- Revenue: $876 million, flat year-over-year.
- Software Revenue: $397 million, flat year-over-year; increased 5% excluding adjustments.
- Services Revenue: $259 million, decreased 2% year-over-year.
- Adjusted EBITDA: $144 million; normalized $145 million.
- Adjusted EBITDA Margin: 16.4% reported; 16.6% normalized.
- Adjusted Earnings Per Share: $0.09.
- Restaurant Segment Revenue: $201 million, declined 9% normalized.
- Restaurant Segment Adjusted EBITDA: $62 million, increased 22%; margin 30.8%.
- Retail Segment Revenue: $156 million software, $187 million services; total declined 7% normalized.
- Retail Segment Adjusted EBITDA: $87 million, declined 24% normalized.
- Digital Banking Revenue: Increased 9% year-over-year.
- Digital Banking Adjusted EBITDA: Increased 17%; margin expanded by 260 basis points.
- Net Leverage: 4.1 times; $2.6 billion of debt; $204 million of cash.
- Adjusted Free Cash Flow: Use of $26 million.
- 2024 Revenue Guidance: $2.805 billion to $2.86 billion.
- 2024 Adjusted EBITDA Guidance: $355 million to $375 million; margin 12.6% to 13.1%.
- Pro Forma 2025 Revenue: Approximately $2.15 billion.
- Pro Forma 2025 Adjusted EBITDA: Approximately $430 million; margin approximately 20%.
- Pro Forma Net Leverage: Approximately two turns.
- Pro Forma Adjusted Free Cash Flow: Approximately $170 million; 40% conversion rate.
Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- NCR Voyix Corp (VYX, Financial) announced the sale of its Digital Banking segment to Veritas Capital for $2.45 billion, plus up to $100 million in contingent consideration.
- The company has partnered with Ennoconn Corp. for point-of-sale and self-checkout hardware, which is expected to improve lead times, innovation speed, and pricing competitiveness.
- A multiphase cost-alignment program has been implemented, resulting in the elimination of approximately 800 staff and $75 million in annualized payroll-related costs.
- Normalized software revenue increased by 5%, and software ARR growth was 6%, indicating strong performance in higher-margin revenue streams.
- The company signed nearly 300 new customers and saw a 35% increase in retail and restaurant platform sites, demonstrating strong customer acquisition and platform adoption.
Negative Points
- Normalized services revenue decreased by 2%, partly due to a $10 million out-of-period adjustment and lower onetime hardware implementations.
- The hardware market has not recovered as expected, leading to continued declines in hardware revenue.
- The company anticipates hardware revenue and related install services to be lower through the balance of the year due to macro trends and the ODM transition.
- Adjusted free cash flow for the quarter was a use of $26 million, impacted by transformation and restructuring initiatives.
- The company has identified approximately $20 million in stranded corporate costs that will need to be addressed following the divestiture of the Digital Banking business.
Q & A Highlights
Q: How are you thinking about capital allocation and steady-state targeted leverage once the transaction is completed?
A: We believe that 2 times net leverage is the right target. We will continue to invest in CapEx for our products and platform, consider tuck-in acquisitions to add capabilities, and potentially start share repurchase once we allocate the current proceeds. (Brian Webb-Walsh, CFO)
Q: Are there any considerations for stranded costs or dis-synergies associated with the transaction?
A: Yes, there are roughly $20 million of corporate costs that will become stranded. We will get coverage of a portion of that through the TSA in the first year, and it has all been considered in the modeling. (Brian Webb-Walsh, CFO)
Q: Are you changing your forecast for the restaurants and retail segments?
A: The $630 million to $635 million on the software line removes the revenue for Digital Banking. The $30 million to $35 million in services and hardware lines are related to retail and restaurants, reflecting hardware pressure and the ODM announcement. (Brian Webb-Walsh, CFO)
Q: How will the deleveraging take place over time?
A: We plan to pay off the Term Loan A and the revolver balance, take out a portion of the senior notes, and terminate the AR facility. There are no restrictions on how we use the proceeds. (Brian Webb-Walsh, CFO; David Wilkinson, CEO)
Q: What has changed in the hardware environment relative to 90 days ago?
A: There hasn't been a recovery in the hardware market. Large enterprise clients are sweating assets longer and not going through the refresh cycle. The strategic transaction with Ennoconn aims to reduce hardware variability. (David Wilkinson, CEO)
Q: Does any of Voyix's debt go away with the Digital Banking sale?
A: No, the Digital Banking sale is debt-free, and we retain the debt, which we will pay down with the proceeds. (Brian Webb-Walsh, CFO)
Q: How much of the hardware guidance decline is related to the ODM model versus broader market trends?
A: The majority is related to the macro environment and trends in retail and restaurants. About 30% of the decline is due to the ODM transition. (Brian Webb-Walsh, CFO)
Q: What aspects of the organization were most impacted by the cost savings initiatives?
A: We focused on non-customer-facing roles, particularly back-office corporate functions, to get ahead of the stranded costs from the two transactions announced. (David Wilkinson, CEO)
Q: How will the new outsourcing agreement impact the services side of the business?
A: The services business remains a core differentiator. We purposefully selected a partner that allows us to maintain servicing relationships with clients. Over 50% of our recurring services revenue is already on non-NCR Voyix hardware. (David Wilkinson, CEO)
Q: How are you accounting for the risk of disruption from these changes?
A: We had conversations with big customers, partners, and employees to minimize disruption. The feedback has been positive, and customers understand the changes and the strength it creates for us. (David Wilkinson, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
