NCR Voyix Corporation

Greetings and welcome to NCR VOEX first quarter 2025 earnings call. At this time all participants are on a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press door zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Sarah Jane Schneider. Thank you. You may begin.

Good morning and thank you for joining our first quarter 2025 earnings conference call. This morning we issued our earnings release reporting financials for the quarter and in March 31, 2025. 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 .ncrvox.com and have been filed with the SEC. With me on the call today are Jim Kelly, our chief executive officer, Brian Wubwalsh, our chief financial officer, Benny Tadele, president of restaurants, Darren Wilson, president of retail, and Nick East, our chief product 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 to the most comparable GAAP measure in accordance with SEC regulations, please see our press release furnished as an exhibit to our Form 8K 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, SJ, and good morning, everyone. I would like to welcome all of you to our first quarter earnings call. Before beginning, I would like to introduce Nick East, our Chief Product Officer. As you saw in our press release, Nick will oversee product innovation and marketing across the company's platform architecture. In his new role, Nick will direct our investments in platform solutions to meet the growing demands of our customers and the market. Further, we now have two executives based outside the United States, which will provide a broader perspective of international trends and bring us closer to our global customer base. Turning to our recent performance, this quarter we signed new mid-market and enterprise customers in both our restaurant and retail segments, expanded key existing relationships, and signed customers to the platform. We also progressed on implementing our hardware ODM and our new card acquiring capabilities. While our results were in line with expectations, work remains as we accelerate deployments, transition hardware, and exit one-time revenue streams in favor of recurring subscription billing. As we will outline today's remarks, we are making progress on our cloud-native platform and payment initiatives, which will launch during the second half of this year and drive revenue growth leading into 2026. While early days, I am encouraged by the traction we are beginning to see on our growth initiatives to improve future performance. Since our last call, I have met with more than 40 of our largest customers across the U.S., Latin America, and Europe to gain constructive feedback and reinforce our commitment to excellence in software and services. Our market-leading position in restaurant and retail is backed by our unmatched global presence of more key customers, and these relationships are key to both our current positioning and go-forward strategy. These customers are eager to learn about the platform strategy embedded in our next generation solutions. Nick, Benny, and Darren will discuss our product execution later on the call. I will now provide an update on our hardware business, both as it relates to the recent tariff announcements and our ODM transition. In 2024, the U.S. market represented approximately 60% of our annual hardware sales as it pertained to self-checkout and -of-sale hardware finished in Mexico. During the later part of the quarter, we began receiving tariff surcharges for certain service parts from a limited number of our China-based suppliers. This trend has continued but not accelerated into the second quarter. The current run rate of tariff-related cost is between $8 million and $12 million for the balance of the year or up to $20 million if all suppliers implemented surcharges. In parallel, we have initiated actions to mitigate some of the impact by sourcing suppliers in markets where tariffs are lower or do not apply. As we said on the last call, the implementation of our ODM agreement with Enicom is on track for pilot this summer and is expected to be operational by year end. Our partner's area of focus since December has been the installation of a third-party application to manage the Nashville warehouse, which supports all markets outside of Europe. We will begin piloting across our markets later this summer and anticipate a full transition by year end. Turning to payments, we are in the process of integrating WorldPay's front-end processing capabilities into our customer offering, anticipated to be operational by the end of the summer. As such, we have recently launched payments training for our sales teams to enable initial dialogue with existing customers not currently utilizing our payment solutions. Given the positive feedback that I've received from my customer meetings, I'm optimistic about our ability to both convert the base and attract new customers to our payment acceptance solution. As an example, while early days, we have recently renewed an enterprise restaurant customer who will leverage our new -to-end payment offering once available. We will continue to work to operationalize our international markets over the next 6 to 24 months. Turning to our capital allocation priorities, in March and April, we completed an additional 25 million of share repurchases amounting to 2.6 million shares under our existing program. Since the beginning of the repurchases in November, we have repurchased approximately 10 million shares for a total of $125 million. Our board recently adopted an amended share program, which increased the total aggregate purchase authority under the company's share repurchase program to 200 million. The company will consider the timing of buybacks together with other uses of cash, such as investments in products and infrastructure. Lastly, before I turn the call over to Nick, I would like to provide context for our Voix Commerce platform strategy. For more than 20 years, the company has acquired over 40 on-premise software applications, most of which are still in use today, serving our restaurant and retail customers. In 2019, the company shifted its product strategy from acquiring third-party applications to developing in-house cloud architecture and edge microservices to deliver platform benefits to our customers. This was the genesis of the Voix Commerce platform, or VCP, initially developed with capabilities to connect legacy applications to the cloud. Later this year, we will begin launching VCP's cloud-native and edge applications to existing and new customers as we sunset the sale of our legacy on-prem applications. The VCP will enable our customers to transform their physical locations into digital experience channels for shoppers and diners. We are excited about the potential of a platform-powered business to mutually accelerate growth for our customers and for NCR Voix. To ensure this remains central to the company's transformation, we have appointed Nick East to lead our product strategy under VCP.

