NCR Corporation

Thank you for standing by. My name is Carly and I will be your conference operator today. At this time, I would like to welcome everyone to the NCR Forex Corporation second quarter 2026 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, Simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Sarah Jane Snyder, Vice President of Investor Relations. Please go ahead.

Good morning, and thank you for joining our second quarter 2026 earnings conference call. This morning, we issued our earnings release, reporting financials for the quarter ended June 30th, 2026. A copy of the earnings release that we will reference during this call is available on the investor relations section of our website, which can be found at www.ncrvoids.com and has been filed with the SEC. With me on the call today are Jim Kelly, our Chief Executive Officer, Nick East, our Chief Product Officer, Darren Wilson, President, Retail and Payments, Benny Tadele, President, Restaurants, and Brian Webb Walsh, our Chief Financial Officer. This call is being recorded and the webcast is available on the investor relations section of our 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 play 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, we will be discussing or providing certain non-GAAP financial measures today, which we believe will provide additional clarity regarding our ongoing performance. 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. Police Bureau press release furnished us an exhibit to our Form 8-K file this morning and 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. Jim?

Good morning, and thank you for joining us. For the second quarter, revenue increased 1%, adjusting for the ODM transaction. Recurring revenue increased 3%, and adjusted EBITDA increased 5% compared to the prior year. These results reflect continued progress across the business driven by the commercial actions we took last year to strengthen our installed base combined with continued growth in software services and payments. We are seeing improved operating performance while building momentum behind our VOIX Commerce platform. Our product portfolio is now modernized creating an integrated cloud native software payments and services offering that resonates with customers. We now have 10 of the 25 signed VCP customers live across more than 2,000 lanes and expect another 1,000 lanes live in production by the end of September.

Customer engagement continues to strengthen.

Increasingly, conversations are centered on enterprise-wide platform transformation rather than individual products. Customers are looking for solutions that simplify operations, improve security, and provide greater speed and flexibility. We believe our integrated platform is well positioned to meet those needs. Enterprise technology decisions take time. Customers typically move through with demonstrations, customer labs, and finally commercial agreements. Given the scale of replacing a point of sale environment that has often been in place for decades, the timeline of this process can vary based upon the size and complexity of the customer. Execution doesn't end with a signed contract. Accelerating deployments while reducing implementation costs remains another top priority. During the quarter, we completed our first fully remote voice pause installation with a large European grocery retailer in roughly half the time of a traditional deployment. We expect to reduce remote installation time to less than one hour per store, lowering cost for our customers while significantly increasing our deployment capacity. Nick will discuss how automation and AI are helping us scale even further. In summary, we continue to make solid progress across our strategic priorities, increasing customer adoption, expanding recurring revenue, and positioning NCR Voyix for sustainable long-term growth.

With that, I will turn the call over to Nick. Thanks, Jim.

Earlier this year, we reached an important milestone with the successful launch of our embedded Voyix Commerce Platform application portfolio. Our focus has shifted from building the core VCP applications for each of our industry verticals to scaling customer adoption through targeted innovation and the rapid delivery of customer-specific capabilities. Since mid-2025, we have signed 25 VCP contracts, reflecting strong demand from both existing and new customers. We also have 16 active customer labs across seven countries where customers are evaluating our VCP applications as they progress toward commercial agreements. Development of 11X remains on schedule and is expected to begin initial pilots by year end. Our store in a box solution for small and mid-market restaurants will be available for customer labs by the end of the third quarter, followed by pilots in the first quarter of next year. These milestones further expand our deployment pipeline and support future recurring software revenue growth. For existing customers, AI agents dramatically simplify software upgrades to the VCP by analyzing existing environments and seamlessly migrating configurations, application settings, and operational data to the platform. The result is faster deployments, lower implementation costs, greater consistency, and a highly scalable migration model. After deployment, those same AI agents continue optimizing customer environments, delivering ongoing operational value. Beyond deployments, our innovation strategy is increasingly centered on intelligent automation and agentic AI. At the next show coming this October, we'll participate in a fireside discussion with one of the industry's largest fuel retailers on how AI and next-generation commerce technologies are reshaping convenience retail and the future of commerce. The event will also showcase the latest innovations across the VTP. We first introduced these AI features at the NRA show in May, demonstrating how computer vision can monitor inventory in real time and automatically trigger actions across points of sale, digital ordering, and marketing systems. Since then, we've expanded these capabilities into retail while extending AI across inventory management, supply chain operations, merchandising, and back office workflows. Thanks, Nick.

