NCR Corp

LSE:0K45

Earnings Call Transcript 2021-Q4

[Operator]

Please stand by, we are about to begin. Good day. And welcome to the NCR Corporation Fourth Quarter Fiscal Year 2021 Earnings Conference Call. Today’s conference is being recorded.

At this time, I’d like to turn the conference over to Mr. Michael Nelson, Treasurer, Vice President of Investor Relations. Please go ahead, sir.

[Michael Nelson, Treasurer and Vice President, Investor Relations]

Good afternoon. And thank you for joining our full year and fourth quarter 2021 earnings call. Joining me on the call today are Mike Hayford, CEO; Owen Sullivan, President and COO; and Tim Oliver, CFO.

Before we get started, let me remind you that our presentation and discussions will include forward-looking statements. These statements reflect our current expectations and beliefs, but they are subject to risks and uncertainties that could cause actual results to differ materially from those expectations. These risks and uncertainties are described in our earnings release, in 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 8, 2022, and on the Investor Relations page of our website. A replay of this call will be available later today on our website, ncr.com.

With that, I would now like to turn the call over to Mike.

[Mike Hayford, Chief Executive Officer]

Thanks, Michael. And thank you everyone for joining us today for our fourth quarter and full year 2021 earnings call. I will begin with some of my views on the business, including an update on our move to NCR becoming a software-lead-as-a-service company with a higher shift to recurring revenue streams. I will also provide commentary on the strategic review process we noted in our earnings release, and will then review our financial performance and an outlook into 2022. And then Owen, Tim and I will take your questions.

Let’s begin on slide four with some highlights from this past year. We entered the fourth quarter with momentum across our business and finished a very strong year. Keep in mind, we entered 2021 hoping that the COVID pandemic was mostly behind us, but we continue to experience COVID-related flare ups throughout the year and then added challenges brought on by the supply chain issues in the second half of 2021.

Throughout the year, our team continued to execute and delivered a very strong year for our shareholders. I want to specifically call out our 15,000 customer engineers who have continued to work to support our clients in stores, restaurants and banks during the past two years of the pandemic.

I am also proud of the continued execution our teams have done to improve our products and services, as we have been making our way back to the office with a flexible hybrid work environment.

During this time, we have had a keen focus on taking care of our customers, with the belief that customer -- happy customers will buy more from NCR. We also successfully completed one of the largest acquisitions in NCR’s history. We completed the Cardtronics acquisition midyear and are well on our way with integrating the two companies.

In 2021, NCR delivered 15% total revenue growth, with recurring revenue growth of 25%. Adjusted EBITDA increased 39%, while adjusted EBITDA margins expanded 300 basis points to 17.4%. Our earnings per share increased 51% and we delivered free cash flow of $460 million for the year.

Now moving to slide five, we have had strong momentum across our strategic growth platforms, which support a transition to shift NCR to a software-lead-as-a-service company. Our 2022 outlook expects another strong year, with strong revenue growth and significantly higher profitability. Tim will discuss our guidance in more detail later.

In Banking, we continue to have positive momentum in our Digital Banking platform. In the fourth quarter Digital Banking had 37 renewals, four new logo deals and three business banking wins, all positive drivers of growth. Demand has been strong for our Digital Banking platform, as well as for our online digital account opening, that which we obtained through the acquisition of Terafina.

We have made significant progress returning Digital Banking to a growth engine for NCR. During the fourth quarter Digital Banking revenue accelerated a 14% growth on a year-over-year same period basis.

We receive increased interest in our ATM-as-a-Service solution, an integrated go-to-market model combining NCR and Cardtronics team provided a key point of competitive differentiation. Seacoast Bank of Florida and Texas based EECU both selected NCR’s ATM-as-a-Service offering to own, run, manage and modernize their ATM fleet. And Bank of Baroda, one of India’s largest banks with over 9000 ATMs select the NCR ATM-as-a-Service offering.

In Retail, we have positive momentum in winning the upgrade imperative for retail point-of-sale solutions. We have recently signed a contract to migrate A.S. Watson from NCR’s a legacy POS to our next gen NCR commerce platform with a five-year subscription. A.S. Watson is one of the largest -- one of the world’s largest international health and beauty retailers with over 16,000 stores in 28 markets.

We also had a competitive win with ASDA [ph] as one of the largest retailers in the U.K., as they will be migrating from the competitor’s legacy product to our NCR commerce platform with a five-year subscription covering software, services and hardware in our company’s journey for NCR to run the store.

During the quarter we continue to gain traction from our Digital First retail front-end app Freshop. This SaaS solution helps grocers implement their own e-commerce and delivery services through the NCR commerce platform.

In self checkout, we are also seeing continued adoption with our market leading solutions. Bed Bath & Beyond has started to rollout NCR cloud-enabled self checkout solutions across its footprint, which represents a meaningful expansion of self checkout into department and specialty retail stores.

In Hospitality are focused on customer success and wallet share gain is proving itself our ability to attract new customers and better service existing customers. NCR expanded our relationship with Landry’s a multinational entertainment company with more than 60 restaurant brands, signing a five-year Aloha Essentials subscription and launch -- and launching e-commerce solutions for quick and easy mobile ordering and delivery. The agreement drives Landry’s end-to-end digital transformation, freeing its restaurants to focus on delivering exceptional guest experiences.

