NCR Voyix Corporation Price & Performance (VYX)

A copy of the earnings release and the presentation that we will reference during this call are available on the Investor Relations section of our website. Can be found at ncroix.com have been filed with the SEC. With me on the call today are Jim Kelly, Chief Executive Officer Brian Welt Walsh, our Chief Financial Officer Benny Tudell, President of Restaurant and Darren Wilson, President, Retail. This call is being recorded and the webcast is available on the Investor Relations section of website. Before we begin, please be advised that remarks today will contain forward looking statements. These forward looking statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from those expressed or implied by such forward looking statements. For additional information on these factors, please refer to our earnings release and our other reports filed with the SEC. We caution you not to place undue reliance on these statements. Forward looking statements during this call speak only as of the date of this call, and we undertake no obligation to update them. In addition, will be discussing or providing certain non GAAP financial measures today. Which we believe will provide additional clarity regarding our ongoing For a full reconciliation of the non GAAP financial measures discussed in this call, to the most comparable GAAP measure in accordance with SEC regulations please see our press release furnished as an exhibit to our Form eight ks filed this morning our supplemental materials available on the Investor Relations section of our website.

With that, I would now like to turn the call over to Jim. Thanks, Sarah Jane, and good morning. I would like to welcome all of you you to our fourth quarter earnings call. I am Jim Kelly, NCR Voyix's newly appointed Chief Executive Officer.

As you may know, I was appointed Independent Chair of the Board of Directors in October of 'twenty three, by Executive Chair, in May of last year. This fifteen month period allowed me to gain keen insights into our operations, products, customers and strategy before stepping into my new role. Ahead of discussing our fourth quarter results, I wanted to share my initial observations of the company. I accepted my current position as I believe we have a strong foundation upon which to execute our growth objectives and would like to elaborate on what I view as our key strengths.

Beginning with our competitive positioning, the company has an extensive track record supporting some of the largest global retail and restaurant brands, and is today the number one in self checkout and point of sale software for convenience and fuel grocery and restaurants. While the sales cycle for enterprise point of sale is very competitive, once committed, we generally maintain these relationships for over ten years sometimes as long as thirty years. This is clearly illustrated by our strong revenue retention of 98% over the last three years. The second is our platform, Over the past five years, the company has invested significantly in our platform to meet the growing demands of restaurants and retailers around the globe. We have several paths to connect customers to the platform. This enables existing customers to access real time insights and additional functionality avoiding a wholesale point of sale conversion. The success of this approach is reflected in our high teens revenue growth in the enterprise platform customers and represents 15% of total company software and services revenue. Further, we have approximately 74,000 sites on our platform an increase of 26% from the prior year and over 110,000,000,000 API calls at the end of twenty twenty four.

In restaurants, Aloha Cloud point of sale has been widely available for fast casual for more than a year with nearly 15,000 locations operating on our platform today, many of which are multi site businesses. For 2025, we have plans to launch several enterprise platform solutions two of which are in labs with customers. We are actively working with our existing base and beginning this year. [indiscernible] In retail, our newest self checkout solutions launched 2024 are available in The U. S. And parts of Europe and Asia Pacific. We expect full rollout globally by year end. Our point of sale and fuel are in pilot in both The U. S. And Asia Pacific with deployments scheduled for later this year followed by a release in 2026. As our suite of platform solutions are released to the market, we anticipate accelerating platform sites and transaction growth. The third difference is service. The needs of retailers and restaurants with our extensive global service offering. We leverage a team of 8,000 highly trained professionals to provide software management store implementation and hardware maintenance for our customers. Our unmatched remote and field service teams ensure 20 fourseven support particularly during the holiday seasons.

While historically these services were built on a fee for service basis or an annual contract, are now bundling services and software into a multiyear subscription And where services are standalone, we are offering a subscription contract. This approach is mutually beneficial as customers gain greater cost transparency while we improve resource allocation, and drive efficiency. And lastly, our payments opportunity. While the company has successfully executed its payment strategy, with small and midsized restaurants, we have been unable to meet the complex and diverse payment requirements of enterprise retailers with the existing third party authorization platform. As such, we have entered into a five year non exclusive agreement with Worldpay, a global leader in payment solutions to provide the necessary functionality to meet the needs of our enterprise customers beginning in The United States. For 2024, our U. S. [indiscernible] the majority of which relates to enterprise customers. Once implemented later this year, we will begin offering these payment capabilities to new and existing customers. In parallel to launching in The U. S, we will work with Worldpay to roll out these capabilities to our other markets. Finally, over the next two quarters, I will be traveling to meet customers strengthening our relationships and ensuring we are executing on product deployment and service expectations.

The focus on urgency and accountability together with the actions taken last year to rightsize the balance sheet and streamline operations, will position us better to leverage our core strengths and achieve our growth plans. With that, I will turn the call over to Benny to provide an update on restaurant [indiscernible] Thanks, Jim. In the fourth quarter, our restaurant business signed more than 200 new software and service customers including an enterprise restaurant. As we also converted more than 135 existing customers to our platform.

Our platform and payment sites increased by 68% NCR.