Our retail business signed more than 40 new customers during the quarter, primarily in the mid-market. Platform and payment sites increased 8% and 13% respectively, while recurring revenue grew 6%, driven by 15% growth in recurring software revenue. In the U.S., we recently signed a VUX supply chain agreement with LC Foods. extending our grocery and CFR capabilities into food distribution. This win demonstrates the versatility of our VCP applications and further expands our reach into this large adjacent market. As interest from food and beverage distributors continues to build, we are focused on converting that momentum into additional sales. In Europe, we signed a recurring services agreement in Germany with a leading reverse vending provider, further diversifying our service business. In Latin America, we signed the Voyex POS agreement with a large home improvement retailer in Colombia and Chile, further expanding our platform footprint in the region. Finally, in Australia, we secured a large equipment refresh across approximately 350 stores for an existing grocery customer. Following the ODM transaction, we continued to support the hardware needs of our customers. Turning to payments, this quarter, we continued executing our gateway strategy, converting customers in the US and Latin America to Voyex Connect at market pricing. As certifications continue, we expect to expand this strategy across Canada Europe and Asia Pacific. Additionally, we signed a new agreement with Voyager to expand fleet card acceptance through Voyage Connect. We now have direct integrations with Voyager, Corpay and WEX, strengthening our convenience and fuel offering. With that, I turn the call over to Benny.

Thanks, Darren. In the second quarter, our restaurant business signed over 100 new customers. Platform size increased 12% and payment size decreased 1%. Enterprise and mid-market recurring revenue increased 6%, driven by 9% growth in services revenue and 3% growth in software revenue when excluding last year's Nencore Brazil divestiture. Offsetting the performance of our mid-market and enterprise business with a continued softness in SMB. Market interest in Aloha Next continues to build. During the quarter, we signed an agreement with Pizza Ranch, making them the first new enterprise customer to adopt Aloha Next. The agreement includes Aloha Next and Vorix Pay across more than 200 locations. Winning in one of the industry's most operationally demanding restaurant segments continues to validate the market-leading technology and related benefits of our cloud-native platform. Internationally, we signed an agreement with one of the largest restaurant operators in Asia Pacific to modernize its Aloha point of sale environment and centralize data management across multiple countries and brands. This established a foundation for future adoption of Aloha Next while expanding our footprint across the region. The National Restaurant Association Show marked the formal launch of Aloha Next, our modernized restaurant application. Customer reaction was very positive, generating strong engagement that continues to translate into active customer labs and a growing pipeline. Finally, our services business continues to strengthen our revenue base. This quarter, we renewed our relationship with a leading global coffee chain and secured a new engagement with a major global QSR brand to support their technology in the US and Canada. Together, these wins reinforce our position as a trusted partner for many of North America's largest restaurant operators. With that, I'll turn the call over to Brian.