Nick? Thanks, Jim. Good morning, everyone. Before I begin, I wanted to introduce myself as NCR Voix's Chief Product Officer. I built a career successfully developing and delivering highly scalable software products for customers worldwide, and I'm excited to continue this journey with the Voix Commerce platform and for the opportunities it represents for both the company and our customers. I've been with the company for the last six years after selling my edge software technology company Zintstra to NCR in 2019. In that time, I've worked closely with our engineering and operations teams to integrate this software into the platform and with our retail and restaurant customers. The VCP was created to enable customers to improve their business and financial outcomes through enhanced digital delivery, better data-driven decision making, and a more agile ability to rapidly innovate and integrate new technologies like computer vision and AI. In addition, the platform reduces IT operational costs, greater security, shared hardware, and improved labor productivity. NCR Voix has the experience, scale, and market-leading positions to build, deploy, and operate our customers' technology environments, enabling them to seamlessly transact and compete in the market. The software products, like buildings, require good architecture. We have pressure tested that architecture, its performance, its scalability, and its CIOs, CTOs, and CISOs in some of the largest global companies, and further confirmed it with an independent third party. The platform is the architecture on which all of our applications are aligning and how we will deploy our new capabilities, including payments, going forward. These cloud-native applications will provide our customers with real-time data collection, allowing them to personalize customer interactions, improve decision making, and enhance engagement and loyalty, which ultimately drives greater value. To date, we have enabled early adopter customers to leverage certain platform capabilities, which is reflected in the platform sites we publicly report. As Jim said, we're now launching our new cloud-native applications via the VCP and sunsetting the sale of our legacy applications. There are a number of products across a range of retail and restaurant verticals we are bringing to market this year, all built upon the VCP. These solutions are developed once, with capabilities that serve many, and are sold through multi-year subscription contracts with escalators. This strategy benefits our customers, allowing them to access enhanced data and the ability to drive innovation. For MTRVoyx, this represents increased recurring revenue streams and improved software margins. With that, I'll turn the call over to Benny to discuss our restaurants

