Executive Summary / Key Takeaways

• Strategic Pivot to Software & Services: NCR Voyix (VYX) is undergoing a profound transformation, divesting non-core assets like its ATM business and Digital Banking segment, and transitioning its hardware manufacturing to an ODM model. This strategic shift aims to establish VYX as a software and services-led digital commerce powerhouse, targeting a recurring revenue composition of 75% post-ODM.
• Platform-Centric Growth & Innovation: The Voyix Commerce Platform (VCP) is VYX's core technological differentiator, driving significant operational efficiencies and enabling rapid innovation for customers. With transaction volumes and orders surging over 50% year-over-year in H1 2025, VCP-powered solutions like AI-enabled Picklist Assist and Edge virtualization are enhancing customer experiences and VYX's competitive moat.
• Payments as a New Growth Engine: A strategic partnership with Worldpay, operational by mid-September 2025, positions VYX to capture a significant share of the $500 billion in U.S. payments processed by its customers through POS in 2024. This integrated payments offering is expected to be a substantial new recurring revenue stream, particularly for enterprise clients.
• Improving Financial Trajectory Amidst Transition: While total revenue declined in Q2 2025 due to hardware softness, VYX demonstrated strong gross margin expansion (23.0% in Q2 2025 vs. 17.5% in Q2 2024) and Adjusted EBITDA growth (up 20% to $95 million in Q2 2025), driven by cost reduction initiatives and a favorable software/services mix. Net leverage has significantly improved to 1.9x.
• Positive Outlook with Execution Risks: VYX maintains its full-year 2025 guidance for revenue ($2.575B-$2.65B) and Adjusted EBITDA ($420M-$445M), underpinned by anticipated VCP launches, payments integration, and cost savings. However, macroeconomic pressures, tariff uncertainties, and the smooth execution of the ODM transition and platform rollouts remain critical factors to monitor.

Setting the Stage: A Digital Commerce Transformation

NCR Voyix Corporation (VYX), with a heritage stretching back to 1884 as NCR Corporation, has long been a foundational technology provider for retail and restaurants. For over two decades, the company expanded its footprint through more than 40 software acquisitions, embedding itself deeply within global brands. This extensive history culminated in a pivotal strategic shift in 2019, moving away from third-party acquisitions to developing its proprietary, cloud-based Voyix Commerce Platform (VCP). This marked the genesis of VYX's modern identity, focusing on a software and services-led approach.

The past two years have seen VYX undergo a dramatic restructuring to sharpen its focus. In October 2023, the ATM-focused businesses were spun off into NCR Atleos (ATLE). This was swiftly followed by the sale of the Digital Banking segment in September 2024 for $2.45 billion, with the proceeds largely used to reduce indebtedness by $1.84 billion, significantly strengthening the balance sheet. Concurrently, VYX announced a transition of its self-checkout (SCO) and point-of-sale (POS) hardware businesses to an outsourced design and manufacturing (ODM) model with Ennoconn (6414), expected to commence by year-end 2025. These bold moves are designed to transform VYX into a leaner, more agile entity, targeting a recurring revenue composition of 75% post-ODM, up from approximately 60%.

VYX's overarching strategy is clear: to be the leading digital commerce solutions provider by leveraging its VCP, expanding its payments capabilities, and capitalizing on its extensive global service network. This strategy is built on four key pillars: focusing on customer needs, enhancing go-to-market strategies through global distribution, investing in innovative products and managed services, and disciplined capital allocation. The company's foundational strengths include its market leadership in SCO and POS software for convenience, fuel, grocery, and restaurants, underscored by a robust 98% revenue retention rate over the last three years. Its global team of 8,000 highly trained service professionals provides 24/7 support, a critical differentiator in an industry where uptime is paramount.

The broader industry landscape is characterized by an accelerating digital transformation. Retailers and restaurants are increasingly adopting technology to enhance customer engagement, streamline operations, and combat challenges like "shrink" (inventory loss). Cloud-native technologies and microservices, while common in digital commerce, are gaining traction in brick-and-mortar stores, creating a fertile ground for VYX's platform-centric offerings. The demand for self-checkout solutions remains strong across all markets, driven by the need for cost efficiency and automation.