Thank you, Benny, and good morning. For the quarter, total revenue decreased 21% to $523 million, reflecting the transition of the hardware business at the end of Q1. Excluding this impact, total revenue increased 1%, driven by recurring revenue growth of 3%. Within recurring revenue, software increased 6% and services increased 1%, supported by actions taken last year to correct efficiencies and legacy agreements, in addition to our payments initiatives and new product sales. platform sites increased 10% to $85,000, and payment sites increased 2% to $8,500. Importantly, our platform site metric primarily represents legacy point-of-sale applications tied to subscription contracts. Beginning in 2027, we will provide updated site metrics that reflect the sale of our modernized point-of-sale and related solutions. This, along with our remaining contract value, will be more indicative of future financial performance. adjusted EBITDA of 98 million, increased 5%, driven by revenue growth, coupled with our cost actions. Adjusted EBITDA margin expanded 460 basis points to 18.7%, reflective of the hardware transition, revenue growth, and efficiency actions. Excluding the hardware impact, adjusted EBITDA margin expanded 80 basis points. Non-GAAP EPS of 17 cents per share was flat year over year due to a higher tax rate, as the prior year period benefited from a one-time tax benefit. GAAP EPS was a loss of $0.03 per share in the quarter, primarily due to restructuring and transformation, in addition to stock-based compensation and amortization of intangibles. In the second quarter, we signed four mid-market contracts for our embedded VCP applications, bringing our total customers to 25. Our VCP contracts represent $286 million of remaining contract value, up 65% year-over-year. Turning to our segment results, reported retail revenue decreased 20% to $365 million, which reflects the hardware transition. Excluding this impact, retail revenue increased 4% driven by 6% growth in recurring revenue from VCP application sales and payments pricing initiatives. Retail adjusted EBITDA increased 20% to $97 million driven by revenue growth coupled with our cost initiatives. Adjusted EBITDA margin increased 880 basis points year-over-year to 26.6%. due to a combination of the hardware transition, revenue growth, and our efficiency actions, excluding the hardware impact, retail margin increased 350 basis points. Turning to restaurants, reported revenue declined 23% to 158 million, reflective of the hardware transition, excluding this impact, restaurant revenue declined 10 million or 6% in the quarter. The decline was driven by lower than anticipated hardware installations as customers have delayed refreshes likely in the next year, declines in SMB, and the divestiture in Brazil. We expect the SMB trend to moderate as we launch our store-in-the-box solution, which Nick outlined in his remarks. Restaurant adjusted EBITDA decreased 15% to $58 million, driven by lower revenue and mix. Adjusted EBITDA margin was 36.7%, an increase of 350 basis points year-over-year due to the hardware transition. Excluding this impact, restaurant margin decreased 380 basis points. Lastly, corporate expenses were $57 million for the quarter, and we expect this to remain relatively consistent for the balance of the year. As a reminder, in the third quarter of 2025, corporate expenses benefited from the completion of the Allios and Convescent transition service agreements, resulting in lower prior year expenses. Adjusted free cash flow was $56 million for the quarter before restructuring. This quarter benefited from working capital improvements, including cash inflows related to the hardware transition. restructuring outflows of 30 million were lower than expected due to a delayed 24 million payment for litigation, which was subsequently paid in July. We invested 41 million in capital expenditures and continue to expect our CapEx for the year to be similar to 2025. We repurchased approximately $11 million of common shares during the quarter. We ended the quarter with a net leverage position of two times based on our net debt as of June 30th and the last 12 months adjusted EBITDA. Turning to our full year 2026 outlook, We are maintaining the guidance we provided in May and expect revenue to be between 2.188 billion and 2.303 billion and adjusted EBITDA to be between 432 million and 447 million with adjusted EPS between 89 and 92 cents. I'll now turn the call over to the operator for Q&A.

At this time, if you would like to ask a question, press star followed by the number one on your telephone keypad. We'll pause for a moment to compile the Q&A roster. Your first question is from Kartik Mehta with North Coast Research.

Hey, good morning. Jim, last quarter you said you had, I think, 22 wins for the VC plate platform. I'm wondering, you know, as you talk to customers, are you seeing the adoption accelerate and just what you're seeing or hearing from your customers as regards to their desire to adopt the new platform?

Good morning, Karthik. Thank you. Actually, I was at dinner last night with Darren and Benny and Nick with a customer. I think I saw six customers last week. all of which are either already in a pilot or one of them is a pilot, the rest of them are coming here to see the new CEC that we've talked about before. I would say the feedback across all the customers I've seen, which is well over 100, are very excited about the fact that NCR has this new application based on their existing infrastructure. not having to change a point of sale since we're essentially giving them the same one just modernized and not having to retrain their staff and all the other stuff that we've said in the past has been very positive. I think the recognized though for restaurants, we only launched it officially in May and January for retail. While we did have some sales early last year, kind of pre-sales of the product, These are very large enterprise organizations. Many of them are multinational. So you're dealing with organizations spread around the world. So my expectation is you'll continue to see, we'll continue to see that number move up. I don't know that this is the RCV. I don't know that it'll ever be completely linear. It's not a revenue growth. This is selling multi-year contracts to existing customers, but even on the new side, if you just do a count of customers, over 20% of what we've signed to date reflects new relationships for the company. So I think we feel as positive as ever in the trajectory and the acceptance of the product. Again, recognizing that in some of the markets, like we are, I think now at 2000 lanes, predominantly in in grocery, so CFR restaurant. We just sold a supply chain, which was the first one, which is a segment we've never talked about before, but we have a pretty significant place in supply chain as well. So this is still early days, and I'm extremely optimistic about the trajectory of where we're going.