performance. Thanks, Nick. In the first quarter, our restaurant business signed nearly 200 new software and services customers. Our platform and payment sites increased by 5% and 6%, respectively. Software ARR and total ARR both decreased 1% in the quarter. However, when adjusting for the timing of certain items, software ARR and total ARR both modestly increased. In our enterprise division, we own a multi-year platform and payments contract with Ziggy's Coffee, a rapidly growing drive-through and coffee house shop with nearly 150 locations across the US. As part of the agreement, we will provide Aloha Point of Sale, Aloha Sales Manager, and VoyxPay, in addition to hardware maintenance for their entire store footprint and support their continued store expansion. We also renewed and expanded our relationship with Raising Canes, a fast casual chain in the US, signing a multi-year platform contract for 850 locations nationwide. As a result of our new contract, we connected Raising Canes to the platform to enable them to minimize costs and disruption as they continue to grow their brand. Lastly, in April, we renewed and expanded our relationship with Buffalo Wild Wings, signing a four-year Aloha agreement with an Aloha Menu subscription. Highlighting what Nick and Jim described earlier, Aloha Menu is a great example of how we are bringing new innovations to the market via the Voyx Commerce platform in 2025. Aloha Menu is a standalone menu management system that allows restaurants to centralize the building and maintaining of their menu across all geographies and channels, including POS, kiosk, mobile, and online ordering. While Aloha Menu is integrated to Aloha Point of Sale, it is also designed to integrate with any restaurant point of sale application, including competitors. This is a competitive differentiator for us, enabling us to work with restaurants regardless of the point of sale provider. We anticipate strong interest in Aloha Menu as we prepare to launch it later this year. In addition to leveraging our software and hardware, Buffalo Wild Wings will continue leverage our deployment services and our service desk for their restaurants. Finally, in our mid-market business, we continue to demonstrate consistent payments attachment at 97% for new customer signings. Our focus is now on attaching Voyx Pay to our existing base given our expanded capabilities. As Jim previously mentioned, we are already in early conversation with certain of our enterprise customers to be able to extend Voyx Pay and look forward to accelerating our payments execution once we are operational with WorldPay later this year. I will now turn the call over to Darren to discuss our retail performance.

Darren? Thanks, Benny. Good morning, everyone. In the first quarter, our retail business signed more than 30 software and services customers. Our platform and payment sites increased by 48% and 14% respectively. While we have not previously reported payment sites to retail, we have offered payments to certain SME customers in the US and will now report sites going forward, given our relationship with WorldPay. Software ARR increased by 9% and total ARR increased 4% in the quarter. As previously mentioned, this quarter we continued to introduce our next generation applications to meet the demands of our existing customers and the larger market ahead of our expected launch dates later this year. For example, as we recently announced, we renewed and expanded our relationship with Morrison's, one of the largest supermarket chains in the UK, to upgrade their in-store technology from legacy NCR point of sale to a full suite of VCP solutions. In addition to voice pause and self-checkout, we will provide Morrison's with software and hardware maintenance services and a hardware refresh. Further, Morrison's will implement our Aloha solution for their in-store cafes. This multi-year commitment will provide Morrison's with increased speed to market, enhanced shopping experiences and streamlined checkout. Additionally, our VCP point of sale and self-checkout are now live at several locations in the US and we are focused on executing additional rollouts this year to further support our customer's strategic goals. We also have four other grocery, fuel and convenience customers for whom we will roll out our VCP point of sale later this year. This quarter, we continue to execute on our strategy, expanding an existing point of sale software contract with Grocery Outlet for 2,500 lanes across 500 sites in the US. We will now provide them a path for platform connectivity as we roll out VCP point of sale for Enterprise, followed by mid-market grocery. In our convenience and fuel division, we renewed and expanded our relationship with Pilot Company, signing a new five-year agreement for our VCP self-checkout, spanning nearly 1,000 lanes across 280 sites in the US. In addition to self-checkout, we will provide other value-added applications to help Pilot improve the guest experience and further streamline their operations. Finally, we expanded our relationship with Isatan Mitsushokie, one of the oldest and largest department stores in Japan, effectively doubling our hardware technology footprint while displacing the incumbent. Our new contract, which includes both hardware and installation services, demonstrates the global strength of NCR Voyix brand and the trust our customers have in us to deliver high quality services and solutions. With that, I will turn the call over to Brian. Brian?

