Business Overview and History

NCR Voyix Corporation (NYSE: VYX) is a leading global provider of digital commerce solutions, serving businesses of all sizes in the retail and restaurant industries. With a rich history spanning over 140 years, the company has evolved from its roots as a provider of point-of-sale (POS) hardware to become a software-led technology leader, offering end-to-end solutions that enable its customers to seamlessly transact and engage with their end-users.

NCR Voyix was originally incorporated in 1884 as the National Cash Register Company, primarily focused on manufacturing and selling mechanical cash registers. Over the decades, the company diversified its product portfolio, expanding into areas such as automated teller machines (ATMs), self-service kiosks, and enterprise software solutions. In 2023, the company underwent a significant transformation, spinning off its ATM-focused business into a separate publicly traded entity, NCR Atleos Corporation, to sharpen its focus on its core retail and restaurant technology offerings.

Prior to the spin-off, NCR Voyix managed and reported operations in multiple segments including Retail, Hospitality, Digital Banking, Payments Network, and Self-Service Banking. After the spin-off, the company streamlined its operations to two reportable segments - Retail and Restaurants. This strategic move allowed NCR Voyix to focus solely on its core retail and restaurant technology offerings.

In 2024, NCR Voyix made another strategic move by completing the sale of its Digital Banking segment businesses to an affiliate of The Veritas Capital Fund VIII, L.P. This divestiture allowed the company to further streamline its operations and strengthen its balance sheet. Additionally, the company has transitioned its self-checkout and point-of-sale hardware businesses to an outsourced design and manufacturing model, shifting its focus towards software and services-led offerings.

Throughout its long history, NCR Voyix has faced various challenges and restructurings but has emerged as a leading provider of digital commerce solutions for the retail and restaurant industries. The company's core strengths include its extensive track record supporting large global brands, its innovative software platform, and its comprehensive global service and support capabilities.

Today, NCR Voyix is headquartered in Atlanta, Georgia, and employs approximately 14,000 people across 30 countries. The company's two reportable segments are Retail and Restaurants, serving customers ranging from small and medium-sized businesses to large, multinational enterprises. NCR Voyix's comprehensive suite of solutions includes cloud-based software, services, and hardware, enabling its customers to optimize their operations, enhance the customer experience, and drive digital transformation.

Financial Performance and Outlook

Over the past three years, NCR Voyix has demonstrated a solid financial performance, with revenue ranging from $3.17 billion in 2022 to $3.18 billion in 2023. The company's software and services revenue, which accounted for 72.7% of total revenue in 2024, has been growing at a steady pace, increasing from $2.04 billion in 2022 to $2.12 billion in 2023.

In 2024, the company reported total revenue of $2.83 billion, a decline of 11% year-over-year, primarily due to the expected weakness in hardware sales. Software and services revenue decreased 3% to $2.06 billion, as the company exited certain one-time software licenses and services, which totaled $60 million for the year. This strategic move is part of the company's ongoing shift towards a recurring revenue model, with software and services now accounting for 72.7% of total revenue, up from 66.6% in 2023.

Despite the revenue decline, NCR Voyix's adjusted EBITDA increased 75% to $114 million in the fourth quarter of 2024, with margin expanding 850 basis points to 16.7%. This significant improvement was largely driven by the company's cost-cutting initiatives, which resulted in approximately $120 million of in-year cost savings.

For the full fiscal year 2024, NCR Voyix reported a net income of $202 million. However, the company faced challenges in cash flow management, with operating cash flow at -$132 million and free cash flow at -$349 million for the year.

In the most recent quarter (Q4 2024), the company reported revenue of $682 million, representing a 14% year-over-year decline due to expected weakness in hardware sales. The quarter resulted in a net loss of $9 million. Software and services revenue declined 2% due to the termination of commercial agreements with NCR Altleos, but excluding this impact, software and services revenue increased 1% driven by growth in hardware maintenance, platform and payments revenue streams.

Looking ahead, the company has provided guidance for 2025, expecting currency-neutral revenue to range from $2.575 billion to $2.65 billion, reflecting a 9% to 6% decline, primarily due to the expected transition of its hardware business to an outsourced design and manufacturing (ODM) model. However, the company's core software and services revenue, adjusted for terminated commercial agreements and the exit of certain one-time software and services agreements, is expected to grow in the low single-digits in 2025.

Recurring revenue, which includes software maintenance, cloud, and payment processing, is anticipated to grow in the mid- to high-single digits, while the company's Annualized Recurring Revenue (ARR) and platform sites are both expected to increase in the mid- to high-single digits as well. Currency-neutral adjusted EBITDA is expected to range from $420 million to $445 million, representing an increase of 21% to 28%. The adjusted EBITDA margin is projected to be between 16.3% and 16.8%.

Additionally, NCR Voyix expects non-GAAP diluted earnings per share to be between $0.75 and $0.80 for 2025. Adjusted free cash flow unrestricted for the year is anticipated to be between $170 million and $190 million, excluding $55 million in restructuring, $300 million of taxes related to the digital banking sale, and $20 million of accelerated product investments.

It's worth noting that NCR Voyix has maintained a strong revenue retention rate of 98% over the last three years, demonstrating the company's ability to retain and grow its customer base.

