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Business Combinations

3 Months Ended

Sep. 30, 2021

Mergers, Acquisitions and Dispositions Disclosures

2. BUSINESS COMBINATIONS

Pending acquisition of LibertyX

On July 31, 2021, NCR entered into a definitive agreement to acquire Moon Inc. dba LibertyX, a leading cryptocurrency software provider. The transaction is expected to close later in 2021, subject to customary closing conditions, including obtaining certain regulatory licensing consents and approvals.

Acquisition of Cardtronics plc

On January 25, 2021, NCR entered into a definitive agreement to acquire all outstanding shares of Cardtronics plc (“Cardtronics”) for $39.00 per share (the “Cardtronics Transaction”). The legal closing of the Cardtronics Transaction occurred on June 21, 2021.

Cardtronics is the world's largest non-bank ATM operator and service provider enabling cash transactions by converting digital currency into physical cash at over 285,000 ATMs across 10 countries in North America, Europe, Asia-Pacific, and Africa. The Cardtronics Transaction is expected to accelerate our NCR-as-a-service strategy and enhance our ability to provide technology solutions and capabilities that run our customers’ businesses.

Purchase Price Consideration The purchase consideration transferred consisted of the following:


In millions	Purchase Consideration
Cash paid to common stockholders and holders of certain restricted stock and stock option awards	$	1,775
Debt repaid by NCR on behalf of Cardtronics	809
Transaction costs paid by NCR on behalf of Cardtronics	57
Fair value of converted Cardtronics awards attributable to pre-combination services	19
Settlement of pre-existing relationships	14
Total purchase consideration	$	2,674

Other than certain outstanding restricted stock and stock option awards issued to directors which were paid out in cash at closing, the Company converted outstanding unvested Cardtronics awards into NCR awards pursuant to an exchange ratio as defined in the acquisition agreement. Each restricted stock award that was outstanding, whether performance-based or time-based, was converted into time-based awards, and will continue to be governed by the same vesting terms as the original Cardtronics awards. Cardtronics stock option awards were converted into NCR stock option awards with an exercise price per share for option awards equal to the exercise price per share of such stock option award immediately prior to the completion of the acquisition divided by the exchange ratio, and will continue to be governed generally by the same terms and conditions as were applicable prior to the acquisition. The amounts attributable to services already rendered were included as an adjustment to the purchase price and the amounts attributable to future services will be expensed over the remaining vesting period, net of estimated forfeitures. The fair value of options that the Company assumed in connection with the acquisition of Cardtronics were estimated using the Black-Scholes model.

Recording of Assets Acquired and Liabilities Assumed The fair value of consideration transferred to acquire Cardtronics was allocated to the identifiable assets acquired and liabilities assumed based upon their estimated fair values as of the date of the acquisition as set forth below.

The preliminary allocation of the purchase price for Cardtronics is as follows:


In millions	Fair Value
Assets acquired
Cash and restricted cash acquired	$	296
Trade accounts receivable	84
Prepaid expenses, other current assets and other assets	154
Property, plant and equipment	359
Estimated acquisition-related intangible assets	877
Total assets acquired	$	1,770

Liabilities assumed	690
Net assets acquired, excluding goodwill	1,080
Total purchase consideration	2,674
Estimated goodwill	$	1,594

We recorded a preliminary allocation of the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of June 21, 2021. The provisional amounts for intangible assets are based on third-party valuations performed. Additionally, further adjustments to the purchase price allocation will be required, within the measurement period, once the Company is able to complete more detailed procedures, and additional refinement to finalize valuations, among other items.

Goodwill represents the future economic benefits arising from other assets acquired that could not be separately recognized. The goodwill arising from the acquisition consists of revenue and cost synergies expected from combining the operations of NCR and Cardtronics. It is expected that approximately $153 million of the goodwill recognized in connection with the acquisition will be deductible for tax purposes. The goodwill arising from the acquisition has been allocated to our Banking segment. Refer to Note 3, Goodwill and Long-Lived Assets, for the carrying amounts of goodwill by segment as of September 30, 2021.

The following table sets forth the components of the intangible assets acquired as of the acquisition date:


	Fair Value		Weighted Average Amortization Period (1)
	(In millions)		(In years)
Direct customer relationships	$	340	15
Technology - Software	485		8
Non-compete	1		1
Tradenames	51		5
Total acquired intangible assets	$	877

(1) Determination of the weighted average period of the individual categories of intangible assets was based on the nature of applicable intangible asset and the expected future cash flows to be derived from the intangible asset. Amortization of intangible assets with definite lives is recognized over the period of time the assets are expected to contribute to future cash flows.

In connection with the closing of the acquisition, the Company incurred transaction costs of zero and $46 million in the three and nine months ended September 30, 2021, respectively, which has been included within selling, general and administrative expenses in the Condensed Consolidated Statement of Operations. Refer to Note 5, Debt Obligations for additional discussion on fees incurred related to the financing for the Cardtronics Transaction.

Unaudited Pro forma Information The following unaudited pro forma information presents the consolidated results of NCR and Cardtronics for the nine months ended September 30, 2021 and the three and nine months ended September 31, 2020. The unaudited pro forma information is presented for illustrative purposes only. It is not necessarily indicative of the results of operations of future periods, or the results of operations that actually would have been realized had the entities been a single company during the periods presented or the results that the combined company will experience after the acquisition. The unaudited pro forma information does not give effect to the potential impact of current financial conditions, regulatory matters

or any anticipated synergies, operating efficiencies or cost savings that may be associated with the acquisition. The unaudited pro forma information also does not include any integration costs or remaining future transaction costs that the companies may incur related to the acquisition as part of combining the operations of the companies.