Jim, and then I think Nick talked about this too, which is using AI and automation for installs. Does that in the future quicken booking to revenue because you're able to install these so much quicker?

Yeah, I'll let Nick cover it. But as I said in my comments, as did Nick, I think that's a big differentiator for the future, which is using agents to be able to read the legacy and for existing customers and install, but I'll let him give you more color.

Yeah, Karthik, the rate at which you can get a customer live after adoption, either migrated from our existing software or moving to, as a new customer, moving to our platform, really depends on the customer size and complexity. So we talked about store in a box, restaurant in the box. At the bottom end of the market, the idea is that we get them installed immediately. You ship it out, you unbox it, it's pre-configured, and you're up and running straight away. So the gap between bookings and then driving the go live is virtually zero. For the really large complex multinational customers, there's a project to do and that's where we've been working really hard on AI agents to do exactly what you say. So imagine you've got a customer with a complicated menu, catalog, a whole set of pricing and promotion. then what AI agents are helping us to do with our migration blueprint tools is analyze the existing, create the capability to automate the configuration over to the new platform. That's part of it. What we've also been able to do this quarter is also accelerate deployment through remote installation, even in some of the most complex environments. And I think it's also surprised the IT teams of our largest customers that we can convert, for example, a very large grocery store from the old to the new. in a couple of hours overnight without a single person on site. So I think the combination of AI tools and some of the automation we've built into the platform means that we are definitely accelerating the rates at which customers can go live.

Yeah, the way I would describe it, Cardick, simplistically for me, I'm not as sophisticated in this as Nick, is just like when you get a new iPhone out of the box. You put one against the other and it transfers all the existing information over to the new. and we're able to do that even with an on-prem application for the cloud applications that we already have. We've already perfected that process. So it's important to the customers because the way it's been done historically takes a long period of time and a lot of resources. This is short on resources and it's gonna be a lot less expensive for them. I mean, it'll be profitable for us because it's predominantly you know, a software application, but you know, we are, I think that's part of the pitch to the customers as well as they come in and they say, what's the effort to be able to move it over? And I think, you know, the last thing is, as you know, we're also, the contracts we're assigning are multi-year contracts. These are traditional subscription. It's different what the company has done historically, which more is a, as they open a store, then it drives revenue. That's no longer the model for the company.

Perfect. Thank you both. I appreciate it.

Thanks, Arne.

Your next question comes from Mayank Tandon with Needham and Company.

Hi, guys. This is Brandon on for Mayank. Thanks for taking my question. To kind of build off the last question, I'm just wondering if you can talk about the overall visibility in the guide as you enter the back half of the year. taking into account the macro as well as the new product ramps in RCV.

Yeah, I think as you follow the company, our installed base is half of it is services. These are today multi-year contracts. So visibility is generally pretty strong relative to the primary drivers, which is software and services today. Payments is a much smaller piece. at least currently. And since hardware is not being reported, that's been historically the area that's very lumpy. It still has an impact. I think it did this quarter for restaurants, delayed purchases. So there's some impact to us, I guess, relative to economy. But generally, as we said in the guidance, we are maintaining the guidance we gave at the beginning of the year.

Okay, thanks.

I was wondering if you can talk about the demand for the new platform. I know it's early, but in terms of protocols, are you seeing anything different on the go-to-market side versus restaurant and retail and SME and enterprise? Thanks.

Yeah, I'll let some of the other guys add to this. Just coming back to what I said earlier, traditionally, I think we talk about grocery and CFR predominantly, but the company has, I guess, restaurant, but we have other verticals that have not been getting any attention in the past, but as a result of our project F1, where we've modernized those primary applications, we've modernized the entire suite of what the company's owned over the years. And that's one of the reasons, as I mentioned, we just had a press release out, I believe we did, a press release out for supply chain. So that's a vertical we've not spoken on these calls yet, or we will have a and release out. So I think the strength of each of the verticals look very good, as I mentioned earlier, but I don't know, Darren, do you want to?

