NCR Voyix Corp Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Digital Banking and Hardware Transactions: Completed sale of digital banking on Sept 30, with $2.45B gross proceeds. Used $1.8B to reduce indebtedness. Hardware agreement to become effective by year-end, Ennoconn to handle manufacturing, etc.
• Third Quarter Performance: Total revenue $708M, down 11% (hardware and related services). Software and services flat ex-one-time true-up. Normalized adjusted EBITDA $101M. Cloud native commerce platform sites ~70,000 (+25% y-o-y).
• Go-to-Market Strategy: Restructured sales teams, revised incentive plans, investing digital banking proceeds in solutions. Focus on upselling existing customers and new customer acquisition. Key revenue growth actions: restructured sales teams, invested in solutions, aggressive renewals/conversions, strengthened leadership, added proven leaders.

Segment Performance

• Restaurants: Reported and normalized software revenue was $87 million, flat year-over-year. Services revenue was $75 million, down 1%. Total segment revenue $211 million, down 7% normalized. Adjusted EBITDA $66 million, up 27%, margin 31.3% (normalized).
• Retail: Reported and normalized software revenue $153 million, down 3% (excluding one-time true-up, up 3%). Services revenue $193 million, down 3%. Total revenue down 12% normalized. Adjusted EBITDA $108 million, down 12%, margin 22.2% (normalized, flat excluding true-up).

Guidance

• 2024: Maintaining revenue guidance $2.805B-$2.860B and adjusted EBITDA $355M-$375M. Will reinstate free cash flow and adjusted EPS guidance in 2025.
• Digital Banking Proceeds: Intend to use ~$100M for share repurchase, $20M for NextGen cloud solutions.

Risks

• Market and Transaction Risks: Impact of digital banking and hardware transactions on financials. Potential risks related to market conditions affecting debt paydown and share repurchases.

Question and Answer

Q: Touch on platform strategies, conversion rates, P&L impact A: Platform strategy driving ARR uplift, aggressive renewals/conversions. Platform conversion at ~20%, investment in renewals to accelerate. Software has higher margin, platform subscription higher margin.

Q: Fiscal '25 guidance, seasonality A: Guidance for '25 in Feb, growing off pro forma 2024, details in Q4 call.

Q: Capital allocation, share repurchase, organic cash flow A: Used digital banking proceeds to pay down debt, aim for ~2x leverage. Intend $100M share repurchase, $20M for NextGen, consider tuck-in acquisitions.

Q: Hardware dynamics, customer feedback on ODM A: Hardware market flat, self-checkout demand strong. Customers positive on ODM model, sees it as next evolution, leverages Ennoconn for hardware fulfilment.

Q: Expenses, margin savings A: ~$35M from $105M cost-cutting program, corporate and other expenses expected ~$60M in Q4.

Q: Payment initiative, value prop vs competitors A: SMB: high attachment rate, one-stop shop. Mid-market/enterprise: total solution, total cost of ownership, leveraging partners for competitive rates.

Q: Sales comp changes, short-term vs long-term impact A: Implemented changes to minimize Q4 impact, real changes in Jan 2025. Focus on new customer acquisition, platform attachment, renewals.

Q: Value prop for new customers, end-to-end solution A: Focus on core retail/restaurant businesses, end-to-end solutions, platform tech, services capabilities, open architecture, scalability.

Q: Restaurant investments, positioning in market A: Accelerating platform capabilities in QSR, focusing on cloud enablement, marketing/commercial packages to connect customers faster.