Our Payments business continued its success during the fourth quarter as we increase the number of payment processing sites attached to our POS by 42% from the third quarter and we are extremely pleased with the performance of Cardtronics, as we continue to add and expand with financial and retail partners. We are driving more transactions across the Allpoint network.

In the fourth quarter, total NCR payment network transactions increased 12% compared to the fourth quarter of 2020. We expect to drive both merchant acquiring transaction growth and new transaction type growth on the Allpoint network. With the launch of Pay360, which will bring more transaction types including complete digital currency solutions and the ability to buy and sell cryptocurrency to our proprietary Allpoint network.

And finally, as we noted in the press release, we have launched a board led strategic review process that will include the input of our executive team, our Board of Directors and outside advisors.

As you heard at our Investor Day on December 9th of last year, the entire management team is very excited about the progress we have made to transform our company and even more optimistic about the future.

We highlighted at almost 3x increase in our customer satisfaction measured by MPS since 2018. We have shifted our company from a hardware-centric brand to a software-lead-as-a-service company and we have invested to build competitive products across all of our business lines.

But while this execution over the past three years has exceeded our goal has been recognized by our customers, the marketplace and our employees, our stock price has not reflected that performance.

We have consistently said if execution and transparency were not sufficient to improve our market valuation, we would consider taking the appropriate action to more immediately and directly liberate that value. While we were not presupposing an outcome from this review, we do intend to consider various potential actions, structures and solutions that will unlock value for our shareholders.

With that, let me pass it over to Tim.

[Tim Oliver, Chief Financial Officer]

Thanks, Mike, and thanks to all of you for joining us today. As Mike described, our solid fourth quarter kept a very strong 2021. We simultaneously generated substantial improvements in nearly every financial metric and accelerated our strategic progress.

Just as a reminder and similar to last quarter, the legacy Cardtronics results are included in our Banking segment. So, beginning with our Q1 2022 earnings release, we will report our results relative to the new segmentation described in our December Investor Day.

Let’s begin on slide six with a top level overview of our fourth quarter financial performance. Starting in the top left, revenue was $2 billion, up $43 million or 25% versus the 2020 fourth quarter, driven by strong growth in all three of our segments. Normalizing for the inclusion of Cardtronics in the prior year, pro forma revenue was up 8% year-over-year.

The addition of Cardtronics revenue, which is predominantly recurring, helped push our aggregate result up to 35% and our proportion of recurring revenue up to 58% in the quarter. On a pro forma basis, recurring revenue was up 5% year-over-year.

In the top right, adjusted EBITDA increased $95 million or 37% year-over-year to $353 million. Adjusted EBITDA margin rate expanded by 160 basis points to 17.4%.

I will provide additional detail and the discussion of the segments, but in summary, the higher value revenue mix from both the acquisition and sale shift, cost productivity and pricing initiatives, all together continue to counterbalance premium costs associated with a very difficult supply chain and an accelerating shift to recurring revenue in our Retail business.

In the bottom left, non-GAAP EPS was $0.76, up $0.17 or 30% from the prior year fourth quarter. The integration of Cardtronics is going very well and we remain on track for the transaction to be 20% to 25% accretive to NCR EPS within its first full year.

And finally, we delivered another solid quarter of free cash flow, with generation of $100 million. Component lead times and the Omicron disruptions caused this quarter to be far less linear than we planned. The resulting inefficiencies caused pressure on working capital, particularly in receivables and finished goods. That said, this marked the seventh consecutive quarter of positive free cash flow generation, as we continue to drive more linear processes throughout our cash cycle.

Slide seven shows our financial highlights for the full year, revenue was $7.2 billion, up $949 million or 15% versus 2020, driven by strong growth across all segments. On a pro forma basis, revenue was up 6% year-over-year.

We continue to make progress expanding our recurring revenue, which in aggregate was up 25% and comprise 58% of total revenue. On a pro forma basis, recurring revenue was up 8% year-over-year.

In the top right, adjusted EBITDA increased $348 million or 39% year-over-year to $1.2 billion. Adjusted EBITDA margin rate expanded 300 basis points to 17.4%, a high watermark for NCR and for context, standalone NCR meaning without the benefit of Cardtronics, adjusted EBITDA increased 19% year-over-year and standalone NCR adjusted EBITDA margin rate expanded 180 basis points.

In the bottom left, non-GAAP EPS for the full year was $2.56, up $0.87 or 51% from the year ago 2020 and we drove strong linear free cash flow for a full year result of $460 million.

Before I move on to discuss the segment review, I need to remind those of you who build models, that beginning in Q1, we will be reporting our results in our new segments. Those segments are Payments and Network, Digital Banking, Self Service Banking, Retail and Hospitality. To assist with your analysis, we will provide several years of historical results describing these new segments shortly after we file our 10-K.

Slide eight shows our Banking segment results, which include the Cardtronics operations. Banking revenue increased $320 million or 40% year-over-year, benefited by the addition of Cardtronics.

