NCR Voyix Corporation

Greetings and welcome to the NCR Voyex Q2 2024 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Should anyone require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Alan Katz, VP of Investor Relations. Thank you. You may begin.

Good morning, and thank you for joining our second quarter 2024 earnings conference call. This morning, we issued our earnings release reporting financials for the quarter ended June 30th, 2024. 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, which can be found at www.ncrvoyex.com and have been filed with the SEC. With me on the call today are David Wilkinson, our Chief Executive Officer, 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 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, 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, the most comparable GAAP measure, in accordance with SEC regulation, please see our press release furnished as an exhibit on our Form 8K filed 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 David.

Thanks, Alan, and good morning, everyone. I would like to welcome all of you to our second quarter 2024 earnings call. In addition to discussing our quarterly financial results, we will also provide details concerning the strategic actions announced this morning including the sale of our digital banking business, our expanded partner agreements with a leading provider for point of sale and self-checkout hardware, and our recent cost alignment initiatives. I would like to remind everyone that the strategic review to optimize the company's operations and drive enhanced long-term shareholder value began in 2022. The initial part of this multifaceted plan was realized in October 2023 with the completion of the spinoff of our ATM business into NCR Atlios. Following the spin, the NCR Voyage Board continued efforts to streamline the business and sharpen the company's focus to better serve our customers and drive enhanced value to our shareholders. As you will see on slide six, we have taken the following actions. First, we announced a definitive agreement to divest our digital banking segment to Veritas Capital for a $2.45 billion purchase price, plus up to $100 million of contingent consideration. Second, we announced partnering with Enecon Corp, a leading hardware provider for both point of sale and self-checkout. And third, we implemented a multi-phase cost alignment program, which began with the elimination of approximately 800 staff globally approximately $75 million in annualized operating and capitalized payroll-related costs at the end of Q2. This program contemplates an ongoing assessment of all costs. These actions will significantly reduce leverage, moderate the variability of hardware-related revenue beginning in 2025, align our current operating costs to the new structure, and position NCR Voyex for accelerated top line growth and margin expansion. Brian will discuss the details of the cost alignment program and our improved future capital profile later on the call. As we have described previously, the digital banking business is an industry leading provider of digital first solutions for banks and credit unions, and the only provider of a truly end to end offering across the physical and digital channels. With 2023 revenue of $579 million, this business employs over 1,600 employees across seven global facilities and serves approximately 1,300 financial institutions in North America. We believe divesting this business benefits both NCR Voyex and Digital Banking, allowing each to focus on its core competencies. Over the last four months, we conducted a rigorous selection process which resulted in identifying the best owner for the business while maximizing value for our shareholders. We expect the transaction to close by year end. For hardware, we have selected a leading manufacturer of point of sale and self-checkout hardware, Anacon Corp, whereby we will function as their agent and maintain the sales relationship with our customers. However, all other aspects of the hardware sale, including design, manufacture, and warranty of the hardware will be fulfilled by InnoCon. Once the agreement is implemented, we will only record the net sales commission from hardware in our revenue. This is the natural next step in the evolution of the company's hardware business, which has transitioned over the years from internal to outsource manufacturing and will now be exclusively handled by a leading third-party design and manufacturing company. This should allow our software customers access to market-leading hardware products with the benefit of improved lead times, enhanced speed of innovation, and increasingly competitive pricing. Turning to slide seven, we have outlined our key go-forward strategic objectives for the second half of 2024 and into 2025. We believe these efforts strengthen operations in our core markets, enhance existing customer relationships, attract new customers, improve allocation of resources to focus on our restaurant and retail segments, and drive profitable growth for the company. These can be best summarized as follows. First, accelerate platform conversions. Today, we have around 20% of our sites connected to the platform. Our expectation is to accelerate platform conversion over the next three years. As we continue to convert customers to the platform and improve customer adoption of value-added platform capabilities, we will significantly increase our software revenues related to our existing