The Condensed Consolidated Statements of Operations includes Cardtronics revenue of $335 million and income from continuing operations before income taxes of $17 million, which includes the impact of purchase accounting adjustments, for the period from June 21, 2021 through September 30, 2021.

The unaudited pro forma consolidated results of operations, assuming the acquisition had occurred on January 1, 2020, are as follows:


In millions	Three months ended September 30				Nine months ended September 30
	2021		2020		2021		2020
Revenue	$	1,901	$	1,842	$	5,632	$	5,331
Net Income attributable to NCR	$	12	$	13	$	81	$	(12)

The unaudited pro forma results for the nine months ended September 30, 2021 include:

•$53 million in eliminated intercompany revenue and cost between NCR and Cardtronics;

•$25 million, net of tax, in additional amortization expense for acquired intangible assets;

•$87 million, net of tax, in eliminated transaction costs as if those costs were incurred in the prior year period; and

•$35 million, net of tax, in additional interest expense from the incremental borrowings under the senior secured credit facility as well as the 5.125% senior notes.

The unaudited pro forma results for the three months ended September 30, 2020 include:

•$26 million in eliminated intercompany revenue and cost between NCR and Cardtronics;

•$14 million, net of tax, in additional amortization expense for acquired intangible assets; and

•$16 million, net of tax, in additional interest expense from the incremental borrowings under the senior secured credit facility as well as the 5.125% senior notes.

The unaudited pro forma results for the nine months ended September 30, 2020 include:

•$64 million in eliminated intercompany revenue and cost between NCR and Cardtronics;

•$41 million, net of tax, in additional amortization expense for acquired intangible assets;

•$67 million, net of tax, of transaction costs as if those costs were incurred in the period; and

•$48 million, net of tax, in additional interest expense from the incremental borrowings under the senior secured credit facility as well as the 5.125% senior notes.

Acquisition of Freshop, Terafina, & Dumac

In the first quarter of 2021, NCR completed acquisitions for total cash considerations of $126 million, as outlined below:

•On January 6, 2021, NCR completed its acquisition of Freshop E-Commerce Solution, Inc. (“Freshop”), a leading provider of grocery e-commerce. The Freshop acquisition further expands NCR’s software and services-led offerings to our retail platform and creates more value for our customers and new capabilities for NCR to run the store. As a result of the acquisition, Freshop became a wholly owned subsidiary of NCR.

•On February 5, 2021, NCR completed its acquisition of Terafina, Inc. (“Terafina”), a leading solution provider for customer account opening and onboarding across digital, branch and call center channels. The Terafina acquisition further expands NCR sales and marketing capabilities in its industry-leading Digital First Banking platform to drive revenue growth across consumer and business market segments. As a result of the acquisition, Terafina became a wholly owned subsidiary of NCR.

•On March 22, 2021 NCR completed its acquisition of certain assets and liabilities of Dumac Business Systems Inc. (“Dumac”), a leading POS solution provider for the quick service, table service, and convenient store markets. The

Dumac asset acquisition further expands NCR's software and services-led offerings, creating more value for our customers and driving revenue growth across the Hospitality segment.

Recording of Assets Acquired and Liabilities Assumed The fair value of consideration transferred was allocated to the identifiable assets acquired and liabilities assumed based upon their estimated fair values as of the date of the respective acquisitions as set forth below. The allocation of the purchase prices are provisional as of September 30, 2021 and may be subject to future adjustments as the Company obtains additional information to finalize the accounting for the business combinations. The allocation of the purchase prices is as follows:


In millions	Fair Value
Cash acquired	$	2
Tangible assets acquired	7
Acquired intangible assets other than goodwill	52
Acquired goodwill	86
Deferred tax liabilities	(8)
Liabilities assumed	(13)
Total purchase consideration	$	126

Goodwill represents the future economic benefits arising from other assets acquired that could not be individually separately recognized. The goodwill arising from the acquisitions consists of revenue and cost synergies expected from combining the operations of NCR and the respective acquisitions. It is expected that $9 million of the goodwill recognized in connection with the acquisitions will be deductible for tax purposes. The goodwill arising from the Freshop acquisition has been allocated to our Retail segment. The goodwill arising from the Terafina acquisition has been allocated to our Banking segment. The goodwill arising from the Dumac acquisition has been allocated to our Hospitality segment. Refer to Note 3, Goodwill and Long-Lived Assets, for the carrying amounts of goodwill by segment.

The following table sets forth the components of the intangible assets acquired as of the acquisition dates:


	Fair Value		Weighted Average Amortization Period (1)
	(In millions)		(In years)
Direct customer relationships	$	11	10
Technology - Software	36		8
Non-compete	1		1
Tradenames	4		9
Total acquired intangible assets	$	52

The operating results of Freshop, Terafina, and Dumac have been included within NCR's results as of the closing dates of the acquisitions. Supplemental pro forma information and actual revenue and earnings since the acquisition dates have not been provided as the acquisitions did not have a material impact on the Company's Condensed Consolidated Statements of Operations.