NCR Voyix Outlines Strategic Shift and Q2 2024 Financials

NCR Voyix, during its Q2 2024 earnings call, revealed a strategic shift towards software and services aimed at fostering future growth. The company experienced a 5% increase in normalized software revenue, while services revenue fell by 2%. NCR Voyix completed the sale of its Digital Banking division for $2.45 billion, with the potential for an additional $100 million in contingent consideration. This sale is part of a larger strategy to decrease debt and streamline operational costs, which includes a partnership with Ennoconn Corp. for hardware solutions and a cost-alignment plan resulting in the reduction of 800 jobs, saving approximately $75 million annually. The company is prioritizing platform conversions, market share expansion, and further investments in its Voyix commerce platform, with goals of achieving a 20% EBITDA margin and 40% free cash flow conversion by 2025.

Key Highlights:

• NCR Voyix reported a 5% growth in normalized software revenue, while services revenue dipped by 2% in Q2 2024.
• The company divested its Digital Banking business for $2.45 billion.
• NCR Voyix partnered with Ennoconn Corp. for hardware solutions and cut its workforce by 800 to save $75 million per year.
• The updated outlook for 2024 includes approximately $2.15 billion in pro forma revenue and an estimated adjusted EBITDA of about $430 million.
• The company aims for a net leverage ratio around two turns and is contemplating future share repurchases.

Company Outlook:

NCR Voyix is shifting its focus towards software and services, targeting mid to high single-digit annual recurring revenue (ARR) growth in its retail and restaurant segments in the latter half of the year. The company aims to reach a 20% EBITDA margin and achieve 40% free cash flow conversion by 2025.

Challenges and Opportunities:

• Challenges: Services revenue showed a 2% decline in Q2 2024, with no recovery seen in the hardware market as major clients delayed hardware refresh cycles.
• Opportunities: The company is witnessing sustained growth in its services business due to prolonged asset usage by customers. The strategic divestiture of the Digital Banking business and the partnership with Ennoconn are expected to provide a robust framework for future expansion.

Financial Details:

For Q2 2024, NCR Voyix’s normalized software revenue was up 5%, and normalized services revenue decreased by 2%. The company updated its 2024 projections, expecting revenue between $2.805 billion and $2.86 billion. Hardware revenue is anticipated to decline due to the transition to the new model and ongoing macroeconomic trends.

Strategic Actions:

NCR Voyix implemented several strategic decisions: sales of the Digital Banking business, partnering for hardware manufacturing, and executing a workforce reduction to align costs with the new business structure. The company continues to reevaluate its cost structure to adapt to its leaner organization and enhance focus on software and services.

In summary, NCR Voyix is undergoing a significant transformation as it navigates a complex market landscape. The recent changes are intended to optimize operations, enhance shareholder value, and position the company for accelerated growth in the years ahead.