customers. Second, is to ensure we have the right resources and incentive programs in place to improve upon past performance of gaining share across our markets. And finally, invest in our VOYX commerce platform to meet the growing demands of our customers. including tuck-in acquisitions of added capabilities, accelerating speed to market. We believe these actions support the continued realignment of our operating model and will enable us to see meaningful improvements in revenue and earnings growth over time. Before I turn the call over to Brian to discuss our financial results, I would like to take a few moments to review some of our second quarter highlights on slide eight. For the quarter, normalized software revenue increased 5%, and normalized services revenue decreased 2% when excluding the adverse impact of a one-time prior periods adjustment and the one-time software true-up from the prior year. We executed on transformation initiatives and saw the impact of the continued growth within our higher margin revenue streams. We achieved solid sales results across our segments, including signing nearly 300 new customers. We also continued converting customers to our platform and now have a total of more than 67,000 retail and restaurant platform sites, an increase of nearly 35% from the prior year. The ongoing execution of our platform strategy, coupled with our increased investment in our global sales and services network, drove software ARR growth of 6% and total segment ARR growth of 5%. Turning to our restaurant segment on slide nine, In the second quarter, we continued to demonstrate momentum, signing more than 220 new customers and increasing our platform and payment sites by 7 and 21% respectively. Software ARR increased 2% and total ARR increased 4% in the quarter. Within our enterprise division, we signed a new multi-year agreement with a large North American hospitality group to provide the Voyax Commerce platform with Aloha Essentials to more than six restaurant brands across Canada. Under our agreement, we will provide a full suite of solutions for approximately 90 restaurant sites with the opportunity to contract an additional 90 plus franchisee sites in the future. Our comprehensive solution will enable this customer to streamline operations and significantly improve business agility, allowing them to execute on their growth opportunities and scale their business. This quarter, we also rolled out our digital ordering platform solutions for a longtime large fast casual restaurant customer across 2000 plus domestic locations. This customer leveraged our platform to power their new digital ordering strategy in the third quarter of 2023. As of today, they have fully implemented our solutions, including our online and mobile ordering services, order monitoring, and menu management to integrate the customer experience across the physical and digital channels. Our technology will be integral to their digital transformation for their end customers, while also lowering their operating costs. Lastly, in our mid-market business, we continue to execute on our growth efforts, signing more than 220 new logos. Our payment sites for this segment continue to increase as well, with 98% of the new mid-market customers signed attaching payments to their point of sale contracts. Turning to our retail segment on slide 10, this quarter we signed two enterprise customers and 45 mid-market customers leading to nearly 800 additional sites. We also increased our platform sites by 70% as we continue to convert on-premise customers and onboard newly signed customers. Software ARR increased 6% and total ARR increased 4% attributed to the powerful impact of attaching to the platform. In our enterprise business, we signed a new multi-year agreement with a large wholesale grocery supplier and grocery store operator in the United States. Under our agreement, we will provide this customer with our full suite of retail platform solutions, including point of sale, next-gen self-checkout, and customer loyalty for 10,000 lanes across 600 of their newly acquired stores. We also expanded our relationship with a longstanding fuel and convenience customer of NCR Voyex. By the end of 2025, we will connect their entire store footprint of approximately 3,500 lanes across Canada to the platform to modernize their point of sale solution. Following the migration, we'll work to cross sell additional solutions. Lastly, we renewed and expanded our services agreement with one of our largest retail customers following our successful execution to support their holiday traffic across more than 5,000 sites consisting of 200,000 lanes. As a result of our performance, this customer not only renewed their contract with us for an additional three years, but expanded the scope of the agreement to include additional services. Turning to slide 11, our digital banking business demonstrated strong financial and operational performance this quarter. Compared to the prior year, revenue increased 9%, and adjusted EBITDA increased 17%. Registered users grew 4% to 29 million, and the number of active users grew 3% to 20 million, while segment ARR increased 9%. As I stated earlier, we anticipate the sale of digital banking to close by year end. We will continue to support the transition of the business to Veritas Capital beyond year end. With that, I will turn it over to Brian who will discuss our second quarter financial performance and the financial impact of the transactions announced today.