Software ARR increased 3% and total ARR increased 4% In our enterprise division, we won a multiyear platform and payments contract with Yogurt Land through a competitive process to service their 200 stores across The U. S. We will provide Aloha Cloud point of sale in addition to data and analytics capabilities integrated online ordering, and third party delivery management. Our proprietary software and payment solution will enable Yogurtland centralize store data and online ordering, while reducing in store hardware and cost of ownership. As you highlighted earlier, we're focused on converting existing software customers to our platform. For example, in Q4, we converted Brinker International a leading casual dining restaurant company and operator of Chili's and Maggionos to enable them to minimize costs in this eruption they continue to grow their brands. Internationally, we signed an $80,000,000 end to end services contract with one of the largest global fast food chains for their business in The UK and Ireland. We displaced the incumbent provider through a competitive process due to our comprehensive managed services offering. Beginning this year, we'll provide this customer with NCR support and efficiency to improve services outcomes for franchisees, restaurant crew members and corporate employees.

We look to expand our services agreement with this customer across their global footprint over time. Finally, our payments attach rate remains strong with essentially all new customers attaching payments to their contract this quarter. As we implement our processing agreement with Wellpay later this year, we'll focus on aggressively cross selling payments into our enterprise base to drive additional growth. Will now turn the call over to Darren to discuss our retail Thanks, Benny.

Morning, everyone.

Like Jim, I briefly wanted to introduce myself as the President of our Retail segment Following a career in payments, I joined NCR Voyix initially in a strategic role before being appointed President International in November of twenty twenty four. These roles provided me excellent insight into the company its customers and operations. Now turning to our performance. In the fourth quarter, our retail business signed more than 35 customers, leading to nearly 700 additional sites. Our platform sites increased by 46% Software ARR increased by 5% and total ARR increased 6% in the quarter. As an example of our platform execution, we renewed and expanded our agreements with two large grocery chains in Europe and The UK to upgrade their existing point of sale to our platform later this year.

Further, we will provide self checkout and value added platform solutions in addition to help desk services, enhance support for these customers. Similarly, we signed a new five year contract with a national grocery chain in Japan, provide our point of sale solution connected to the platform across their store footprint. Finally, as we announced earlier this month, we renewed and expanded a longstanding government relationship with a defense commissary agency for a total contract value of $335,000,000 Under the agreement, we will provide software support, including catalog, ordering, receiving, pricing and point of sale. Addition to hardware maintenance, for nearly two fifty military sites around the world. As Jim outlined, we will continue to focus on winning additional customers expanding our existing agreements at the time of renewal as we move through 2025. And with that, I will turn the call over to Brian. Brian? Thank you, Darren, and good morning, everyone.

Before discussing our fourth quarter performance, I would like to provide a brief update on the hardware ODM implementation.

Our team and Enecon are working very closely Anika needs to fully replicate our infrastructure and technology before the ODM agreement can become operational to ensure there is no disruption to our customers. As such, we expect to continue to recognize hardware revenue for most of 2025 which will be reflected in our full year guidance.

Exiting hardware will improve our recurring revenue composition approximately 60% to 75% once the ODM is operational. As part of the company's continued shift to a recurring software and services model, in addition to hardware, we are exiting certain one time software license which totaled $60,000,000 for 2024. This will further improve our revenue composition to 80% recurring. The profit contribution related to these certain one time items has been offset by cost reductions we are implementing in Q1. We are committed to becoming a primarily recurring software and services company as quickly as possible continuing to deliver an end to end offering to our restaurant and retail customers. Lastly, as it relates to our normalized financial measures, we expect the two remaining Allios countries to be exited during the first half of this year. Countries are included in our reported results for the fourth quarter and full year 2024.

However, we'll continue to exclude the revenue and adjusted EBITDA impacts on our '25 guidance.

Once exited, the financials from these countries will be reflected in discontinued operations for all historical periods.

For the quarter reported revenue was $682,000,000 normalized revenue was $678,000,000 reflecting a decline of 14% due to the expected weakness in hardware sales.

Software and services revenue declined 2% to $521,000,000 dollars due to the $11,000,000 prior period impact of the now terminated commercial agreements with NCR Allios.

Excluding the impact of these agreements, software and services revenue increased 1% driven by growth from our hardware maintenance platform and payments revenue streams. Software revenue decreased 3% to $251,000,000 due primarily to a decline in one time perpetual software license revenue, was partially offset by revenue from our platform and payments revenue streams. Services revenue of $270,000,000 was flat year over year due to the previously mentioned commercial agreements. Excluding the impact of these agreements, services revenue increased 4% which reflects the increase in hardware maintenance revenue. Adjusted EBITDA increased 75 percent $114,000,000 in the fourth quarter as margin expanded eight fifty basis points to 16.7%. Normalizing for the impact of the digital banking stranded costs in the prior year adjusted EBITDA increased 58% to $112,000,000 NCR significant improvement was largely driven by approximately $120,000,000 of in year cost actions executed in 2024 as a result of the company exiting non core businesses. As of the end of the fourth quarter, we had approximately 74,000 sites on our platform an increase of 26% from the prior year. 45% NCR. Let's turn to our segment results for the quarter. Beginning with restaurants, software revenue increased 3% to NCR and services revenue increased 3% to 72,000,000 driven by payments and hardware maintenance growth.