Legacy NCR Banking was up 7% year-over-year with particularly strengthen in software up 15%. In addition to a key upfront software deal in that period, we experienced much higher demand for subscription software services, with a total signed contract value up 28% year-over-year.

We also saw increased demand for our hardware solutions with revenue up 10% and orders up 28%. Hardware orders growth includes increased demand for our new scalable recycler product, which is expected to accelerate across 2022 as we complete customer testing.

We continue to successfully replace our one-time revenue that was traditionally recognized with the sale of ATM hardware, with more durable, predictable and valuable software and services revenue streams.

Banking adjusted EBITDA increased $98 million or 74 4% year-over-year. Adjusted EBITDA margin rate expanded by 40 basis points to 20.6%. The margin increase was the result of significant accretion from the inclusion of Cardtronics, a more profitable and valuable revenue mix in our legacy NCR businesses, as well as cost productivity and price increases we would previously put in place.

The bottom of the slide shows our Banking segment key results. On the left, we had a terrific year in Digital Banking, with revenue up 9% for the full year. Digital Banking growth rate accelerated throughout the year, with a fourth quarter up 14% compared to the same quarter of 2020.

Digital Banking registered users increased only 3%. The sequential decline was caused by a customer consolidation and a subsequent move to an in-house solution. The shift to recurring revenue continues to gain traction, with recurring revenue up 42% for the full year and up 6% on a pro forma basis. In the fourth quarter, recurring revenue growth accelerated to 8% on that same pro forma basis.

Moving to slide nine, which shows our Retail segment results, starting at the top left, Retail revenue increased $51 million or 9% year-over-year, due to higher point-of-sale and self checkout solutions revenue, increases in North American hardware sales and software licenses for enterprise and self checkout applications, as well as cloud revenue paced this growth.

Retail adjusted EBITDA declined 1% year-over-year, while adjusted EBITDA margin rate contracted 150 basis points to 14%. Hardware material costs and freight expedites and higher services staffing levels constrain margin expansion. These impacts were partially offset by price increases and reduced expenses.

We continue to have success transitioning our Retail business from one-time perpetual sales into multiyear subscription-based revenue streams. The strategic deals that Mike mentioned that ASDA, A.S. Watson and Bed Bath & Beyond, were key wins in the fourth quarter. The nature of these contracts shifted roughly $14 million of very high profit revenue that would previously have occurred as upfront software license to recurring revenue, which impacted the year-over-year comparisons.

The bottom of this slide shows Retail segment key metrics, on the left, self checkout revenue increase 13% for the full year, in line with our expected full year 2021 double-digit results.

And in the center bottom are platform lanes, a KPI that illustrates the success of our strategy of converting our Retail customers to our platform-based subscription model. In 2021, we more than tripled the number of platform lanes.

Momentum for our strategy of converting traditional lanes to platform lanes carries into 2022, with a substantial lane conversion backlog. Recurring revenue in this business increased 9% for the full year.

Slide 10 shows our Hospitality segment results and illustrates momentum across this business, with particular strength in the enterprise market, caused by an uptick in new restaurant openings in technology refreshes.

Hospitality revenue increase $49 million or 27% as restaurants reopen, rework their existing locations and expand.

Revenue is returning to 2019 levels and the virus disruptions are becoming less disruptive. Our pipeline is strong and our backlog is significantly higher than it was a year ago. We continue to triage components supplied to insulate our customers from supply chain disruptions.

Fourth quarter adjusted EBITDA was flat from the fourth quarter of 2020, with an adjusted EBITDA margin rate of 11.7%. Intentional increases in sales and marketing costs to catalyze growth and significant cost pressure for both chipsets and expedited freight and hardware for our enterprise customers impacted those margins.

Hospitalities key metrics in the bottom of the slide include Aloha Essentials and recurring revenue. Aloha Essentials sites increased 148% for the full year, while recurring revenue increased 9% in 2021.

Turning to slide 11, where we provide our full year results for 80/60/20 strategic targets. These goals were originally put in place in 2019 as 2024 targets, and even with the pandemic and supply chain disruptions, we have executed successfully and these goals nearly complete. This will be the last time we present this slide as we have a new set of more aggressive and aspirational five-year goals for our organization.

First, we strive to generate 80% of our revenue from software and services or less than 20% of our revenue from discrete hardware sales. In 2021, software and services represented 73% of our revenue, up from 72% in 2020.

Next, we aim for 60% of our revenues to be recurring to drive more resilient, more predictable and more valuable revenue. In 2021, recurring revenue represented 58% of our total, up from 54% in 2020.

And we aspire to a 20% adjusted at the margin rate, we made significant progress on this metric with an adjusted EBITDA margin of 17.4% in 2021, compared to 14.4% in 2020.

On slide 12, we present free cash flow, net debt and adjusted EBITDA metrics to facilitate leverage calculations. We continued the trend of strong or linear free cash flow. We generated total free cash flow of $100 million. We have a strong balance sheet, ample liquidity and the financial strength to support our growth strategy. This slide also shows our net debt to adjusted EBITDA metric with a pro forma leverage ratio of 3.7 times.