Yeah, sure. I think we're seeing consistent demand across the verticals. As I've put in my prepared remarks, we've signed more than 40 customers in the main market, spanning all the verticals kind of referenced or that are core focal area, adding on supply chainers, as Jim said, but equally has also announced we're starting to get that traction on payments as well with the Voice Connect signings that are referenced. So good healthy trends across all our existing customers but also new logos as Jim touched on with the 20% of the business being from new logos. So yeah, good go-to-market traction. We're very focused on demoing the new product, both at shows but also through our customer experience centers around the world. And that is receiving very, very positive feedback. Pass over to Benny.

Yeah, so on the restaurant side, I would describe the market as cautiously optimistic. I think the pressure on cost, like Jim described, continues for them. So there's a lot of focus on bottom line improvement and efficiencies. Traffic largely back is what we're seeing, but at the same time, consumer spend is still stretched. And you hear from restaurants, costs on food, on even insurance and energy, things like that. And it's doing a couple of things for us. As you look at the mid-market enterprise segment, that is now a very heavy focus on ROI, buying journey. So not necessarily a spending freeze, but what does create Retailer Investment from Efficiency on the Operation Side, AI Automation, Ease of Training and Onboarding of Resources, Augmentation Resources. So on that side, what we see is maybe a tad longer of a buying journey as the buying committee have more scrutiny on what returns the best for their investment. But it aligns very well with our value proposition on Aloha Next and the wider platform strategy. And in fact, since we launched Aloha Nix at NRA. I feel very encouraged by the momentum we're seeing, similar to what Darren described. We've had a number of demos that I talked about in the prepared remarks. We have a number of labs going on, and in some, having contractual discussions. Also on track to go live at the end of this year. So all of that is very encouraging in terms of what we're seeing in the market. On the SMB end of the market, it's a very different buying journey, a very cost-sensitive and economic-sensitive, as well as simplicity of deployment and in management of the solution. Hence, why we're bringing the Aloha Next restaurant-in-a-box solution to really align with that segment's buying behavior as well as operational behavior. So as we launch that, I feel very good about that as well.

I'll maybe add one thing, Brian. If I look across retail and restaurants, and there's some very specific customer conversations you've had recently, exactly what Darren and Benny have both said, the advantage we have with customers who have both retail and restaurants, and there are a lot of them, right? There's a real convergence between, particularly in the convenience market, between food offerings and convenience. So what they're looking to do under this sort of slightly pressurized consumer market is reduce cost and find synergies, but also find ways of driving revenue up and loyalty and value for each of those customers up. One of the things there, in fact, we had a customer last week who was so interested in our ability to do that across the new platform because the technology stack allows us to combine our retail and restaurant operations and drive synergy that they're flying here tomorrow. to delve into that so that we can drive that cost synergy for them, but also be able to do more cross-sell and up-sell. So I think there are some, you know, you can say whether some, you know, compression in the market is also opportunity to help use technology to drive down costs and drive up customer value.

And we're getting a lot of interest from customers in that market to do that. All right. Thanks, guys. That's super helpful. Thank you.

Your next question is from Matt Somerville with DA Davidson.

Thanks.

Just a couple questions. I know you touched on our CV, but I want to double back to that. How should we expect our CV, that metric to kind of play out from here? We saw a year on year deceleration in Q2 relative to the growth you saw in Q1. We saw a little bit of a sequential decline. What conclusions should we be drawing from this newer metric you're providing and how should that metric evolve from here?