Total segment revenue declined 5% to $211,000,000 due to the expected decline in hardware. Adjusted EBITDA increased 36% to $68,000,000 as margin expanded nine eighty basis points to 32.2%. This improvement was driven by software and services revenue, growth coupled with our efficiency initiatives. Turning to retail, software revenue declined 3% to $155,000,000 while services revenue increased 4% to $193,000,000 The growth in services revenue reflects hardware maintenance growth, While the decline in software reflects the decrease in one time software license revenue, Total segment revenue declined 15% to $461,000,000 due to the expected decline in hardware sales. Adjusted EBITDA increased 13% to $102,000,000 as margin expanded five sixty basis points to 22.1%. Improvement was driven by a combination of services revenue growth and our efficiency initiatives. Lastly, corporate and other expenses decreased 25 normalizing for the spin in digital banking impacts in the prior year, corporate and other expenses decreased 16% NCR. These results reflect the cost initiatives we implemented in 2024 and lapping spin related to synergies this quarter. Adjusted free cash flow unrestricted was $72,000,000 for the quarter before considering $27,000,000 of cash expenditures related to restructuring and other strategic initiatives. Represents a conversion rate of nearly 64% when excluding restructuring.

We initially anticipated tax payments of $375,000,000 pertaining to the proceeds from the digital banking sale last year. We have updated our estimates based on tax planning have lowered the amount to $320,000,000 of which $20,000,000 was paid in Q4. We ended the quarter with 1.6 turns of net leverage based on $419,000,000 of pro form a 2024 adjusted EBITDA. During the quarter, we repurchased 4,000,000 shares for approximately 56,000,000 under our 100,000,000 share repurchase program. In February, we completed the remaining repurchases purchasing 7,300,000.0 shares in total. As we move into 2025, we expect to maintain [indiscernible] at or below two turns. As we consider the allocation of future cash flow, we will prioritize investments in our platform and related products, in addition to considering both common and preferred share repurchases with excess cash. Turning to our outlook, we are providing revenue guidance inclusive of hardware revenue as discussed, we expect the Anicon ODM to become effective at some point in the second half the year. At which time, we will update our guidance to reflect only the related commissions, on a go forward basis. As such, we expect to range from $2,575,000,000 to $2,650,000,000 which reflects a 9% to 6% decline in driven mostly by hardware as shown on Slide 11 of the presentation.

Our core software and services revenue adjusted terminated commercial agreements with Atlios and ceasing one time software and services agreements, is expected to grow in the low single digits in 2025. ARR and platform sites are both expected to increase mid to high single digits in 2025. Currency neutral adjusted EBITDA is expected to range from $420,000,000 to $445,000,000 representing an increase of 21% to 28% NCR. Adjusted EBITDA margin is expected to range from 16.3% to 16.8%. Our outlook does not include any potential impact of the pending tariffs given the current uncertainty regarding the timing and ultimate structure, it's and the extent to which the company can mitigate the impact. Non GAAP diluted earnings per share is to be between $0.75 and $0.8 This is based on a fully diluted weighted average share count of approximately 162,000,000 shares and an expected tax rate of 26%. Adjusted free cash flow unrestricted for the year is expected to be between $170,000,000 and $190,000,000 when excluding $55,000,000 NCR restructuring, dollars 300,000,000 NCR taxes related to the digital banking sale and $20,000,000 of accelerated product investments being funded by the digital banking proceeds. This reflects an adjusted conversion rate of 40% to 43%.

Our adjusted free cash flow unrestricted guidance does not include the which we now anticipate will primarily benefit us in 2026. At year end, total inventory was $2.00 $8,000,000 comprised of finished goods and raw materials of $89,000,000 and service parts of 119,000,000 Once the ODM transition is complete, as inventory transitions to Anicon, we anticipate a cash flow benefit of approximately 50% of the 89,000,000 when taking into account accounts payable. The remaining service parts inventory will remain with the company to support our services business. Finally, I'd like to provide some color on the first quarter. Q1 revenue is expected to decline in the mid teens due to a significant hardware refresh from one of our largest retail customers in the prior year period. We expect Q1 adjusted EBITDA to demonstrate high teens growth versus Q1 twenty twenty four reported results, which reflects cost actions taken in 2024.

Adjusted EBITDA is expected to improve sequentially as we go through the year reflecting our normal seasonality in addition to the timing of revenue, and our 2025 cost initiatives. With that, I'll turn the call over to the operator to begin the question and answer session.

Operator?

Thank you. We will now be conducting the question and answer session. The first question is from Kartik Mehta from Northcoast Research. Please go ahead.

Hey, good morning.

Jim, maybe just on the payments agreement that you announced, it seems like that could be a significant opportunity for you going forward.

Maybe if you could just elaborate on timing of when you think you could start seeing a benefit of that and how long that could take in terms of achieving kind of full benefit Good morning, Kartik.

Yes, as you saw in or heard in the comments that I made, dollars 500,000,000,000 is a big number. It actually translates into 12,000,000,000 transactions Unfortunately, while I think it was a good move by Mike, the prior CEO, two prior CEOs ago, in bringing payments to the company because software, as you know, has been aligning with payments significantly over the last several over the last ten years. Unfortunately, the JetPay platform just did not have the capabilities It could support restaurant, but it could not support the retail organization just given the complexities of different Fuel issuers and other complexities of the restaurant space. So my expectation is that this will be live by the end of the summer at the latest. Because we'll be migrating some of the accounts that are currently with the prior provider on to JetPay excuse me, on to Worldpay. And then in addition, as soon as the system is operational, which could be as early as the spring. Before the conversion. We'll start migrating we'll start selling new retail customers domestically And then also as I said, we're going to start rolling it out to Latin America and Europe to take advantage of their footprints in both regions.