We ended the fourth quarter with $447 million of cash and remain well within our debt covenants, which include a maximum pro forma leverage ratio of 5.5 times. We also have significant liquidity with over $900 million available under the revolving credit facility.

On Slide 13, we present our full year 2022 outlook. We expect revenue of $8 billion to $8.2 billion, representing growth between 12% and 15%. That range represents caution around the first half global transaction volumes and presumes component availability eases in the second half. We also assume a typical net impact from the shift to recurring revenue.

We expect adjusted EBITDA to be $1.5 billion to $1.575 billion, representing a growth rate of 21% to 27%. This range presumes a difficult cost price dynamic in the first half that eases in the second. It also includes full execution of the Cardtronics transaction synergies.

Non-GAAP EPS is expected to be $3.25 to $3.55 for the year, representing growth of 27% to 39%. We have assumed a tax rate of 26% and a share count of 154 million shares in that analysis.

We expect to generate free cash flow between $500 million and $600 million. A key to free cash flow will be the ability to use non-recourse financing to fund the ATM and SCO-as-a-Service strategy.

To assure alignment with your quarterly models, I also want to provide some thoughts on Q1 and the calendarization of 2022. You will recall that a very low pandemic adjusted cost base, combined with a modest post-virus bounce allowed us to get out to a fast start in 2021. The second half performance, while still strong, was significantly impacted by step function changes in our component costs and our freight costs.

Performance in 2022 is likely to be a mirror image of that environment, with price increases catching up with costs in the first half and the second half increase in revenue as transaction volumes normalize and components become more readily available.

So for Q1, we expect revenue of $1.9 billion to $1.95 billion, which is up 23% to 26% on a reported basis. Part supply will likely constrain hardware sales and global Omicron impacted transaction volumes will be down. While the hardware revenue will push forward in the subsequent quarters, transaction volumes do not.

We expect adjusted EBITDA of $325 million to $350 million, which results in a margin rate very similar to that of Q4. A less advantageous hardware mix and premium manufacturing costs will be countered by price increases and cost productivity.

We expect non-GAAP EPS of $0.60 to $0.65. We have assumed a tax rate of 26% and a first quarter share count of 152.5 million shares.

We expect the first quarter to be a modest use of cash due to typical seasonal factors, such as our annual 401(k) match and our annual cash compensation expense that were not funded in 2021 and to expected higher inventory levels. After Q1, we expect modest sequential quarterly improvement across most financial metrics to ultimately produce the results described by our annual guidance.

And finally, slide 14 bridges 2021 adjusted EBITDA of $1.24 billion to 2022 adjusted EBITDA guided range, provides a high level depiction of our earnings drivers for 2022. We expect benefits from increased volume and price increases to drive $150 million to $200 million of incremental adjusted EBITDA.

The inclusion of Cardtronics results for the full year is expected to add another $150 million. And we are on track to achieve $100 million in cost synergies associated with the Cardtronics transaction and expect an incremental $25 million in net productivity.

The primary headwind in 2022 will be our ongoing shift away from selling perpetual software licenses and hardware to subscription and as-a-service models. We anticipate the shift to recurring to be roughly $150 million, similar to the amount in 2021, but more weighted to retail and ATM-as-a-Service.

The more successful we are shifting our revenue to multiyear contracts, the larger the near-term headwind would be. We will make sure to call out any major contracts and describe those economics at the time.

With that, I will turn it back to you, Mike.

[Mike Hayford, Chief Executive Officer]

Thanks, Tim. In closing I am on slide 15. We have made significant strategic progress in 2021 and we did what we said we would do, delivering consistent, strong financial and operating performance.

Throughout the year we have had a keen focus on taking care of our customers with the belief that happy customers will buy more. Our focus is paying off with our net promoter score increasing by 33% in 2021 and 2020.

Improved customer satisfaction helps NCR garner a higher share wallet and was a key contributor to revenue growth and margin expansion across all of our industries. We entered 2022 with momentum and a clear strategic vision as we accelerate our transformation to a software-led as-a-service company.

Looking forward, our key priorities are clear. First, we expect to accelerate growth as we leverage our software and payments platform to increase share of wallet. As we discussed at our Investor Day, we have established a new five-year targets, which we call 80/15/1. We strive to generate 80% of our revenue to be recurring, we expect to deliver 15% annual non-GAAP diluted EPS growth each year and we aspire to generate $1 billion of free cash flow in 2026.

Second, we are eager to capitalize on the opportunities that Cardtronics and LibertyX brings us. We closed the LibertyX transaction at beginning of January and we are very excited about this opportunity. This acquisition continues our strategy to digitally engage with consumers and provide retailers and banks additional solutions for the customers to pay, transact and remit.

Third, we will continue to improve execution to drive solid returns for our shareholders, while we transform the business to drive a rerate of our valuation.

And finally, we will explore strategic actions to accelerate shareholder value creation as we believe our stock price has not reflected the improved performance demonstrated over the past three years.

This concludes our prepared remarks for today. With that, we will open the call for questions. Thank you for your time. Operator, please open the line.

[Operator]

Thank you. [Operator Instructions] We will take our first question from Dan Perlin with RBC Capital Markets. Please go ahead.