The Voyix Commerce Platform (VCP): A Technological Core

At the heart of VYX's transformation and competitive strategy lies the Voyix Commerce Platform (VCP). This cloud-based architecture, developed over the past five years, utilizes microservices and APIs to connect legacy applications to the cloud, and is now evolving to deliver cloud-native and edge applications. This represents a significant technological leap, enabling VYX to sunset the sale of its legacy on-premise applications in favor of a modern, flexible, and scalable solution.

The VCP offers tangible, quantifiable benefits that directly translate into a competitive advantage for VYX and its customers. In the first half of 2025, consumer transaction volume flowing through the VCP was more than 50% higher than the prior year, processing over 500 million API calls in June alone. Similarly, consumer orders running through the VCP increased nearly 60% in the first half of 2025, with over 75 million orders processed in June. This robust performance demonstrates the platform's scalability and stability under heavy load.

Key innovations built on the VCP further differentiate VYX:

• Picklist Assist: This AI-enabled computer vision capability for self-checkout is a prime example of VCP's power. It leverages cameras already built into most grocery SCO scanners to identify and present a short list of the most likely items based on color, weight, and other characteristics. Implemented across more than 22,000 checkout lanes worldwide, Picklist Assist significantly improves speed, accuracy, and efficiency, enhancing outcomes for both retailers and their end customers. Its ability to work with both legacy and cloud-based checkouts provides a flexible upgrade path.
• Edge Virtualization Solution: This technology allows VYX's customers to operate their physical stores with the speed and efficiencies typically associated with digital channels. For instance, a large European customer recently used Edge to trial a new kiosk with a new hardware device, implementing a working solution in less than two weeks. This dramatically improved speed to market by months and bypassed lengthy certification processes, offering unparalleled agility.
• Aloha Menu: Slated for launch in early 2026, this new centralized menu management solution for restaurants is designed to integrate with any restaurant point-of-sale application, including those of competitors. This broad compatibility is a significant competitive differentiator, allowing VYX to serve restaurants regardless of their existing POS provider, expanding its addressable market.

For investors, the VCP and its innovations represent a powerful competitive moat. These technologies contribute to VYX's ability to offer higher-value, subscription-based services, leading to improved software margins and more predictable recurring revenue. The platform's open architecture and ability to integrate third-party applications also provide customers with flexibility, fostering stickier relationships and driving long-term growth.

Strategic Execution and Financial Performance

VYX's strategic pivot is beginning to yield tangible financial results, even as the company navigates significant operational transitions. For the second quarter of 2025, total revenue was $666 million, an 8% decline compared to the prior year, and $1.283 billion for the six months ended June 30, 2025, a 10% decline. This top-line pressure is primarily attributable to continued softness in hardware sales and the planned exit of certain one-time software license revenues. However, a deeper look reveals the positive impact of the transformation. Recurring revenue, a key strategic metric, increased 4% to $422 million in Q2 2025 and 3% to $829 million for the first half of 2025. This now comprises 63.4% and 64.6% of total revenue for these respective periods, demonstrating a successful shift towards a more predictable revenue model. Gross margin saw a significant expansion, reaching 23.0% in Q2 2025, up from 17.5% in Q2 2024. For the six-month period, gross margin improved to 22.4% from 18.4%. This improvement was largely driven by increased service gross margin across cloud, professional, software maintenance, payments, and hardware maintenance, a direct result of cost reduction initiatives implemented in the second half of 2024.

Operating expenses also reflect disciplined cost management. Selling, general, and administrative expenses decreased 8% in Q2 2025, and research and development expenses saw a substantial 27% reduction. These efficiencies, coupled with a 66% decrease in interest expense in Q2 2025 due to significant debt reduction post-Digital Banking sale, contributed to a net income from continuing operations of $1 million in Q2 2025, a notable improvement from a $90 million net loss in the prior-year period. Adjusted EBITDA for Q2 2025 grew 20% to $95 million, with a margin of 14.3%.