Liquidity

As of December 31, 2024, NCR Voyix reported a debt-to-equity ratio of 1.11, indicating a balanced capital structure. The company held $724 million in cash and cash equivalents, providing a solid liquidity cushion. Additionally, NCR Voyix had access to $480 million under its senior secured revolving credit facility, further enhancing its financial flexibility.

The company's current ratio stood at 1.18, while its quick ratio was 1.03, both as of December 31, 2024. These ratios suggest that NCR Voyix has sufficient short-term assets to cover its short-term liabilities, indicating a healthy liquidity position.

Strategic Initiatives and Competitive Positioning

NCR Voyix's strategic focus is on leveraging its robust platform, extensive global service capabilities, and growing payments offering to drive growth and enhance value for its customers and shareholders. The company has made significant investments in its cloud-native, API-driven platform, which enables its customers to seamlessly integrate and manage their in-store and digital technology stacks.

The company's global service team of over 8,000 professionals provides software management, store implementation, and hardware maintenance services, positioning NCR Voyix as a trusted partner for its customers. In 2024, the company announced a five-year non-exclusive agreement with Worldpay, a global leader in payment solutions, to provide enterprise-grade payment capabilities to its retail customers, a strategic move that is expected to drive additional growth in its payments business.

NCR Voyix faces competition from a diverse array of companies in the retail and restaurant technology space, including Aptos, Inc., Block Inc., Diebold Nixdorf, Inc., Fiserv Inc., and Oracle Corporation, among others. However, the company's extensive industry expertise, robust product portfolio, and strong customer relationships have enabled it to maintain its position as a market leader, as evidenced by its ranking as the world's largest supplier of POS software for the eighth consecutive year in the Global POS Software 2024 study by RBR Data Services.

Risks and Challenges

Like any technology company, NCR Voyix is exposed to various risks and challenges, including competition, evolving customer demands, technological changes, and macroeconomic factors. The company's ongoing transition to a recurring revenue model and the implementation of its outsourced hardware design and manufacturing (ODM) strategy carry inherent risks and could impact its financial performance in the short term.

Additionally, the company's global footprint exposes it to foreign exchange rate fluctuations, geopolitical tensions, and regulatory changes, which could affect its operations and financial results. Cybersecurity threats and data privacy concerns are also critical risks that the company must navigate effectively to maintain the trust of its customers and protect its intellectual property.

In April 2023, NCR Voyix experienced a cyber ransomware incident that impacted operations for some customers. The company has incurred $47 million in expenses related to this incident, of which $36 million has been recovered under insurance policies. This event underscores the importance of robust cybersecurity measures and the potential financial and reputational risks associated with such incidents.

Segment Performance

NCR Voyix's operations are organized into two reportable segments: Retail and Restaurants.

The Retail segment focuses on serving enterprise and mid-market retailers across the Convenience Fuel Retail, Food Drug Mass Merchant (FDMM), and Department Specialty Retail industries. In 2024, this segment generated revenue of $1.96 billion, representing 69.2% of the company's total revenue. Retail segment Adjusted EBITDA was $383 million, reflecting a margin of 19.6%. The decrease in Retail revenue and Adjusted EBITDA compared to the prior year was driven by declines in hardware revenue and one-time perpetual licenses and installation revenue, partially offset by increases in hardware maintenance revenue and professional services revenue.

The Restaurants segment serves restaurants and food service establishments of all sizes, including quick service, table service, and fast casual restaurants. For the year ended December 31, 2024, this segment reported revenue of $825 million, accounting for 29.2% of total revenue. Segment Adjusted EBITDA was $251 million, representing a margin of 30.4%. The decrease in Restaurants revenue compared to the prior year was driven by declines in one-time hardware and installation revenue, partially offset by an increase in software and services revenue, driven by platform conversions and payments processing growth. The improvement in Restaurants Adjusted EBITDA was due to the favorable software and services revenue mix, along with cost mitigation actions taken during 2024.

Geographic Performance and Industry Trends

While NCR Voyix does not provide a detailed geographic breakdown of its performance, the company notes that 40% of its 2024 revenue was generated from outside the United States, highlighting its significant international presence.

The retail and restaurant technology landscape is characterized by rapid advancement and evolution, leading to increased competition. Businesses are focusing on investing in technology, data, and enhancing the customer experience. NCR Voyix reports active conversations and interest from customers in upgrading technology and adding new capabilities, indicating a positive trend in the industry that aligns with the company's offerings.

Conclusion

NCR Voyix's transformation from a hardware-centric company to a software-led technology provider has positioned it well to capitalize on the growing demand for digital commerce solutions in the retail and restaurant industries. With its robust platform, extensive service capabilities, and growing payments offering, the company is poised to deliver long-term value for its customers and shareholders, despite the near-term challenges it faces.

The company's focus on driving subscription-based recurring revenue and earnings growth through converting existing software customers to its platform, expanding their use of proprietary cloud solutions, managed services, and attached payment offerings, as well as signing new software and services customers, aligns well with industry trends and customer demands.

As NCR Voyix continues to execute on its strategic initiatives and navigate the evolving technological landscape, it remains a compelling player in the rapidly evolving world of digital commerce. The company's strong revenue retention rate, growing recurring revenue base, and strategic focus on software and services position it well for future growth, despite the challenges posed by its ongoing transition and the competitive nature of the industry.