[Dan Perlin, RBC Capital Markets]

Thanks, and good evening, everyone. I wanted to just start, Mike, with the strategic review. I know you probably don’t want to go into details on it. But the question, I guess, I have is, as we look across the business and the incremental segmentation that you guys have provided, which I think provide a lot more clarity. The question is, when you think about the opportunities, I mean, can all these businesses at this stage truly stand on their own? Do you see dissynergies to the extent that you would look at some of the options, and I think, it’s a lengthy list that you mentioned in the press release? So I am just trying to get some sense as to what you are thinking there. Thank you.

[Mike Hayford, Chief Executive Officer]

Yeah. Thanks, Dan. Yeah. I mean, so we gave transparency around five business segments, predominantly, because they -- as you look at NCR, those five business segments, we felt gave better visibility into comps in the marketplace and the ability to understand NCR.

But when it comes to what we look at strategic alternatives, we kind of outlined some in the press release. We are going to keep our minds open. I would assume that that’s an outcome as you look at the five segments that was the intent of why we gave transparency in five segments.

But as we look at what we could do to unlock value, and again, we really look at this and say, listen, we have executed for three years. We have hit every quarter for three years. We have improved our product. We have improved our strategy. We have delivered our products to the market. We have a customer set. We have grown our business and we are pretty excited about where we are going in the future.

But yeah, we look at where we trade and we are very disappointed with the value, and we have said, in the last couple of years, if the market doesn’t catch up and value us appropriately, we would take a long hard look at what we might do.

So if you think about the laundry list of things that we might be evaluating, clearly, looking at some of those components that you identified from the five business segments, whether some of those might have more value or more access to capital as a standalone, I think, that would be fair to say we would look at that.

I think you could look at the company, and say, the question we always get, how much synergy between the two businesses? We think there’s some synergy. But, yeah, you could look and say, could you split into two or three pieces and have entities at a little bit more pure-play as they go out and compete and create an investment vehicle.

We are going to look at things like -- we actually think one of the challenges we have, the marketplace, the customers, clearly we brought back the brand, the credibility of the brand. We have great brand perception credibility with our employees.

We are not sure about that with the investment community. So do we have to do something with the brand and the entity that people invest? Do we have to look at our footprint locations, countries, our manufacturing footprint and we need to do something along those lines?

I don’t think we would rule out, do we look at -- do we combine with an entity in some ways to perform that continues to push us more to software services, pushes more on the platform company? I would expect it to be in the same industries that we are already in today. I don’t know if we have a potential strategic value interest in, but I do think we would have some sponsors that might be interested in transaction.

So, I think, we are going to be very open-minded. There may be some other ideas that come to us. The net of this is we believe we have executed financially. We have executed strategically. We have executed with our products. We have improved our company over the last three years. Yet, we are not -- it’s not reflected in our valuation. So this is the step we are taking simply because of that fact.

[Dan Perlin, RBC Capital Markets]

That’s great. Thank you for all the detail. Just a quick follow-up for Tim, when you think about the guidance and you gave a lot of details here about kind of some of the toggle points. But are you more, as you sit here today, are you more concerned about the cost aspect of the business to get you to kind of the high low kind of range or are you more concerned about the demand environment across the spectrum of what you can at least see from visibility at this point? Thank you.

[Tim Oliver, Chief Financial Officer]

Yeah. So demand is fine. Demand is actually relatively good, nearly everywhere, with the exception of transaction volumes at Cardtronics. When the Crown countries start to open up more and we -- the U.S. opens up more. I think those will recover as we get kind of put the Omicron variants in our rearview mirror. So demand will not be a problem. I feel good about our demand.

From a cost perspective, those things we can control, which is our cost -- our controllable cost, we will manage that. We do every year. We have productivity initiatives underway. Adrian and his team look at our manufacturing base and try to make sure that we get sufficient productivity in a typical year to offset inflation.

As you know, we came into this year with a significant headwind from inflation that we experienced in the latter half of last year and while the supply chain is getting better, it’s not great.

And so, my biggest concern would be, can our price increases keep pace with the cost that we have seen thus far? That would be, in my mind, how that plays out will determine what end of the range we end up in.

[Dan Perlin, RBC Capital Markets]

Got it. Thank you.

[Operator]

Thank you. We will take the next question from Matt Summerville with D.A. Davidson.

[Matt Summerville, D.A. Davidson]

Thanks. A couple of questions, first, if you look at your guidance, Tim, the 12% to 15% revenue growth, how much of that would you say would be pro forma legacy NCR, similar to how you talked about the reporting periods here in the call?

[Tim Oliver, Chief Financial Officer]

I am not sure. I will have Michael get you that data. We are going to give you pro forma data going back eight quarters for all of the segments that will be inclusive of Cardtronics. So I actually didn’t do that math for you…

[Matt Summerville, D.A. Davidson]

Okay.

[Mike Hayford, Chief Executive Officer]

Hey. Matt, this is Mike. I would -- it gets increasingly hard going forward to try to break that out and I will give you an example. We talked about three ATM-as-a-Service deals that we executed in the fourth quarter.