And just to give you an order of magnitude, if you go back to our my previous company EVO, we had close to $700,000,000 of revenue and we did about $150,000,000,000 in volume. So this is multiples in terms of size. And again, as I said, this is a completely new revenue source for the company. It's one that I think they would have liked to have achieved previous. We've worked on this for a number of months and fortunately I think Worldpay has been a great partner to work with to get to an agreement that will enable us to sell [indiscernible] along with our sales of product and services into our base as well as new customers.

Thanks, Jim. And just as a follow-up, Darren, obviously new role for you, congrats on that. But I was wondering if as you've looked at the business, kind of one or two opportunities you think you can take advantage of in 2025 Hi, Kartik. Thanks for the question. Yes, there's huge opportunities across all our markets. The kind of pivot to our next generation solutions and recurring revenue model, especially in the services space as well, is a real untapped potential. So we've got a number of customers in the pipe in terms of our future state product, which are going through implementation now, which is why we didn't name any of them in the quarter. But I think you'll hear over the next couple of quarters announcements of some pretty significant next generation opportunities that include both our next product line, but also our services opportunity. So and then bolt on later in the year the payments functionality too. Plenty of channel opportunities there. Perfect.

Thank you both. Appreciate it. Thanks, Aric. The next question is from Will Nantz from Goldman Sachs.

Please go ahead.

Hey, I appreciate you taking the question. So first question on the software and services outlook. I hear you on the exiting of the licensing arrangements and the top compares that generates for the year. Could you talk about just what is the remaining exposure to software licensing? And how do you how do you think about sort of the cadence of exiting these structures over time? How long would this be a drag on total revenue?

Thanks again for the question. I think what we're laying out is a direction that we're heading. So as we said in the script, we kind of pro form a to what the impact would be Would there be some one time licensing that will occur this year? I'm likely that will be the case, but the direction I've given to the sales organization through both Penny and Darren is that for the company as we look forward, we're going to sign up customers on a subscription basis. For the reasons that we stated in the script, because in the end, it's better for them and obviously it's better for us so that we have better line of sight NCR has been around for a long time. And it seems like the model that was in place years ago just perpetuated itself and was what was sold previously. But we're going to take a more direct and aggressive stance going forward with new customers and even the existing customers The company had already started this path David had this underway last year. And we're just going to make a bigger push going forward. And that's why Brian and his prepared comments identified the impact.

So it's not a large number, but it obviously has some impact. I think Brian wants to add to this. I would just add that at the end of the year, if we execute we think we're going to, there's probably 30 to $40,000,000 of software, one time software license revenue still left but it will be mostly gone.

Got it. That's helpful. So presumably, if you continue to exit these things, the drag in 2026 is lower than the I think $60,000,000 that you outlined today?

Yes, agreed.

Yes, if you look at you look at what's occurred last year, lot of this was the restructuring efforts after the spin selling digital banking, We would have liked to have ODM done by the end of the year, but some technology challenges got in the way and ultimately want to make sure that our customers are see no impact to this change. But there's other aspects of the business now on the sales side as well as repositioning how we're going to be a software product company going forward and those steps are being implemented this year.

Got it. Okay. That makes sense. Okay. And then the second question was just on the hardware outlook. So understanding there's some gross versus net that we need to think about on the revenue outlook [indiscernible] Is there any way you could share on a like for like basis how the outlook compares to the $100,000,000 of revenue you gave pro form a for the ODN deal.

Previously? And just as a follow-up on the first quarter outlook, I think last year you called out pretty significant headwinds from people delaying hardware refreshes. Is that still happening? Is that why you're calling out another tough comp in the first quarter this year?

Yes. So first on the question around The pro form a revenue, if we take the gross hardware and move it to net. The metrics file that we published, you can see how we finished the year with that metric. And we had said the pro form a business would be $150,002,000 in revenue. And we ended up at 2,171 We said that the pro form a EBITDA, we were targeting $4.30, we ended up at $4.19. So the margin was about 19.3%. So we essentially performed in line with what we said. You think about hardware for this year, we're giving our guidance based on gross hardware. Just because we anticipate spending most of the year selling hardware directly. And you can see if you look at the midpoint of our guidance, we're down about 22%. But I would say that the pro form a revenue has held up in line with what we expected last year. When I think about hardware in general, yes, last year and this year, we're having pressure because people are doing less refreshes, our customers are doing less refreshes. But specifically, if I think about the cadence of this year, we had one large customer that did do a lot of activity in Q1 last year.

That now their activity has spread more between Q2 and Q4. And so that's giving us a timing issue on hardware. So the rate of revenue decline moderates as we go through the year. Because of that and as we ramp deals that we sold in the second half of last year around software and services. A lot of our big deals that Darren and Benny mentioned ramped in the second half. Thank you. The next question is from Charles Nabon from Stephens Inc.

Please go ahead.

Good morning and thank you for taking my question.

My first question is on the government contract.

I think you had said it's five year deal for three total contract value of $335,000,000 Could you give us a little detail in terms of how much of that is incremental? I don't know if you already had a relationship with them. And that the revenue recognition there? [indiscernible] meaningfully.

So we're getting incremental revenue from that contract this year.

And it starts to ramp towards the end of the first quarter in so we'll start to see revenue pick up.