So the metrics will grow over time. As I mentioned earlier, it's not completely linear. So if I sign four customers that are relatively small compared to some of the largest customers that we've already signed, then the number either stagnates or in this case goes down because RCV also represents its revenue. So that's the earnings that are going to start coming into the company because they start immediately on signing of the contract. So that has a natural tendency to decline. It goes up by signing additional contracts. It represents less than maybe 6% of our installed base. So it's still in its infancy. And I don't know that you can expect, I mean, I'd like to expect, but I know you can expect every quarter it's going to go up sequentially the exact same way. These are very large organizations. They're multinational, most of them, or at least a large segment of them. And the conversations are early. So I think as this year progresses and into next year, those numbers will continue to rise. But at the same time, there is a downward pressure because that represents the revenue that we will start recording, the software part of the revenue. It does not include the services. It does not include payments, obviously does not include hardware sales. So this is just isolating software under, you know, long-term, you know, multi-year contracts. So I have no doubt you'll continue to see it move up. I just don't know every single quarter it'll be linear or it'll be a compare that makes logical sense. Because if you think about it, these are specific companies that are moving to this contract, to these, for our existing base, moving to this, these new applications. But as I mentioned earlier as well, Matt, we've got, I think, 20% of what we've signed thus far in terms of customers are new to NCR entirely.

Got it.

And then as a follow-up, how should we be thinking about the remaining sort of revenue and EBITDA cadence across the two I say that in the sense that I know there's some timing on product launches, et cetera. So how does the rest of the year kind of play out in the businesses? Thank you.

Yeah, so Matt, it's Brian. What I would say is that obviously in my prepared remarks, we're maintaining the guidance for the year on revenue. So down two to up three. And that implies sequential improvement in Q3 and Q4. And Q4 is, you know, from a seasonal perspective, it's usually our strongest quarter and we continue to see it that way. and we'd expect contribution from both segments sequentially to see improvements. And then on EBITDA, same thing. EBITDA maintaining a 3% to 7% growth. We operated in the first half in line with that. So we see consistent performance in the second half growth-wise, which implies, again, sequential improvement in adjusted EBITDA and in margins. And we would see that contribution across both segments.

Matt, just to add to that. To what Brian said, as more of these contracts, as more of our customers convert to the new application, there's obviously additional value to us because there's some cost savings and enhancements through the product to our customers. So we anticipate as well the margins going into next year will continue to improve as a result. I'd also mention that the conversations around payments have all been very constructive as well. I think for all our SME restaurants and many of the small retail, we provide almost 100% penetration for new customers with payments. But even for the large enterprise that have signed up or in the process of signing up for the new application, payments is front and center. So our expectation, my expectation, is a very high percentage of those customers will begin using us for payments.

Appreciate the comment. Thank you. Thanks, Matt.

Your next question is from Jack Evans with Goldman Sachs.

Hey, guys. Congratulations on the results. Just a couple quick ones. Of course, we've been spending a lot of time with the higher memory cost, taking a look at the hardware environment. Brian, I appreciate the comments on the push-out. Any color you could provide on how that's impacting broader discussions with current customers and future customers and where that may be impacting the P&O and the near term and the confidence that you guys have in kind of seeing that rebalance in 2027?

Yeah, so if I look at the quarter in Q2, hardware was relatively flat down a little bit on a nut basis. But we did see the pressure that we talked about on the install revenue inside of the restaurant business. So we are seeing a little bit of cautiousness on project work from customers and a little bit on hardware as the memory chip cost is an issue for customers. As we've said before, that's a $20 to $30 million issue for us that we're passing on through price. And so we do see a little bit of pullback because of that. And we think the balance of the year to next year, we probably stay pretty consistent to the operating environment we're currently in.

Yeah, but they can delay only generally for so long. At some point, they have to refresh. Either parts aren't available or the product is no longer available to continue in its current form. So I would expect, while we've seen some delays, and that's one of the things that Benny highlighted, I'm expecting that'll get itself sorted out.

Yeah, I may make one other comment. When we look at the software side of the business, what we are able to do, the hardware that has life in it still and the customer wants to be able to push out their refresh cycle, our new platform is able to leverage and sweat those assets. So we've done quite a lot of work to make sure they're not forced to an upgrade. For example, there is a sort of a well-known cycle where a new upgrade to Microsoft Windows as an operating system on a point of sale or a self-checkout device requires an upgrade to a newer chipset. with our new platform will be able to avoid that so we can keep the customer current, keep them secure without them having to upgrade an asset that still has life. So I think the swings and roundabouts to that, customers are looking for sweating their assets. The customers who are looking to sweat their assets a little bit longer, we have a software solution for them and that means they're adopting the software faster. So that price pressure can be quite positive to accelerate the software discussion for us.