I think, we talked on the last call, we are very optimistic about that business as we see entities, both small and Bank of Baroda, which is a very large entity in India. Who look at our ability. Our ability is NCR/Cardtronics, not only to deliver the components, the service, but also to operate and that’s a combined offering of NCR/Cardtronics.

So it’s really hard to say what -- where is that coming from? We expect more of that in through about 2022. So I don’t think you are going to see us try to break out what is coming from each side of the businesses from a legacy perspective.

[Tim Oliver, Chief Financial Officer]

So while my wingman was talking, I did some math, it’s about half of that number is pro forma growth. So the 12% to 15% will be about half of that will be our pro forma growth.

[Matt Summerville, D.A. Davidson]

Got it. And then, you mentioned several times, Tim, about how pleased you are with some of the backlogs you are seeing in the businesses. I was wondering if you could maybe put some numbers around that, whether it would be as a whole for NCR at the segment level, and then, maybe comment on in a more ideal world supply chain, et cetera wise, how much revenue maybe you would have otherwise been able to deliver in Q4? Thank you.

[Tim Oliver, Chief Financial Officer]

Okay. Yeah. So the first part of that is, we don’t disclose backlog qualitatively. I feel really good about where we entered this year versus where we entered last year. So to have backlog in ATMs and to have backlog in SCO is a nice thing.

In terms of how much revenue pushed forward from one quarter to the next. We have talked about $40 million to $50 million in hardware revenue pushing forward from Q3 into Q4, and now from Q4 into the first half of 2022. So it’s on that magnitude.

[Matt Summerville, D.A. Davidson]

Got it. Thank you, guys.

[Operator]

Thank you. We will take our next question from Charles Nabhan with Stephens.

[Charles Nabhan, Stephens]

Hi. Good afternoon and thanks for taking my question. I wanted to ask you about LibertyX, specifically the degree to which that impacts -- that impacted the quarter, as well as your guidance for 2022?

[Tim Oliver, Chief Financial Officer]

So there’s nothing in the quarter to speak of. We didn’t get the deal closed until January. So there was no impact to the fourth. We got it closed mid-Jan. There will be some impact to the first quarter and the full year -- last year’s full year revenue, depending on how you account for it, there’s still some debate as to whether this is gross or net accounting. But depending on how we account for it on a gross basis, it could be $80 million of that guidance.

[Charles Nabhan, Stephens]

Okay. Great. And I know you have commented on supply chain, but I wanted to get a little more color specifically around the source of some of those headwinds, whether they are coming from freight, supply or labor, whether you are seeing those areas stabilize and it sounds like you are raising price, you are able to pass that on from a pricing standpoint in the first half of the year. So I just wanted to confirm…

[Tim Oliver, Chief Financial Officer]

Yeah.

[Charles Nabhan, Stephens]

… to the latter my understanding there as well.

[Tim Oliver, Chief Financial Officer]

So I will do the first part. I will reiterate what we said last time. I won’t give color on what’s really going on in the supply chain, much closer to deny it. But we have talked last quarter about our price increase is lagging our cost increases by about three months to four months’ time and I think that’s still true.

And I said, we would catch up within those three months time as soon as price -- as costs stop going up. They haven’t yet stopped going up and so we are still chasing a bit those cost increases with price and that’s why I have some caution in the first half of the year. Owen, maybe you can give some color.

[Owen Sullivan, President and COO]

Yeah. That addresses the price increases and where we are. I would say from a -- what we are seeing in the supply chain and it’s evolving pretty fluidly here and actually quickly. As we came out of the fourth quarter, a lot of the issues were around both materials and freight. What we are seeing right now is a bit of let up on the pressure in terms of the semiconductors.

As we look at what we have done in terms of recertifying the supply chain and creating some optionality, we are starting to see some of that pressure come off, especially as we look at the end of the first quarter and into the second quarter.

What we hope we then see is the freight numbers starting to abate and supply being available to us, and as we look out over the next couple of quarters, we are feeling better about the supply. And then, hopefully, what we will see as supply increases is, obviously, some moderating on cost.

So, but as we look at the year, demand is very strong. We are seeing some of the challenges the supply chain starting to abate and we are hoping that we will see a more normalized environment and I use that in airports toward the second half of the year.

[Charles Nabhan, Stephens]

Got it. I appreciate the color. Thank you.

[Mike Hayford, Chief Executive Officer]

Thanks.

[Operator]

Thank you. We will hear next from Erik Woodring with Morgan Stanley.

[Erik Woodring, Morgan Stanley]

Thanks, guys. Good afternoon. Just to follow up on one of the earlier questions. For the $40 million to $50 million of hardware revenue that was somewhat pushed from 3Q to 4Q and now to early 2022. Was that specifically because of component availability or was that a situation where customers were impacted by pricing? And then I have a follow up. Thanks.

[Tim Oliver, Chief Financial Officer]

No. All component availability.

[Erik Woodring, Morgan Stanley]

Okay. Super. And then, can you just remind us how to think about the cost savings from the Cardtronics acquisition in 2022? How much of that is, if that has changed at all over the last few months as you have kind of worked through the deal further? Thanks.