Got it. And just a quick follow-up on the guide. In terms of the revenue growth, how should we think about that from a recurring versus non recurring standpoint? And then secondly, if you could just touch on any remaining efficiency initiatives you have in place and the potential impact on margins in the coming year as well?

Yes. So recurring revenues grow expected to grow nicely in both retail and restaurants. This year, 4% to 5%. And so all the pressure is coming from the non recurring the hardware that we've talked about partially because we're exiting it on purpose and then just the hardware being down the pressure from the install revenue. So that's how we see that kind of playing out. And then when we think about cost, there is about $100,000,000 of cost actions we're taking this year. 70% of that is around our vendors. We've been working a vendor program for the last four or five months that involves in sourcing key functions and just finding to to our headcount and that's mostly being actioned in the first quarter. So those cost actions will ramp we go through the year and that's the timing of the revenue kind of moderating. The cost actions ramping is why EBITDA will sequentially improve as we go through the year.

And just to this is Jim. Just to add some color to that. So that is those actions now have a lot to do with exiting the one time services that the company I think became accustomed to over the years. As opposed to teams of people supporting our existing customer base. I think that's as I said in my comments, that's clearly one of the differentiators for our company, 8,000 people thousands of which are in the field supporting our customers. And it's not feasible to support these large multinationals without a team of people on the ground. In their locations, delivering service whether it's delivering equipment or delivering solutions on software and implementations And to the extent in the past, some of the services provided were more onetime in nature as we're shifting away from a onetime business to a recurring business. That's where you're seeing these reductions come. And they didn't take place last year, largely because we had existing SOWs that were in place. So it wasn't feasible, but as we start this year and reposition the company, for a more recurring model, then there's obviously some consequences associated with that.

Got it.

Appreciate all the color.

Thank you. The next question is from Ian Zaffino from Oppenheimer and Company.

Please go ahead.

Hi, Graeme. You guys just talk about the retail environment right now and expectations for growth there? That's a pretty broad question. Thanks, Ian.

Obviously, we're covering the globe in terms of retail coverage. So to zero in on one territory market, is is interesting and we can explore that offline. That said, the despite the hardware situation that Brian outlined we're actually seeing very active conversations in on all of our markets, both in terms of expansion [indiscernible] in terms of services, solutions or software solutions from existing customers, but a lot of active new logo opportunities out there with customers looking to upgrade their estate or upgrade their efficiencies in their estate but also adding new lanes, new sites, etcetera. So it's having been at the last two retail trade shows, both in New York and in Germany. The The flow through on stands was probably record level in terms of interest [indiscernible] kind of next gen type solutions and very much under the services efficiency Shrink continues to be a significant issue in grocery or any self checkout environment. So there's a lot of interest in helping retailers kind of improve both their efficiencies and their losses. So and we have the product range and solution range to cover that. So it's buoyant, I would say.

Yes. I would add to that. If you look at go back to the comments I made on the growth in the platform and itself, 26% growth in transactions coming from the platform. That is representative of our existing estate of customers that are more and more accessing that But additionally, new customers interested both in the platform and our next generation solutions. And it's not just on the software side. As I was walking in here this morning, I just start to the new Head Of North America NCR he was talking about a very, very large RFI or RFP that we just entered in The U. S. For a customer we have not had previously. And that's around the services side. And Again, I think maybe that's a little bit under appreciated for the company is that services business here is a significant part of our differentiator in the marketplace. The combination of the two, I think, sets us apart. So my expectation is technology is always driving very heavily over the years to make sure that we have those products. I think we've been maybe a little late in getting some of them to market. But as Benny said, and Darren, there's a lot and also in my comments, there's a lot of that coming to market this year that we can begin discussing with customers.

So we're modestly optimistic about the prospect of overachieving just given what we've seen in the early days of this year.

Okay.

Thank you very much. Next question is from Dan Perlin from RBC Capital Markets.

Thanks. Good morning. Jim, I appreciate all the comments you opened up with in your prepared remarks. My question is, Now that you're back in the CEO seat, and given kind of the change of management here, what are you hoping to accelerate or is there strategic priorities that had changed as a result like the immediacy with which the switch occurred suggest that you guys got to accelerate something. So I'd just love to hear your thoughts there.

Well, thank you, Dan. It has been a long time. I think the last time you and I talked, I think we were staying in Vegas at some ETA show or something. That's right. Okay.

That's right, I do. Actually, it's actually a sad story because when I left there, my general counsel was looking at me like, what are you going to say? But when I left there, I had a kidney stone, which I had no idea what a kidney was and I would highly recommend everybody to drink a lot of water because kidney stones are incredibly painful.

Anyway I will take that under advisement.

There you go. You didn't ask that question, but It brought back a very bad memory, even though our conversation was very pleasant. The skinny stone was not. Anyway, So I think circling on not just because I'm here and and Darren on the payment side, we've added a number of payments people The alignment of payments and software, as I said earlier, has been ongoing for many years. It was a big thrust for us at EVO.

Think it's something like I said, Mike, made an early investment payments in and it's been impactful to our restaurant business. It's just unfortunate that the product set at JEMPE, which is not broad enough in the effort to try probably more than they wanted to invest I think with Worldpay, that is a big opportunity.

