NCR Voyix Corporation

Greetings and welcome to the NCR VOIX Q4 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, Sarah Jane Schneider, Vice President, Investor Relations. Thank you.

You may begin. Good morning, and thank you for joining our fourth quarter 2024 earnings conference call. This morning, we issued our earnings release reporting financials for the quarter ended December 31st, 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 ncrfoils.com and have been filed with the SEC. With me on the call today are Jim Kelly, our Chief Executive Officer, Brian Weld Walsh, our Chief Financial Officer, Benny Tadell, President, Restaurants, and Darren Wilson, President, Retail. 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 to the most comparable GAAP measure in accordance with SEC regulations, please see our press release furnished as 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.

Thanks, Chair Jane, and good morning. I would like to welcome all of you to our fourth quarter earnings call. I am Jim Kelly, NCR VOIX's newly appointed Chief Executive Officer. As you may know, I was appointed Independent Chair of the Board of Directors in October of 23, followed by Executive Chair in May of last year. This 15-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 10 years, sometimes as long as 30 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 teams 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 billion API calls at the end of 2024. 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 prospects to deliver a phased release of enhanced capabilities beginning this year. In retail, our newest self-checkout solutions launched in 2024 are available in the US 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 US 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 strong demand from our existing base along with new customers, accelerating platform sites and transaction growth. The third difference is service. We are uniquely positioned to meet 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 24-7 support, particularly during the holiday seasons. While historically these services were built on a fee-for-service basis or an annual contract, we are now bundling services and software into a multi-year 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 mid-sized 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. customers processed over $500 billion in payments through their point of sale, 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 US, 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 right-size 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. Benny?

Thanks, Jim. In the fourth quarter, our restaurant business signed more than 200 new software and services customers, including an enterprise restaurant, as we also converted more than 135 existing customers to our platform. Our platform and payment sites increased by 6% and 8%, respectively. Software ARR increased 3% and total ARR increased 4% in the quarter. In our enterprise division, we want a multi-year platform and payments contract with Yogurtland 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 to centralize store data and online ordering, while reducing in-store hardware and cost of ownership. As Jim 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 Maggiano's, to enable them to minimize cost and disruption as they continue to grow their brands. Internationally, we signed an $80 million 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 increased 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. I will now turn the call over to Darren to discuss our retail performance.

Thanks, Benny. Good 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 Voyex initially in a strategic role before being appointed president international in November of 2024. 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 to enhance support for these customers. Similarly, we signed a new five-year contract with a national grocery chain in Japan to 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 million. Under the agreement, we will provide software support, including catalog, ordering, receiving, pricing, and point of sale, in addition to hardware maintenance for nearly 250 military sites around the world. As Jim outlined, we will continue to focus on winning additional customers and 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 through the details of the transition. Enecon 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 from 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 licenses and services, which total $60 million 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 while 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 Alios countries to be exited during the first half of this year. These 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 million and normalized revenue was $678 million, reflecting a decline of 14% due to the expected weakness in hardware sales. Software and services revenue declined 2% to $521 million due to the $11 million prior period impact of the now terminated commercial agreements with NCR-Atlios. 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 million due primarily to a decline in one-time perpetual software license revenue which was partially offset by revenue from our platform and payments revenue streams. Services revenue of $270 million 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% to $114 million in the fourth quarter, as margin expanded 850 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 million. This significant improvement was largely driven by approximately $120 million 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. Software ARR and total segment ARR increased 4% and 5% respectively. Let's turn to our segment results for the quarter. Beginning with restaurants, software revenue increased 3% to $91 million, and services revenue increased 3% to $72 million, driven by payments and hardware maintenance growth. Total segment revenue declined 5% to $211 million due to the expected decline in hardware. Adjusted EBITDA increased 36%. to 68 million as margin expanded 980 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 million, while services revenue increased 4% to 193 million. 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 million due to the expected decline in hardware sales. Adjusted EBITDA increased 13% to 102 million as margin expanded 560 basis points to 22.1%. This improvement was driven by a combination of services revenue growth and our efficiency initiatives. Lastly, corporate and other expenses decreased 25% to 56 million. When normalizing for the spin in digital banking impacts in the prior year, corporate and other expenses decreased 16%. 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 million for the quarter before considering 27 million of cash expenditures related to restructuring and other strategic initiatives. This represents a conversion rate of nearly 64% when excluding restructuring. We initially anticipated tax payments of 375 million pertaining to the proceeds from the digital banking sale last year. We have updated our estimates based on tax planning and have lowered the amount to 320 million, of which 20 million was paid in Q4. We ended the quarter with 1.6 turns of net leverage based on 419 million pro forma 2024 adjusted EBITDA. During the quarter, we repurchased 4 million shares for approximately 56 million under our 100 million share repurchase program. In February, we completed the remaining repurchases purchasing 7.3 million shares in total. As we move into 2025, we expect to maintain our pro forma net leverage ratio 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 Enercon ODM to become effective at some point in the second half of 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 currency-neutral revenue to range from $2.575 billion to $2.65 billion, which reflects a 9% to 6% decline, driven mostly by hardware, as shown on slide 11 of the presentation. Our core software and services revenue, adjusted for 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 million to $445 million, representing an increase of 21% to 28%. 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 and the extent to which the company can mitigate the impact. Non-GAAP looted earnings per share is expected to be between 75 and 80 cents. This is based on a fully diluted weighted average share count of approximately 162 million shares. and an expected tax rate of 26%. Adjusted free cash flow unrestricted for the year is expected to be between $170 million and $190 million when excluding $55 million in restructuring, $300 million of taxes related to the digital banking sale, and $20 million 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 expected positive impact to working capital from the ODM transition, which we now anticipate will primarily benefit us in 2026. At year end, total inventory was 208 million, comprised of finished goods and raw materials of 89 million and service parts of 119 million. Once the ODM transition is complete, as inventory transitions to Enecon, we anticipate a cash flow benefit of approximately 50% of the $89 million 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 2024 reported results which reflects cost actions taken in 2024. Our 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 will 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. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. The first question is from Kartik Mehta from North Coast Research. Please go ahead.