Thank you, Darren, and good morning, everyone. For the quarter, we delivered revenue and adjusted EBITDA in line with expectations. Total revenue of $617 million declined $93 million, or 13%, as expected due to continued softness in hardware sales and related installations of $67 million and exiting $20 million of on-time software and services revenue, including the termination of NCR Atelier's commercial agreements. Recurring revenue increased 2% to $407 million and now represents 66% of total company revenue. Software ARR and total segment ARR increased 5% and 2% respectively, and platform sites increased 27% to 77,000 sites. Adjusted EBITDA increased 19% to $75 million in the quarter, as margin expanded 330 basis points to 12.2%. This was largely driven by our 2024 cost actions. Let's turn to our segment results. Beginning with restaurants, recurring revenue decreased 1% to $138 million due to the timing of certain revenue items. This, coupled with the expected hardware and other onetime declines, resulted in total segment revenue declining 5% to $191 million. Segment adjusted EBITDA increased 7% to $59 million, as margin expanded 370 basis points to nearly 31%. This improvement was driven by our efficiency initiatives and sales mix. Turning to retail, recurring revenue increased 4% to $265 million, driven primarily by the ramp of a new large customer agreement. This, together with the expected hardware and other onetime revenue declines, resulted in total segment revenue declining 14% to $420 million. Segment adjusted EBITDA decreased 24% to $65 million, primarily due to the declines in hardware revenue and gross profit. Lastly, corporate and other expenses decreased 37% to $49 million, which reflects the cost initiatives we implemented in 2024 and 2025. Adjusted free cash flow was a use of $20 million for the quarter, before considering $33 million cash expenditures related to restructuring and other strategic initiatives. This reflects normal seasonality, coupled with a timing of certain cash receipts from customers totaling $40 million, which were subsequently received in April. We originally estimated digital banking related tax payments of $375 million, and in February, we reduced this estimate to $325 million. We are now further reducing these payments to $304 million, $20 million of which was paid last year, and $284 million of which was paid in Q2. We repurchased approximately 5 million shares for $62 million during the first quarter. From November 2024 through April 2025, we repurchased approximately 10 million shares for $125 million. Our board has adopted an amended share repurchase program, which increased the total aggregate repurchase authority under the company's share repurchase program to $200 million. Future share repurchases will continue to be part of our capital allocation strategy, together with investments in products and infrastructure. Turning to our outlook, as Jim mentioned, we are estimating the current run rate of tariff related costs to be between $8 million and $12 million, or up to $20 million if all suppliers implemented surcharges. At this time, we are implementing mitigations and maintaining our guidance for the year. We will continue to monitor the evolving trade and tariff environment. We continue to expect currency neutral revenue to range from $2.575 billion to $2.65 billion, which reflects a 9 to 6% decline, driven primarily by hardware. We expect the rate of revenue decline to improve throughout the year as revenue ramps, on-sign deals, and as we execute our initiatives. 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 improve 400 to 450 basis points and range between .3% and 16.8%. Non-GAAP diluted earnings per share is expected to be between 75 cents and 80 cents. An adjusted free cash flow for the year is expected to be between $170 million and $190 million when excluding restructuring, digital banking related taxes, and accelerated platform and product investments. This reflects an adjusted conversion rate of 40 to 43%. With that, I will turn the call over to the operator to begin our question and answer session. Operator?

Thank you. At this time, we'll be conducting a question and answer session. If you'd 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'd 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. Our first question comes from Matt Somerville with DA Davidson. Please proceed with your question.

Thanks. Morning. A couple questions. First, in the comparative remarks, you talked a little bit more about some self-checkout wins, maybe relative to, more so relative to what you talked about maybe last quarter. And I guess I'm wondering if you're starting to see a broader inflection in demand after a pretty tough 2024 in that business, knowing that that in particular drives pretty nice software and services attached. So maybe if you can give more of a broader update on what you're seeing there, and then I have a follow-up.

Hi, Matt. Darren here. Thanks for the question. Yeah, insightful. Inevitably, retailers go through a tough time, as we've all seen. And that said, their priorities are trying to drive cost efficiency, trying to drive shrink efficiency, but also with various measures around the world, trying to optimize people and supplement people for automation. So there is a continued interest in self-checkout across all markets. We're seeing it in every territory we're operating. So yes, we announced the good win there, which was great. But ongoing dialogue, which has been consistent really throughout last year, as retailers are really searching for those type of solutions. They're also, however, looking for, you know, and as if we've talked to the platform agenda, looking at platform innovation and using the self-checkout really as a core source of getting data, be that loyalty or adjusted pricing, personalized pricing or other initiatives. So it's actually a linked agenda rather than just the independent self-checkout. It is linked to a platform strategy.