Charles, Adam, the team there have been great to work with and we're looking forward to a very strong partnership going forward. And I think on the our retail side, think that will take some of the pressure off the top line as we implement across The U. S. And then as we said in these other markets. I think the other piece is historically company was a very large $8,000,000,000 company as you know with lots of different components to it, now the big ATM business that is separated. I think there was a very big focus on servicing the base probably less than focusing on the new customers. There is somewhat of a finite number of large enterprise organizations, but we clearly do not have [indiscernible] Or nearly close to that.

So the message at the sales kickoff, which took place in January, was about growth and focus on as much servicing our very important base, but also finding more and more customers I think the combination of those two factors, I mean, we have some customers today that [indiscernible] our delivery date. So that's also a big aspect of it, which will also drive additional growth because you can kind of think of this as backlog. Whereas as we complete the first rollout, then the rest of them follow and that's additional revenue. So think we have a number of areas that will be impactful this year and clearly into 2026. Unfortunately, payments aren't going to start immediately. As I said, it's probably more like the summer, end of the summer, where it's fully implemented and converted, but we'll start selling that as quickly as possible. One last thing. I think the diversion of the spin obviously was not helpful to the organization going into 2024. Plus the sale of digital banking and ODM and that took a lot of resources and attention away from what I just described. I think with that behind us, we have one focus, which is growth.

And growth is going to come in a number of different forms. It's part of it is just executing and getting everybody circled around that objective.

Excellent. Just a quick follow-up on the payment component there for a moment.

Understanding that on the enterprise side, obviously that's being handled had been handled previously by other processors and maybe we'll pay on some of them on the restaurant side. But the question is, I just want to make make sure we're clear, the revenues that were being generated in payments in and around the enterprise side of that equation. Clearly, you didn't have a rev share agreement with the prior process or you did? I'm just trying to make sure I understand the equivalality of it.

No. Previously, I don't remember what year it was, maybe 'nineteen or so. Jefe was acquired. So that was a public company. The entirety of it. There wasn't a rev share. There was the traditional kind of ISO structure that was now owned by company. So they were in the payments business. That was divested in I think '23 But all that got divest all that was divest were those accounts that were not software customers of NCR VoyX NCR. So the customers that were pre existing JetPay customers, those were sold together with the authorization platform. The rest of the infrastructure of the payment space stayed with the company. And so we've continued to be in payments It's just we're utilizing a what used to be ours, but a third party platform now because it was sold to to a third party and there was no rev share with someone else. We do not have a rev share structure In the new agreement, it is a fee for service basis that you would expect. [indiscernible] And Dan, it's limited only to an authorization system. So the rest of the infrastructure the company kept And so we have the leverage that you would expect in payments.

Fixed costs, low variable costs, high fixed costs. So we have all the fixed costs. So the more transactions we put over that fixed cost, it's just incremental margin to the company.

Perfect. That's great. Thank you so much for that clarity.

Sure. Thank you. Next question is from Matt Summerville from D. A. Davidson.

Please go ahead.

Thanks. Excuse me. Couple of questions. First, I want to make sure I'm clear on the ODM A few months ago, the posturing was basically like, all right, everyone adjust their models, you need to put in kind of this net $100,000,000 sort of number for hardware. Have the cutover done by the end of the year. To now where the cutover is going to take the majority, it sounds like, of this year and now models need readjusted again. So help me understand what events kind of took place or what maybe was misunderstood initially about this transition? And then I have a follow-up.

Okay. So it wasn't directly me, but I was here as the Executive Chair at the time. Obviously two big projects going on. The sale of the digital banking business, the $2,500,000,000 for that business and at the same time, ODM And yes, you're absolutely right. The expectations, I wasn't on the call, but I'm assuming that the expectations as you just We're set that we would get this done by the end of the year. And to some extent, a big part of that was done. The European and Asia Pacific market minus Japan was ready for was fit for service There was a discussion internally about going ahead and launching half of it. I was uncomfortable with that in my previous position. That I believe and still do that this needed to be all or nothing. Because the last thing we need to do is questions or concerns with our customers and that's our primary interest is to make sure that is completely transparent to them. Challenge turned out that mean not to get in over the weeds, but the the provider The provider system is an SAP system, our system is an Oracle system.

And the largest U. S.-based warehouse distribution center, which is I think in [indiscernible] SAP system was not able to insufficient time to be able to manage the complexities around servicing our customers out of the Nashville facility. And so they have pulled back they're now using a third party package that I believe they've already acquired. I met with a couple of weeks ago. And that's being implemented. So we could have gone halfway, but it would just more confusion obviously to you guys to kind of split it in half. But more importantly, as much as we care about you guys, we also care about our customers pretty dearly. And we did not want to create any confusions in that regard. So the exact timing I think we're just hedging We didn't get the first one right. So we're just hedging that it's going to take well into the summer and I want to make sure that we've tested and tested and tested and pilot and tested to again to make sure that we don't have any disruption to the company. As you saw in what we put out, you still have the net piece that is still the direction that we're heading.

The company, Enercom, is fully committed I met with the Chairman, CEO and the local leader I said a couple of weeks ago, And yes, it's very it's disappointing to you. It's extremely disappointing to us as well. I think as well for our sales organization because they too thought that this was going to happen and we have a number of customers mean, employees that are kind of tied up in the mix that are supporting that business that we're told one thing and now we've had to tell them something else. So So we take responsibility that we didn't get it done. Together with our partner. But just like digital banking, I mean they haven't pulled out of our infrastructure yet either.