Hey, good morning. Uh, 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 a timing of when you think you could start seeing a benefit of that and, you know, how long that could take in terms of achieving kind of full benefit.

Uh, good morning, Cardick. Um, yes, I, as you saw in or read or heard in the, uh, comments that I made. 500 billion is a big number. It actually translates into 12 billion transactions. Unfortunately, while I think it was a good move by Mike, the prior CEO, or 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 years, or probably over the last 10 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 onto 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 selling new retail customers domestically. And then also, as I said, we're going to start rolling it out to Latin America and Europe, probably the next two markets. to take advantage of their footprint in both regions. And just to give you an order of magnitude, if you go back to my previous company, Evo, we had close to $700 million of revenue, and we did about $150 billion 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 this 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 a new role for you. Congrats on that. But I was wondering, as you've looked at the business, kind of one or two opportunities you think you can take advantage of in 2025?

Hi, Karthik. Thanks for the question. Yeah, there's huge opportunities across all our markets. The kind of pivot to our next generation solutions and kind of recurring revenue models, especially in the services space as well, is a real untapped potential. So, yeah, 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. And then bolt on, later in the year, the payments functionality too. There's plenty of channel opportunities there. Perfect. Thank you both. Appreciate it. Thanks, Charlie.

The next question is from Will Mance from Goldman Sachs. Please go ahead.

Hey, I appreciate you taking the question. First question on the software and services outlook. I hear you on the exiting of the licensing arrangements and the tough comparison that generates for the year. Could you talk about what is the remaining exposure to software licensing and 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?

Well, 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 proformed what the impact would be. Would there be some one-time licensing that will occur this year? Likely that will be the case. But the direction I've given to the sales organization through both Benny 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 you know, 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, you know, at the end of the year, if we execute like we think we're going to, there's probably 30 to 40 million of software, one-time software license revenue still left, but it will be mostly gone.

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

Yes, I agree.

Yeah, if you look at what's occurred, I mean, last year, a lot of this was the restructuring efforts after the spin, selling digital banking. And 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 for hardware outlook. Is there any way you could share on a like-for-like basis how the outlook compares to the $100 million of revenue you gave Proforma for the ODM 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?

Yeah, so first on the question around the pro forma revenue, if we take the gross hardware and move it to net, in the metrics file that we published, you can see how we finished the year with that metric. And, you know, we had said the pro forma business would be 2150 in revenue, and we ended up at 2171. We said that the pro forma, even though we were targeting 430, we ended up at 419. So the margin was about 19.3%. So we essentially performed in line with what we said. As 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 forma 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 this year 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, they ramped in the second half.

That's very helpful. I appreciate all the details and thanks for taking the question.

Thank you. The next question is from Charles Naban from Stevens 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 a five-year deal for a total contract value of $335 million. 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 secondly, how we should think about the timing of that, the revenue recognition there.

Yep. So that is a longstanding relationship we have, but it did expand pretty meaningfully. And so we're getting incremental revenue from that contract this year. and it starts to ramp towards the end of the first quarter, and 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 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, both the hardware that we've talked about, and then one-time revenue around services, partially because we're exiting it on purpose, and then just with 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 million 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 insourcing key functions and just finding efficiencies with our vendors. And then the other 30% is related to our headcount, and that's mostly being actioned in the first quarter. And so those cost actions will ramp as we go through the year, and that's the timing of the revenue kind of moderating and the cost actions ramping. is why EBITDA will sequentially improve as we go through the year.