[Tim Oliver, Chief Financial Officer]

Yeah. It’s not changed at all. The assumption is we will still get that $120 million of cost out. It gets increasingly hard to tell when we take cost out, whether it was Cardtronics cost or synergy cost or legacy NCR cost, but we will get out far more than that, cost in aggregate across the organization. And you will recall, we did get somewhat of a head start to. We probably got $30 million worth of value from those synergies, the easy synergies that publicly traded costs out in 2021.

[Erik Woodring, Morgan Stanley]

Okay. Thanks. And then, maybe just one last one if I could slip it in there, and this is for you, Mike. Just, obviously, you went through the strategic review initially here, but just curious why today, why now, why has that -- is there something that you saw over the last few months that has initiated this or has this been in the works, just curious about timing? That’s it for me. Thanks.

[Mike Hayford, Chief Executive Officer]

Well, we have talked -- again, I’d say in the last couple of years that, we put a strategic plan together late 2018 going into 2019. We laid out some strategic goals. We laid out 80/60/20 goal. We executed quarterly and we have done a -- the team has done a really great job of improving the products competitiveness, product quality.

And yet, as we got through the end of 2021, which if you think about it, we didn’t expect COVID to continue to linger throughout 2021, it did around the globe. We got hit with the things we are talking about now with supply chain. But yeah, we delivered really strong 2021 performance.

Having said all that, if you are executing on financial performance, you are improving the product quality, you are executing on your strategic goals, but yet, our value and our valuation is actually lower than it was in 2018.

So there’s nothing other than the fact that we look at that, and say, for whatever reason the market doesn’t understand our business or is unable to give us a value that we think is there. Again, we have said for two years, if the market doesn’t catch up and understand the value we think is inherent in the business that we have, we would take the steps to unlock that value. So it’s simply -- we are doing that simply based on where we sit today with our stock price.

[Erik Woodring, Morgan Stanley]

Thanks, Mike.

[Operator]

Thank you. We will take our next question from Kartik Mehta with Northcoast Research.

[Kartik Mehta, Northcoast Research]

Hey. Good afternoon. Mike, one of the things you have talked about in three years as well are price increases on the servicing side for banking and that’s a decent sized business for you. I am wondering how the banks have reacted and if you have been able to push that through and if there are certain characteristics of banks that are willing to accept that?

[Owen Sullivan, President and COO]

Yeah. Kartik, this is Owen. Across the Board, not just with the banks, but our entire customer base. They have been more than reasonable. We talked we were probably 30 -- 90 days behind in terms of implementing, so on us. But as we have responded or pushed the increases out, our customers have been pretty reasonable.

In fact, if you listen to most of our customers in the retail, the restaurant and the banking sectors, they are all talking about passing costs on to their customers and they have done that readily. So there has been not been any significant pushback from the customer base.

[Kartik Mehta, Northcoast Research]

And then, just on ATM-as-a-Service business. I know you mentioned some banks in the U.S. and one, I think, in India. Obviously, the bank in India is very large. But I am wondering in the U.S. what type of banks have you seen that are interested in ATM-as-a-Service? Are there a certain amount of ATMs that they have that you find is kind of the target market or what type of demand you are seeing?

[Mike Hayford, Chief Executive Officer]

Yeah. I mean, the two we called out Seacoast and EECU in the states are community banks. And they actually -- so in addition to the ability to take over their footprint of ATMs, the ability to join the Allpoint network in the case of Seacoast and have that capability to expand a surcharge-free network for all their clients was really important to them.

So we are seeing that, certainly, on the community banks, the regional banks, as I mentioned in last call we did, we have had dialogue with some larger banks, maybe even larger than we would have anticipated.

Bank of Baroda, I think, we talked about this on prior calls, the Indian market has already shifted to much more of an ATM-as-a-Service market. So Bank of Baroda, in that market, bank of that size that are fairly scaled like this, have looked to providers. So we knew that was an opportunity in that market. We think there’s more opportunity in the Indian market.

Australia has embraced this, parts of Europe have embraced it, we are starting to see it in the state. So, in the state right now community banks, we would expect that to start to move up into a larger FIs going forward.

[Kartik Mehta, Northcoast Research]

Thank you. Appreciate it.

[Operator]

Thank you. We will take our next question from Ian Zaffino with Oppenheimer.

[Ian Zaffino, Oppenheimer]

Hey, guys. Thank you very much. I just wanted to touch upon the strategic alternatives a little bit. I just kind of wanted to get a sense of what may not be an acceptable resolution for you guys? And I guess, maybe we have a little bit of memories on the last time five years ago, six years ago or so, where we thought we were going to be moving into some type of value creation, and instead, we got something very different with a dilutive short of raise. Is there any type of consideration for that or are we really going for kind of like plain vanilla strategic alternatives where you have either a spin or some type of separation or something along those lines? I know you can’t give so much detail because you are very early on, but any color you could kind of give would be helpful. Thanks.

[Mike Hayford, Chief Executive Officer]

Yeah. I mean, I don’t -- again, we are going to look at different things. Again, the challenge is as we have had parts of our business start to have more and more success. And if you look at some of the components we have, whether it’s hospitality, whether it’s hospitality SMB, whether it’s digital banking, that’s what we have done at the retail platform, as those businesses have started to compete and win, and people are paying us, but each one as a standalone is really hard to evaluate, because once you start to look at your high value assets, what do you do with the remainco.