Segment performance highlights the ongoing transition. The Retail segment's revenue decreased 12% in Q2 2025 to $454 million, and Adjusted EBITDA declined 7% to $81 million, primarily due to lower hardware revenue and one-time software. However, Retail recurring revenue grew 5%. Conversely, the Restaurants segment saw revenue increase 2% to $205 million in Q2 2025, and Adjusted EBITDA rose 10% to $68 million, driven by a favorable software and services mix and cost mitigation. Restaurants recurring revenue grew 4%.

From a liquidity perspective, VYX ended Q2 2025 with $276 million in cash and cash equivalents and $1.10 billion in long-term debt. The net leverage position stood at a healthy 1.9x, a significant improvement following the strategic divestitures. While net cash used in operating activities was $284 million for H1 2025, this was primarily due to a $284 million tax payment related to the Digital Banking Sale. Capital expenditures for H1 2025 were $81 million, with over 80% directed towards software investments, underscoring the commitment to technological advancement. The company's Board also authorized an incremental $172 million for its share repurchase program, bringing the total to $200 million, with $69 million already repurchased in H1 2025. Management expresses confidence in having sufficient liquidity to meet its obligations and strategic investments.

Competitive Landscape and Strategic Positioning

VYX operates in a highly competitive landscape, but its strategic transformation and technological differentiators are solidifying its market position. The company is a recognized leader in its core segments, notably maintaining global leadership in self-checkout (SCO) shipments with a 22% share in 2024, nearly double that of its closest competitor, according to Datos Insights. VYX also holds the #1 position in POS software for convenience, fuel, grocery, and restaurants.

Direct Competitors and VYX's Edge:

• Fiserv (FISV): While Fiserv offers a broader suite of financial services technology with more comprehensive data analytics and stronger overall profitability, VYX's integrated hardware-software solutions for retail and banking provide a more integrated user experience and are materially easier to customize for specific industries. VYX leads in hardware-software integration, leveraging its legacy in self-service technologies, but may lag in innovation speed compared to Fiserv's agile updates in high-volume banking services.
• Toast (TOST): A formidable competitor in the restaurant space, Toast excels with cloud-based, mobile-first solutions for SMBs, offering faster deployment and rapid revenue expansion in software subscriptions. VYX, however, offers a wider range of hardware peripherals and managed services, which are more robust for high-traffic enterprise environments, providing greater reliability in integrated ecosystems. VYX's Aloha Menu, designed to integrate with any POS, is a direct competitive differentiator against Toast's more closed ecosystem.
• Jack Henry (JKHY): Jack Henry focuses on core banking software for community banks and credit unions, known for its compliance features and established relationships. VYX's offerings provide a more integrated branch-to-digital experience and greater market positioning in international segments due to its diversified retail and hospitality footprint. VYX leads in cross-industry diversification, while Jack Henry maintains higher customer loyalty in specialized banking tools.
• Block (SQ): Block's strength lies in innovative, accessible payment processing and POS for small businesses and fintech. VYX's hardware-focused solutions offer greater durability for high-use environments and a comprehensive service model, which is materially more advantageous for large-scale deployments. VYX leads in operational depth for complex integrations, but Block's platform allows for quicker adoption of new features and faster market penetration in digital-first segments.

VYX's Competitive Advantages (Moats):

• Strong Brand and Customer Loyalty: VYX's extensive track record and deep relationships with global brands translate into a 98% revenue retention rate. This fosters long-term contracts (often 10-30 years), leading to stable revenue and superior margins. The company's renewed focus on customer engagement, with executives actively meeting clients, is reinforcing this loyalty.
• Proprietary Technology (VCP, Picklist Assist, Edge): The VCP's cloud-native architecture, coupled with innovations like AI-enabled Picklist Assist and Edge virtualization, provides significant operational efficiencies and agility. These technologies offer robust performance, better capital efficiency, and enhanced pricing power, particularly in enterprise segments. The hardware-agnostic nature of VYX's software allows for flexibility and broader adoption.
• Extensive Global Service Offering: VYX's network of 8,000 highly trained professionals provides unmatched remote and field support, a critical differentiator for large multinational customers. This comprehensive service model, now increasingly bundled into multiyear subscriptions, ensures 24/7 support and operational continuity, a value proposition that smaller, software-only competitors struggle to match.