And just to add some color to that, 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 one-time in nature. As we're shifting away from a one-time 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 Zafino from Oppenheimer and Company. Please go ahead.

Hi, Greg. Can you guys just talk about the retail environment right now and expectations for growth there?

Thanks.

That's a pretty broad question. Thanks, Ian. Yeah. Obviously, we're covering the globe in terms of retail coverage. So to zero in on one territory market is interesting, and we can explore that offline. That said, despite the hardware situation that Brian outlined, we're actually seeing very active conversations on all of our markets, both in terms of expansion and 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 grade their efficiencies in their estates, but also adding new lanes new sites, etc so it's it's having been at the last two retail trade shows both in New York and in Germany and the flow through on stands was probably record level in terms of interest in 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. And we have the product range and solutions. I need to cover that. So it's buoyant, I would say.

Yeah, I would add to that. If you look at, go back to the comments I made on the growth in the platform 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 talked to the new head of North America, and 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 underrated. 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 for greater efficiency from our customers, and the company has invested 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.

Yep.

The next question is from Dan Portland from RBC Capital Markets. Please go ahead.

Thanks. Good morning. Jim, I appreciate all the comments you opened up with and your prepared remarks. My question is, you know, 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 to change as a result? Like the immediacy with which the switch occurred suggests 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 sitting in Vegas at some ETA show or something. 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 stone 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 for sure. 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 kidney stone was not. Anyway, so I think, you know, circle in on, not just because I'm here 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. I think it's something, like I said, Mike made an early investment to bring payments in and it's been impactful to our restaurant business. It's just unfortunate. that the product set at JetPay was just not broad enough, and the effort to try to get it to there was just probably more than they wanted to invest. So 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 our retail side, I 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, you know, historically the company was a very large $8 billion company, as you know, with lots of different components to it, you know, 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 all of them 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. So I think the combination Of those two factors, we have some customers today that we're probably behind in our delivery dates, 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 I think we have a number of areas that will be impactful this year and clearly into 26th. 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.

That's great.

One last piece. I think the diversion of the spin obviously was not helpful to the organization going into 24, plus the sale of digital banking and ODM. And that took a lot of resources and attention away from what I just described. But 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. 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. Yep. understanding that on the enterprise side, obviously that's being handled, had been handled previously by other processors, and maybe we'll play on some of them on the restaurant side. But the question is, I just want to 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 red share agreement with the prior processor, or you did? I'm just trying to make sure I understand the reality of it.

No, previously, I don't remember what year it was, maybe 19 or so, JetPay was acquired. So that was a public company. They acquired the entirety of it. So there wasn't a rev share. There was the traditional kind of ISO structure that was now owned by the company. So they were in the payments business. That was divested in, I think, 23. But all that was divested were those accounts that were not software customers of NCR Voyex. 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 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. 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 cost, high fixed cost. 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.

The next question is from Matt Somerville from DA Davidson. Please go ahead.

Thanks. Excuse me. A couple questions. First, I want to make sure I'm clear on the ODM. You know, a few months ago, posturing was basically like, all right, everyone adjusts their models. You need to put in kind of this net $100 million sort of number for hardware. We're going to have the cutover done by the end of the year. So 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. So obviously two big projects going on, the sale of the digital banking business, the $2.5 billion 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 described, were set that we would get this done by the end of the year. And, you know, 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. And 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 needed to do was create a questions or concerns with our customers, and that's our primary interest, is to make sure that this is completely transparent to them. The challenge turned out that, I mean, not to get over the weeds, but the provider system is an SAP system. Our system is an Oracle system. And the largest US-based warehouse distribution center, which is, I think, in Nashville, they're SAP system was not able to, in sufficient 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 them a couple of weeks ago, and that's being implemented. So we could have gone halfway, but it would just be 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 piloted 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 Anacom is fully committed. I met with the chairman, CEO, and the local leader, as I said, a couple of weeks ago. And yeah, 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, I mean, excuse me, employees, that are kind of tied up in the mix that are supporting that business that were told one thing. And now, you know, we've had to tell them something else. So, you know, we take responsibility that we didn't get it done together with our partner, but just like, um, digital banking, I mean, they haven't pulled out of our infrastructure yet either. They're going to be here for probably another, uh, through the balance of this year and probably a little bit into next year. Um, 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, Culler. 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 increasingly 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. Unfortunately, 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 obviously, I think it's representative of something that I've seen here. And as I mentioned in my comments, attrition rate at 2%, retention at 98%. 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, to build new systems and support systems. The life cycle of technology changes constantly. So for the situation that you described, I don't know who you're talking about directly. I mean, that can clearly be the case. And there are 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 understand 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 U.K. 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. So yes, 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 to add to it.