So we felt it was really important to look at the totality of our company, look at the context, first of all, of our shareholders, but also look at the context of our customers and our employees and make sure that what we do hold together, so we get the greatest value on the organization, but also have an organization or organizations that still function and have a future.

Having said, what you pointed out on the transaction that took place I believe about six years ago, we, obviously, worked together, management team wasn’t here. I don’t know that I would see something like that. I mean, that transaction, the cost of funding for that. It didn’t seem to add a lot of value to the organization and I don’t think it unlocked shareholder value. So, I think, you will see us very focused on unlocking shareholder value.

[Ian Zaffino, Oppenheimer]

All right. Thank you very much.

[Operator]

Thank you. We will take our next question from Paul Chung with JPMorgan.

[Paul Chung, JPMorgan]

Hi. Thanks for taking my question. So, just on Digital Banking, nice progression on revenues there, can you expand on kind of the registered user decline? Are there risks of other customers kind of bringing the app in-house, what drove that move there and does that kind of impact any revenue trends later on?

[Mike Hayford, Chief Executive Officer]

Yeah. So that, I mean, that is -- so that is a factor of the consolidation of the bank market, which you have once in a while, typically you have small ones. This happened to be a larger client, quite frankly, did a merger of equals and they took it in-house to the other platform. Sometimes you win those, sometimes you lose. So this is a little bit of a step down function, which we called out.

But as you look at our plan for 2022, we have it all laid out, right? The conversion cycle and the timing of when customers come on, when accounts come on, it’s laid out for the next nine months. So we know what we capture that, we will get the growth in double digits that we have talked about in the past. We -- this is something we had anticipated, this was a combination that took place almost a year ago and the customer just converted on the other platform last quarter.

[Tim Oliver, Chief Financial Officer]

And Mike, we have often described that metric is imperfect, right? It only describes about two-thirds of the revenue in Digital Banking that’s linked to the number of users and they are out of sync, revenue does not mimic in any one period of time that user base.

So when users were growing more quickly than revenue, we had to explain it the other direction, now the shoe is on the other foot. But I think, as the year plays out, you will see overall full year growth in users and revenue to be pretty similar back to the double-digit level.

[Paul Chung, JPMorgan]

Got you. And then, switching to retail, self checkout has been pretty steady. How do we think about the trend in 2022 demand trends, backlog, competitive environment, anything there? Thanks.

[Owen Sullivan, President and COO]

Yeah. This is Owen. I would say that, the same enthusiasm we came into 2021 with, we come into 2022 for retail and especially self checkout. What we are seeing based on pressure on labor. That is only driving the need and the opportunity for us to bring more self checkout solutions to the table.

We are seeing it expand beyond the traditional large box retailer into the specialty areas. We mentioned Bed Bath & Beyond. That’s a great example of moving into the specialty retail. And we are also seeing the self checkout solutions really gain traction in the convenience fuel and retail space.

So we think the market is expanding. We think our software and hardware solutions are really well-positioned. And the backlog that Tim talked about earlier is reflected in that for retail as we come into ‘22.

[Paul Chung, JPMorgan]

Thank you.

[Operator]

Thank you. That does conclude today’s question-and-answer session. I’d like to turn the conference back over to Mr. Mike Hayford for any additional or closing remarks.

[Mike Hayford, Chief Executive Officer]

All right. Thank you. So, in closing, just a couple of quick comments. First, we had a great 2021. We did not anticipate the kind of impact that we actually incurred due to COVID. We didn’t anticipate the kind of issues with the supply chain. Our team around the globe did a phenomenal job of working through those things and still delivering an extremely strong 2021.

As we head into 2022, we are very optimistic about the future for our company, as we see growth start to accelerate, as we see success in our products in 2022 and beyond. We are excited about the strategic outlook of where we positioned our products and where we are headed with our software platforms.

And then, lastly, and as it relates to our strategic process that we are undertaking, we simply don’t believe the value of our company is currently reflected in the price of our stock. If you look at the last three years, we have delivered on our financials every quarter. We laid out some long-term goals three years ago 80/60/20 and we are going to meet those goals ahead of time.

At the same time, we have continued to shift our company to a software platform company and deliver platforms of Banking, the CSP and in Digital Banking and then in the Retail and Hospitality side, the NCR commerce platform and we are seeing great success in the marketplace. We have improved our merge perception, of our product quality, of our product delivery, of our service and our strategic plan across all of our businesses.

So, in closing, I want to again thank our team, our CEs in the field continue to work every day, supporting our stores, our Restaurants and our banks. Our teams and the plants continue to deliver and build and our teams continue in a very difficult environment, working from their homes, working from the office when they can to deliver for our clients.

It is these team members, 35,000 around the globe that put us in this very strong position to be able to look at strategic alternatives to unlock our value and those are the steps we are undertaking starting today.

With that, I want to thank everybody for joining us for our call today.

[Operator]

Thank you. This concludes today’s conference. Thank you all for your participation and you may now disconnect.