They're going to be here for probably another through the balance of this year and probably a little bit into next year. What's most important in these transactions is they go smoothly. That we don't rush them out. And create a problem for ourselves or for the third party and in particular for our customers.

That's very helpful color. Just as a follow-up, I wanted to touch on the overall retail market and environment. Specifically, we're hearing here in North America, one of the, if not the largest storefront retailer is completely disintermediating the front end. And looking to unbundle to the extent that they can. They're bringing point of sale software in house, which is sort of kind of an unheard of move at least historically for this particular retailer. And I guess I'm wondering if some of that type of behavior has become NCR disruptive to sales cycles, disruptive to the business, Just to the extent you can give a little color and insight into this sort of disintermediation and unbundling whether this is becoming a broader trend? Thank you.

Unfortunately, and Darren can add to this. Emerge, I don't have a tremendous amount of experience watching this movie, but I've heard the stories from David and others here.

I think as companies get larger, they feel as though that it's worthwhile to have it their way. And I think some have done it and maybe some have done it successfully. But at the same time, they're not necessarily experts in this space. They do something else. This is just tangential to what they do and they think this is and obviously I think it's representative of something that I've seen here and I mentioned in my comments, attrition rate at 2%, retention at 98% NCR, It's hard to do what we do. It's extremely hard. And we're investing hundreds of millions every single year either in OpEx or CapEx [indiscernible] build and support build new systems and support systems, the lifecycle of technology changes constantly. So [indiscernible] for the situation that you described, I don't know who you're talking about directly. I mean that can clearly be the case [indiscernible] examples of it.

But I think there's also examples of those who have done it that reach out to companies like us and we've had that happen more recently. And need the expertise that we provide. We have 13,000 people. We have 4,000 people that just work in engineering alone.

Plus the product team. These are highly skilled professionals who understands the complexities of making what seems to us as consumers super easy at the point of sale. How hard it is to actually pull it off.

So yes, that could be the case. I don't have anything as we sit here today, I don't have any indication that any of our large accounts actually some of the biggest ones I'm heading to The UK next month. Next month, in a couple of weeks, I guess next week. To talk to one of our large European accounts that is relying heavily on us to deliver their next gen solution to their stores and to their company. And one of the things and Darren can amplify this that we heard from them is how important point of sale is to their overall solution. [indiscernible] it could happen. Do I think it's a trend? I would be suspect that it would be a trend, but I'm also new at this. I'll let Darren see if he wants Thanks, Jim.

I think the reality is it is a trend that's happened in the last decade and you can repeat that in acquiring retailers have wanted to self acquire, self process self serve. And the they as many as have done it and that's a very limited number. As many then have actually reversed and pulled back out. Because they realize it is, as Jim said, it's extremely costly It's extremely investment heavy. But there are extremely large national or multinational retailers that will want to go down some form of that path. I think as we signposted, kind of the next gen software and the services agenda are some real strength points for us. So actually many retailers are out their entire help desk infrastructure to support if they're changing a hardware or a software environment. Equally, our software solution we have unique product called Edge. And about 40% of our workflows through Edge are actually enabling third party applications. So many retailers are looking, as I said, about shrink solutions. [indiscernible] using camera systems to capture inadvertent or deliberate fraud.

Some retailers are wanting it looking at biometric payment type solutions, be that fingerprint face etcetera. To do that kind of stuff in house, is pretty expensive and challenging. And as enabling that, even if they take some partial step, our platform and our Edge solution will be unique to support them whatever journey they take. But we'll see that trend in terms of limited cases, but I don't think it's a material trend that we need to be seeing. Yes, just two other points. The platform that you hear a lot about from you've heard in the last call and don't have many calls going back. But I think that is also a very differentiated solution where you can add functionality and applications to that platform [indiscernible] specific customers as opposed to maybe the legacy way, which we still have many customers which was bespoke development on-site that only works specifically with your application because it's so customized, moving to a trying to get new features added to it becomes increasingly complex. So without pursuing a similar [indiscernible] solution as we have now for our next generation, I think a customer who or a retailer who builds it bespoke to them, I think we'll be as Darren was just saying, we'll be disappointed because technology is constantly changing.

So you need to have the flexibility to embrace the newer technology that comes to market.

Understood. Thank you guys for the call.

Thank you.

The next question is from Parker Lane from Stifel. Please go ahead.

Hi, good morning and thanks for taking the question here. Jim, you've had a target out there under prior leadership of about 40% of the installed base on platform by 'twenty seven. I was wondering with you stepping into the role, what your updated view is on the meet or exceed the pace of that target of getting 40% on platform?

Yes. When they offered me the position of what he told me about a 40% target.

I don't want to make a I don't want to say yes or no to that. It's not something that I've heard of previously. I think the pace of which we're growing at 26% on the platform, I think in the context of 40% of our customer base onto the platform is that reasonable in another two years or three years? Yes, I think it seems to me to be reasonable. I think as I said earlier, there's the entire focus now, it's my history has been about buying companies. Both at EVO and Global. That's not the model here. The model is executing on investments that have been made here over many years and I think those investments have been have been the right investments. So now it's really about executing and that's a challenge that [indiscernible] so I don't see that as don't see that as out of line for expectation setting.

Understood. Appreciate the feedback. Thanks.

Thank you. The next question is from Eric Woodring from Morgan Stanley.

Please go ahead.