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, where retailers have wanted to self-acquire, self-process, self-serve. And 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've signposted kind of the next-gen software and the services agenda are some real strength points for us. So actually, many retailers are outsourcing their entire helpdesk infrastructure to support if they're changing a hardware or a software environment. Equally, our software solution, we have a 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, so using camera systems to capture inadvertent or deliberate fraud. Some retailers are looking at biometric payment-type solutions, be that fingerprint, face, et cetera. To do that kind of stuff in-house is pretty expensive and challenging. And as enabling that, even if they take some partial steps, 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.

Just two other points. The platform that you hear a lot about from, you've heard in the last, I don't know how many calls going back, but I think that is also a very differentiated solution where you can add functionality and applications to that platform for specific customers as opposed to maybe the legacy way, which we still have many customers, which was bespoke development onsite 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 cloud solution as we have now for our next generation, I think a customer or a retailer who builds it bespoke to them, I think will be, as Darren was just saying, will 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 Stiefel. 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 27. I was wondering, with you stepping into the role, what your updated view is on the achievability of that target, and if there's any initiatives that you're looking to put in place here to meet or exceed the pace of that target of getting 40% on platform.

Yeah, when they offered me the position, nobody told me about a 40% target. I don't want to say yes or no to that. It's not something I've heard of previously. I think the pace at 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? Yeah, I think it seems to me reasonable. to be reasonable. I think, as I said earlier, there's the entire focus now. 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 the right investments. So now it's really about executing. And that's a challenge that we'll have. And so I 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 that. It's very top of the call. But obviously, this market remains very dynamic, let's call it geopolitically. And 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 tariffs 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.

Yeah, I was watching TV when I got home last night after a late dinner and it sounds like they're stretching out again into April. Is that what I heard him say on TV?

You know, he just said today, a couple of minutes ago, Mexico Canada tariff start March 4th, China additional 10% on March 4th. 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, 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, that's not good news for the customers because I think the customers will feel the same way. Hardware is 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 anything of that nature. I think if it happens, then we'll address it and we'll update either guidance or otherwise, but for right now, you know, we're taking the position that a wait and see more than taking, you know, changing guidance as a result of a comment that may have, what sounds like was made this morning. Like I said, last night, it sounded like it was April. So I figured we had a month or so, but you know, this is a new administration, so we'll see what happens.

Nope. Totally understand. Just wanted to, just wanted to get the latest. So completely understand. I appreciate that perspective. And then, You know, maybe Brian, can you maybe just better help us understand, you know, longer term? I'm just looking, thinking directionally about the kind of path of monetization. When we think about the relative growth in ARR and platform sites, increasing, you know, 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, right? You know, 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 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. recognize that we have 8,000 people, not all of them in the field. We have 8,000 people. A lot of them are billing time 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 much, much faster. The issue really relates to how we address our service business in terms of how we're compensated for the commitment and effort that we make 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. So there's a lot of things that help us going forward as that non-recurring becomes smaller.

And again, on the payment side, not because I came from payments, but payments and software have aligned for a number of years, as I'm repeating again. And so I would expect you'll see another significant driver of revenue, similar to others in our industry, that will...

help accelerate arr and just the overall growth these are multi-year 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 a um when you were talking about having close to 700 million with 150 billion in volume what you're trying to do is kind of compare to the fact that earlier in the earlier in the call you were talking about 2024 you know, your customers here at NTR Voyage processing 500 billion of POS. Is that kind of how we should be? Again, not saying that that's how we should think about revenue, but that's kind of the relationship that we should be thinking about here.

Yeah, don't think about it as 500 billion of revenue. Well, then Pfizer, Global Payments, and the rest of them would be very happy if they could be at that rate. No, the idea is these are large, much thinner margins than 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 smaller merchants, larger margins. But the idea is $500 billion is a big number. $12 billion transactions a year is a big number. And those are largely untapped transactions. and where our restaurant business that was put into place, again, with the JetPay story, I think today we're at 100%. So every time we sign a new customer, we have payments attached to it. Unfortunately, because there were not the capabilities within that application or that platform, we couldn't do the same on the retail side. So now because WorldPay 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 retail or XYZ, you know, whether it's a restaurant or fuel, we're 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 billion 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 that we're starting to open up again to payments, not to replace what we do for a living, but to complement it. It's a better experience for the customer, you know, the one throat to 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 effectively, as well as sell to new customers.

Makes a ton of sense, and thank you for that call, 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 NCR OX. Have a good day.

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