers are are dropping in April versus where we had so I don't know that we would have any specific numbers, but I don't think we've heard anything that would alarm us in terms of April versus where we had planned right.

I I think that's true like they'll you know as we said at the end of March we were seeing very level, a buck activity that.

Just as we were seeing more pushed to the right and as opposed to cancellation, we did not see when cancellation, we did see move to the right in both banking and retail.

The hospitality is is more of a a real time backlog. It's we do a lot of selling deliver within the quarter. So we clearly seem to slow down on the hospitality side.

The retail and the banking has has maintained where we saw it at the end of the first quarter I won't say interestingly enough, we're seeing a lot more conversation coming from Europe right now on the retailers and they're starting to reopen the country, they're starting to realize bass and talk about.

Wanting to be position to take on some of the the backlog in the project that they have in place the nose conversation or taking place.

Right now as you can imagine.

Those clients are qualifying, but they're wanting to get them position.

To be able to respond if in fact bell reopening knew that is a reality I think we're gonna experiences for a long time or we'd be opening at what pay it's worth the consumer but I think as it starts to happen as we're seeing in Europe. When we saw that some of our clients and trainer as it started to deal with the reopening.

They have started to reengage impromptu, it's starting to come on line there.

And we're going to see that on our rolling basis across the globe, but I would say that's the only change in the last 30 days since our conversation about.

Activity. So it's not negative it's it's continued to perk you wait.

We'll take our next question from Paul cost her with G.P. Morgan.

No. Thanks, it's like him of course market.

Disconnected, because <unk> pretty encouraging.

It sounds like a control <unk> problem.

Scary there it is good or outside of your controller <unk>, So <unk> quite good it sounds pretty encouraging really.

Yeah that sounds fun <unk> companies, so quickly to do about counts reserves, you know take all directions too.

<unk>.

<unk>.

You know so during on top of functions. So I'm just wondering if there are no have you have a remote console those two things.

Like you might be on you.

I.

Sure.

Supply, we're trying to get a balance to wear a company isn't and.

And you were were at risk in our customer base, and then and then where customer base or holding up a relatively well so.

Yeah. We we are generally have impacted 2020, we went for nine <unk> 31st so as a wife student pieces of our business that we're at higher risk.

You know small small businesses both of each on hospitality tables service restaurant specialty Department stores.

So we kinda went through that and shared what what percent of a revenue stream is going to be at risk and 2020, and that's <unk>. That's always the same today I think we're trying to do with highlights that other parts of the business are continuing to be strong and if anything were having impacts because they're too busy or they got other.

Maybe 29 amber seemed to push push to the right, which means pushing it a second quarter some of the pushing it a first for fishing in the second half 2020, but that that's clearly are going to happen to it.

So why why did we reached out in in load up on the clarity. So we just had a month ago heater pursuing.

Getting and clarity I see so we're sitting here in in in mid March we started falling in front of Irish probably a little things in a lot of companies, which I finally, getting really January because of the supply chains coming into China into our plan to build spell check out devices and and the H.T.M. So we were <unk> watching s. in China watching it.

Around the globe in the impact.

And we don't know how long how different is if if you have any insight I mean, we left and he was like everybody else in front of by your test first we have a lot of context in the industry literally 130 countries around the globe trying to determine.

Where do we can get out of it now it's a question visit u. shaped as a v. shaped into w. shaped didn't at three months six months nine months and quite frankly, depending on whether you get your information from what new sources, you get a different answers so wow I think something.

We look at today looking at today. The same we we did 30 days ago, we take a series of action to be fair test soon.

Obsessively definitely can't come again based on your next in revenue.

For for saying about 2020.

And we think that'll get us your 2020.

But with the uncertainty how.

We just wanted to make sure that we would get three even a weird situation, where it then were predicting sitting so that's probably but I mean, we call it a cushion.

We put it but $1.6 billion total of cash on the balance sheets, which we believe will keep us getting soon even even worse than we predict today and a mixed company coming out the back and we think it gives us some options that other companies don't have particularly.

Restaurant face would they don't have the ability to continue to defend and build customers in during this crisis and they tend to lay off their staff and they'd had to pull out of the market. We believe on the back in our restaurant business are allowed business.

Actually be in better shape and be able to pick up some market share. We believe the same thing in retail that will be standing in some of these are struggling and sound. So.

We did it to addressing certainty.

And we will take our next question from keeps.

With Morgan.

<unk>.

Just one question on my own I don't understand the the ability is incredibly lemonade right now because you cannot I'm expertise and cynicism recovery.

Investor call last month mention I mean could sneak Q3, five two <unk> from two q. it sounds like that maybe a little bit better now, but just curious about snow your acceptance one and then I know you difficult, but then I'm not sure <unk> and be expecting for two okay.

Yeah, I mean, I say or what have you get that right owner Andre if you're going to make side Benson picking the recovery and the timing and so I tried to work well we plan on if the things that we plan on a month ago we.

For the full year.

So I I don't even what a v. shape is I don't know the V. chip is something back.

You know monsoon a quarter or Mount bouncing back in a long period of time I don't think we'd they could.

She can 2020 are planning a second quarter is going to be a challenging Puerto for us as we take a lot so and people come out of the.

Shelter and patient and restriction, we still don't think we would feel see a free flow consumers and consumer confidence for people to go back to restaurants with back from the retail and the way. It was much to say back in December of 2019, So we don't get bouncing back our business that have.

They said, we looked at Sears harder and we think third part it's going to be some of the second quarter, maybe slightly down what where things are business leaders are telling telling us telling them I can own and Andre third quarter looks to be better the second quarter, we will probably the risk that a little bit as we build.

Outlook for the year looking T.V. view third quarter similar to the second part and then we believe fourth quarter will start to pick up.

And quite frankly, U.S., maybe a little bit lugging is is the one reference to Europe and parts of Asia, Australia coming back maybe a little stronger for us in the fourth quarter, we think the impact of laugh all the way to 2020.

Eight second wave or a second death or a a second impact of the criminals iron on the population I would say V. You know are your guess is as good as ours. We have built a question in terms of a balance sheet to allow us to secondly, but obviously crate and a deep.

For a hole in the in longer window. So as we did planning we look into 2021, we don't think that's what's gonna happen per se that it's going to be that much worse on the second wave, but we just don't know so we're anticipating and planning for the uncertainty, but we believe second floor.

Under a impacts to a third quarter similar levels of second quarter, and fourth quarter, starting to get better than fourth quarter getting better than second third that's still not up to where we originally with it at a plan for the year.

[laughter].

<unk>.

My key for it for any additional wear closing remarks.

Thank you so I'd first like everyone for for joining us today, and I first quarter call.

<unk>.

Traded unique challenges, France, janicek, she as well.

Everybody all of our customers.

But we do believe the actions that we are making.

To take care of number one or employees.

And number two I take care of our customers.

We are in a stronger competitive physician coming out of this crisis. We look forward to speaking with your Genesee end of the second quarter, and giving an update on or 20 funny frogger. Thank you.

Thank you for gentlemen, this concludes today's column we thank you for your participation do you mean.

Yeah.

[music].

Yeah.

Yeah.

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Oh.

[music].

Mm.

Mmm.

Mmm.

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