Got it. That makes a lot of sense. Seems like there's a lot of flexibility, which is good to hear. I guess in terms of, I guess, the second question, any color you could provide on the competitive environment and extending that question, I guess, also into kind of the go-to-market as well. It seems like you guys have signed several distribution partnerships. Seems like those seem to be working out well. Any color on both competitive environment and kind of the updated distribution strategy, particularly with the recent launch of VCP?

Yeah, sorry. I don't know that there's been any significant change relative to the competitors. I would say back to my earlier comment, when I meet with customers, that is not really the discussion, especially since changing out a point of sale is difficult and changing to somebody else is even more difficult. So I'm not finding that as any more or necessarily less than what we've seen over the last year. If we still see RFPs, I would say the restaurant side probably sees a little bit more than we see on the retail side. Just the number of players that are trying to move into enterprise space. I think for SME, obviously, I think you know that well. That's a very competitive space and puts pressure on where we are. Do you have any?

I would echo that. No significant change through the year and nothing on... on the sites either in terms of significant changes. What we've certainly seen from the shows we've been to recently is an incredible interest in our platform solution and VCP as you outlined. I think the story, the modernization, the demos, the labs are all proof points and I think the 20% of new logos are all proof points of the story, the message, the solution is really starting to resonate and win as a differentiator but we can't be complacent of course so we're continuing to gear up on proactively sharing the continued development of the product solution and I think the reference clients and proof points as we're rolling out the expanded lanes and sites so said, is it goes really in terms of the competitive environment.

I'm going to add one more piece. I'll tell a story of a customer that was just in last week. I went to dinner with them. It's kind of the routine. We have dinner the night before they come in and they spend pretty much the entire day here talking about, especially if it's an existing customer, you talk about their existing applications and then we go and show them a demo of the new one. This customer I had not seen. It was in the DSR space. They had not seen the product yet. And I would say at dinner, I think they were fairly skeptical that they were going to see something that much different. I would say halfway through the demonstration, the CIO stopped the conversation and said he's never seen anything like this, and he's ready to move forward on this and on payments. So I think the competition is always going to be out in any of the spaces we are, but I think we have something clearly differentiating for us, but I think it's also differentiating the architecture of how it's designed from cloud to edge and microservices, the speed at which this product enables customers to make changes, plus, as Nick was saying, saves them a bunch of money on Microsoft and other cost of running their stores. I think we're in a really good position. It's just it's still early days. We're talking about the first six months of launching this product, so we're very optimistic about the future.

Great, thank you. Really appreciate taking the questions.

Thank you.

Your next question is from Parker Lane with Stiefel.

Yeah, hi, this is Jack McShane on for Parker. Thanks for taking the questions today. My first question is on the restaurant side of the house. Last quarter, it seemed like you were calling out SMB as more of the key headwind. This quarter, it seems to be a little bit more focused on macro. and consumer traffic in the quarter. How much do you feel like is in your control, which I would presume would be the S&B portion versus out of your control, which would be the macro?

I'll get started. Thank you, Jack. So if you stand back and look at the macroeconomics, I described a couple of trends, right? So first of all, There is definitely continued pressure on the bottom line of restaurants. Last year, this year, there is pressure on labor costs, food costs. Like I said, even insurance and energy costs are coming up. So they are feeling the cost pressure, no doubt about that. But I don't see that as having a spend freeze for restaurant technology spend. And particularly when you think about Aloha Next and the platform strategy that's coming to market, it actually aligns to the buying experience Desire Right Now. In fact, there's a study that was out earlier this year that indicated most CIOs, about 50%, are looking to increase spend in technology, but aligned very specifically to improved efficiency, improved operational simplification, AI automation, and Data and Insights, so a data-driven operational management. All of these things quite nicely aligned with what we're bringing to market and hence why I'm very encouraged with the momentum that we're seeing with our conversations since the launch of Aloha Next. So in that dynamics, that is in our control. Now, the buying committees, like I said, more scrutinous. The buying cycles could be a tad longer, but it really is resonating and I believe that is to a large extent, the buying habits are in our control. The second dynamics though is the SMB segment that you talked about, the buying habits of that specific segment is very price oriented and simplification of deployment and management and rolling out the solution for SMB specifically is going to help us address and that's why we're focused on that. Maybe the third one, you're right, in this quarter we talked about the deferred refreshment installment, which is largely on the one-time side of our revenue mix, not on the recurring, not on the software side, but these are so refreshed hardware upgrades and things like that. We will see some deferment. That's what we've seen this quarter, and that would be impacted by macroeconomic, but largely on the recurring revenue on the software and the launch of Aloha Next, which we're pretty good about.