Great. Thanks guys for taking my questions. The first one, Jim, I'm not sure if I missed it at the very top of the call, but obviously this market remains very dynamic let's call it geopolitically. And just can you just maybe help us understand, I realize most of this business is shifting to software and services. Just with the ODM kind of transition delay, how do we think around the risk of tariff there? Just any framework that you can help us provide if there is any risk at all or how to think about that? And then I just have a quick follow-up. Thank you.

Yes, I was watching TV when I got home last night after a late dinner. And It sounds like they're stretching out again [indiscernible] April, is that what heard him say.

On TV.

He just said today, just a couple of minutes ago, Mexico Canada tariff start March 4, China additional 10% on March 4.

So this was like a few minutes ago, which is the only reason I ask.

Well, I don't have a TV on in here. So I didn't see that. Look, if it was as Brian, I think said in his comments, we have the ability to in our contracts I haven't looked at every single one of them, but generally speaking, to be able to pass those on, I mean, that's that's not good news for the customers because I think customers will feel the same way and hardware a very low margin business for us. So I don't think we want to be in the business of absorbing a 25 tariff I don't want to speak about politics associated with tariffs or if it happens, then we'll address it and we'll update either guidance or otherwise, but for right now, we're taking the position that await and say more than changing guidance as a result of comment that may have sounds like was made this morning. I guess last night it sounded like it was April. So I figured we had a sense or so, I'd This is a new administration. So see what happens.

No, totally understand. Just wanted to get the latest. So, completely understand. I appreciate that perspective. And then then maybe Brian, can you maybe just better help us understand longer term, I'm just looking thinking directionally about the kind of path of monetization [indiscernible] increasing mid to high single digits in 25%, but software and services up low single digits when you adjust for kind of the one timers and the licenses. When should we just kind of expect maybe those growth rates to converge a little bit more? Is it really just about layering on all these subscriptions to get to that point? Or Or is there anything else that's kind of holding back kind of the actual reported revenue relative to some of the greater success you're having in the growth of again ARR and platform sites? Thanks so much.

I'll take a piece of that and then Brian can add. We have 8,000 people, not all of them in the field. We have 8,000 people, a lot of them are billing [indiscernible] and services to that. So that's a model that we're addressing. Part of that is subscription, but there's other aspects to it. If you look at just the pure software side, the revenue coming from software, that is growing fast what much, much faster. The issue really relates to how we address our service business in terms of how we're compensated for the the commitment and effort that we make to to service our customers on-site. That has more of an impact than the software aspect. I don't know if you want to add. I would just say the positive is when the ODM agreement goes live, we'll be 80% recurring We expect that recurring to grow 4% to 5% this year. We talked about payments today. Continuing with our platform, our next gen products. There's a lot of things that help us going forward as that non recurring becomes smaller.

And again, on the payment side, because I came from payments, but payments and software have aligned for a number of years as I are repeating again. And so I would expect you'll see another significant driver of revenue similar to others in our industry. That will will help accelerate ARR and just the overall growth These are multiyear contracts that you enter into in the payment space.

And Jim, maybe if I could just follow-up on that very quick quickly. Was the point you were making at the top of the Q and A when you were talking about having close to $700,000,000 with $150,000,000 in volume, what you're trying to do is kind of compare to the fact that earlier in the call you were talking about 2024 Your customers here at NCR Voyage processing $500,000,000,000 of POS. Is that kind of how we should be? Again, not saying that that's we should think about revenue, but that's kind of the relationship that we should be thinking about here?

Yes, don't think about it as $500,000,000,000 of revenue. Global payments and the rest of them would would be very happy if they could Okay. Great.

I'll be at that rate. Now the idea is these are large much thinner margins. [indiscernible] what I would have seen at Global, we had more of a mix or at EVO, we had more of a mix of large customers and small, but it was probably more oriented to the small. Merchants, larger margins. But the idea is $500,000,000,000 is a big number, $12,000,000,000 transactions a year is a big and those are largely untapped and where our restaurant business that was put into place again with the JEPE story I think today, we're almost we're at 100%. So every time we sign a new customer, we have payments at attached to it. Unfortunately, because there were not capabilities within application or that platform, couldn't do the same on the retail side.

So now because Wellpay is a leader in that space and they have all those capabilities. We can now take advantage of now there's going to be a price that we have to pay for the access to their system. But we've worked out, I think, an economic deal that will allow us to offer value to our customers so that when we sign up retailer XYZ, whether it's a restaurant or fuel, not only offering them the software the services, but now we can offer them payments and they have asked for payments. We just have not had the capability of doing it.

And the $500,000,000,000 is just The U. S. That number is double that when you look at the entire footprint, but that's going to take even longer. The U. S. Will be in business as early as the spring for new customers and we'll get the base converted over My expectation is by the end of the summer. And then at that point in time, or even earlier, we hope to talk about other markets we're starting to open up again to payments, not to replace we do for a living, [indiscernible] [indiscernible] complement it it's a better experience for the customer, the one throat choke, so to speak. They don't have to have two different players involved as long as we can be economically viable, then I think we can sell to the base effect Makes the kind of sense and thank you for that color guys. Good luck.

All right. Thank you.

There are no further questions at this time. I would like to turn the floor back over to Jim Kelly for closing comments.

Thank you, operator, and thank you all for joining us and for your continued interest in NCRVOICs NCR.

Have a good day.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.