Competitive Disadvantages/Vulnerabilities:

• Technological Gaps (Relative to Pure-Plays): Despite significant investments, VYX may still face challenges in matching the innovation speed and agility of some cloud-native pure-play competitors, potentially leading to slower product development cycles and higher R&D costs in certain digital-first areas.
• Supply Chain Dependencies: The ongoing reliance on hardware supply chains, even with the ODM transition, exposes VYX to potential disruptions and cost fluctuations, which can impact margins and competitiveness.

VYX's strategic response to these competitive forces involves aggressively pushing its VCP, expanding its payments initiative, and driving new customer acquisition through a restructured sales team. The company's ability to offer a "one relationship" solution, integrating POS, payments, and operational tools, is a compelling value proposition that reduces vendor complexity and enhances revenue opportunities.

Outlook and Risks

VYX's outlook for 2025 reflects a company in active transformation, with management maintaining its full-year guidance despite ongoing shifts. The company anticipates revenue to range from $2.575 billion to $2.65 billion, and Adjusted EBITDA to be between $420 million and $445 million. Non-GAAP diluted EPS is projected to be between $0.75 and $0.80, with Adjusted Free Cash Flow expected to be between $170 million and $190 million.

This guidance is underpinned by several key assumptions and strategic initiatives:

• The ODM agreement with Ennoconn is expected to become fully operational by year-end 2025. Until then, VYX will continue to recognize hardware revenue, with the working capital benefits from this transition largely anticipated in 2026.
• VYX plans to launch additional VCP capabilities starting in Q4 2025 and continuing into 2026, including enterprise grocery and convenience POS, self-checkout, and fuel solutions at NRF in January, and new restaurant applications (labor, inventory, scheduling) in Q4 2025, followed by the Aloha Menu in early 2026.
• The Voyix Pay pilot in the U.S. was completed in July, with migration of existing SME portfolios and new customer signings directly to the processing platform on track for mid-September 2025. This, along with international expansion of acquiring solutions, is expected to be a significant new revenue driver.
• The company is executing on $100 million in cost actions for 2025, with approximately 60% of the savings expected to impact the second half of the year. Capital expenditures are projected to be around $170 million for the full year, with over 80% dedicated to software investments.

Despite the optimistic outlook, VYX faces several pertinent risks. Macroeconomic pressures, including inflation, interest rates, and foreign currency fluctuations, could impact customer spending and profitability. Tariff uncertainty remains a concern, with an estimated $8 million to $12 million impact for 2025. Management has indicated that if tariffs become permanent, these costs would likely need to be a "shared expense" with customers. The smooth implementation of the ODM transition is critical to avoid operational disruptions. Furthermore, environmental liabilities, particularly related to the Kalamazoo River, carry a reserve of $134 million, with the potential for costs to "more than approximately double" under certain scenarios. Ongoing recovery efforts from the April 2023 cyber ransomware incident and February 2024 fraudulent ACH disbursements also present potential for additional costs.

Conclusion

NCR Voyix is in the midst of a profound and necessary transformation, shedding its conglomerate past to emerge as a focused, software and services-led digital commerce leader. The core investment thesis hinges on the successful execution of this strategic pivot, driven by the innovative Voyix Commerce Platform, an aggressive expansion into payments, and the leveraging of its unparalleled global service network. While the short-term financial narrative reflects the complexities of divesting hardware and one-time revenue streams, the underlying trends of recurring revenue growth, expanding margins, and disciplined cost management paint a compelling picture of a company building a more predictable and profitable future.

The technological leadership embodied by the VCP, with its AI-enabled features and agile Edge solutions, provides a strong competitive moat, enabling VYX to differentiate itself from rivals and capture market share. The strategic partnership with Worldpay is poised to unlock a substantial new revenue stream, integrating payments seamlessly into VYX's end-to-end solutions. As VYX continues to launch new VCP capabilities and convert its extensive customer base to platform-centric, subscription models, investors should closely monitor the acceleration of platform site growth, payments attachment rates, and the realization of cost efficiencies. While macroeconomic headwinds and operational execution risks persist, VYX's clear strategic roadmap, strengthened balance sheet, and renewed leadership focus position it to unlock significant value for shareholders as it solidifies its standing as a digital commerce powerhouse.