Great, yeah, thank you. That was very helpful.

And then I wanted to ask Brian, just for an update on the non-recurring share of the business, you've been taking portions off the income statement for some time now. Now in a pretty material way with hardware, you guys have been talking about moving more and more services to recurring models. Can you just give us an update on what remains in the business that's non-recurring and kind of the level of urgency to get any sort of non-recurring business out of the model. Thank you.

Yep, thanks for the question. So the really good news is 83% of our revenue was recurring in Q2. So it's a significant improvement with the new hardware model. And we do have 17% that's still non-recurring, and that's going to be one-time install work that's project-based within services. That will still stay there and be a revenue source over time. In software, we have a couple one-time streams. one one-time software licenses, which has gotten a lot smaller. It's going to be down probably close to 20 million this year. So that's been coming down over the last five years as the company shifted to subscription. That will eventually go to zero. And then we have one-time professional services that will become recurring and over time come down. There may be still a little bit of that, but it should come down from where it is today. But we will still have some one-time revenue in the model, but we can improve on that 83% as we get into the next year and the year beyond with some of those dynamics.

And just to add to that, so everything that we're signing now are a different structure of contract. So it's a multi-year fixed, you know, agreement with CPI or CPI Plus in each one of them. So what you see today in the company is kind of an amalgamation of what was at one point one-time licenses for software, software maintenance, and then a lot of professional services, probably about a quarter of our revenue represents what's called professional services, which is software updates or changes that the customers are asking for the on-prem application. So over time, that's all going to atrophy, and what it's going to be replaced with is the Vox Commerce platform applications. And as people want to enhance that, it has the ability for us to do the upgrades, or it has extensions where they can actually do it themselves. And so it'll move in a different direction, but again, we're really early in the cycle. So the percentage that Brian mentioned, that will continue to move up, but it's not gonna move up materially early.

It's gonna take some time. Great, thanks, guys. Yep, thank you.

Your final question is from Matt Inglis with RBC.

Hey, good morning. This is Matthew Inglis on for Dan at RBC.

So you mentioned an expansion of the gateway strategy in Canada, Europe, and APAC. How should we think about that timeline and just the size of that opportunity? And then can you remind us of the uplift in the economics of those international payment volumes once converted?

Thank you. So the The gateway is the same as we talk about here for the U.S., the VOIX Commerce. I mean, the VOIX Connect, I'm sorry, is what we call it. Today, it processes or runs through at $800 billion in volume domestically. So as we move to the VOIX Commerce platform, which is obviously cloud, the connection point will be VOIX Connect in all markets that we're in. And then from that entry point, we will connect to third parties, local acquiring companies, some of which I may and Darren may have worked at in the past, but whatever's best for the local market, it will represent a new revenue source for us that we don't currently enjoy in the existing base, but it's going to apply to the new applications. It's not being retrofitted to the legacy. None of this is looking backwards. It's all looking forward because the effort, the cost, the retrofit to legacy applications, honestly, it's not worth it to the customers today or us. But going forward, we want better control and security around connecting to our platform.

So it's all going to go through Connect.

Got it. Thanks.

And what's the timeline then for expanding into those new regions?

Well, the timeline is it also correlates with when the customers sign up. So as they sign up in those markets and they ultimately get past pilot and go live. So you can say 27 for Europe and Asia. It's already live for obviously the U.S. and Latin America.

They're working on standing it up in Europe and Japan and Southeast Asia next year. Excellent. Well, thank you very much. Thank you.

There are no further questions at this time. I will now turn the call back to Jim Kelly for any closing remarks.

All right. Thank you, Operator, and thank you all for your continued interest in NCROX.

Ladies and gentlemen, this concludes today's call. Thank you for joining QMA Now Disconnect.