Yeah, maybe I could, Matt, maybe I could make one other comment. You mentioned it's important from the perspective of software attach, and that's absolutely correct. But we can also, with our platform, we're hardware agnostic, so we can actually reuse existing self-checkout hardware and self-checkout hardware of our competitors and others. So we don't require a new self-checkout sale, a new capital investment from our customers in order to land on next generation platform and deliver value from the self-checkout software.

That's helpful. Appreciate the color there. Maybe just one on the cost side of things. Can you update kind of the latest with respect to Vox's restructuring plan, how much you expect to spend this year, how much you expect to benefit from cost outs and the associated timing, and then maybe just a little bit of more granular detail on your mitigation actions, specific mitigation actions with respect to tariffs? Thank you.

So, hey, Matt, I'll start. So if I think about the cost program this year, we sized it at $100 million at the beginning of the year. That started ramping in Q1, but ramps as we go through the year. We initially said we'd need about $55 million of restructuring and transformation to enable that. That's probably up a little bit higher now at about $65 million, just because there's more restructuring. And one of the mitigations as we think about tariffs is looking at cost. So we're looking at our cost programs to see if we can up-size them. I don't know if there's anything you want to add.

Yeah, I would say that we are most of the way through. I wouldn't suggest that all the efforts to right-size the company as a standalone software business is complete, but the vast majority is. There was a small amount taken in the first quarter, but again, we described that on the last call that we were on. As it relates to the tariff mitigation, I mean, some of that I think is going to be something we'll keep to ourselves, but I think more broadly, as I said in the script, we're going to look for other vendors or suppliers that would be either in lower or non-tariff markets to deal with an unknown as to how long this is going to go on. We have conveyed to our suppliers that we would prefer they not pass them on, and thus far we've seen not a significant run rate, as I said in the comments. Right now, this is an ever-changing landscape. I think there's a call this morning about a deal that was just done with the UK market, so we'll stay tuned, but for right now

we feel good where we are. Thank you. Appreciate the call.

Our next question comes from Dan Perlin with RBC Capital Markets. Please proceed with your question.

Thanks. Good morning. I wanted to just kind of double down in on payments again, Jim. So, you talked about, I think, WorldPay converting the front-end capabilities to launching this training program. Sounds like you're having positive feedback. I want to just make sure I understand the distinctions here. Where does all of that really stand in terms of timing and launch? And then, again, what's the conversation like with clients? I also appreciate this new KPI in retail. Sites that it sounded like was related to WorldPay on smaller, I guess, S&B clients. So I'm just trying to reconcile all of those things, if that would be at least a starting point. Thanks,

Dan. I'll take the last first. So, in the past, because it was more oriented to restaurant, given the simplicity of the JetPay front-end, the company historically just talked about restaurant as opposed to retail. As it turns out, for the smaller retail customers, so mid-market versus enterprise, predominantly quick service or maybe some supermarket, there were some customers in there, so we've just started to report that publicly. It was otherwise embedded in the numbers software and services, I'm guessing, in the past. The expectation is that number is going to continue to grow over time. And then, specifically to the process, I think it's well down the path. WorldPay's irrespective of the fact that it just did a merger, the rest of what we're doing is continuing on track. There's a number of former Evo people here, so people who have specific experience both with operating in payments but also with conversions. And so, the expectations, as I said in the comments, would be sometime this summer, hopefully earlier than later. We do have a conversion to complete, so the customers that are currently processing on JetPay will move over to WorldPay and the expectation will have that all completed by the end of the summer. I think the last piece would be on conversations with customers about the opportunity of doing business with us. All of them that I've had, so the 40 that I've met with today, I wouldn't say all of them were oriented initially around payments, but in every conversation I've had, and these are at the CIO level, they're interested in the opportunity to have essentially one relationship as opposed to multiple relationships, to be able to offer a solution that avoids complexity, which is what I think some of them are dealing with. But having said that, we also have a significant number of customers that are already connected through a product that we call Voix Connect that we're leveraging those relationships. It's well over 700 million on that platform today that are today also directed to other processors as opposed to NCR. And so going forward, the conversations are about completing the cycle all the way through the authorization, the rest of the capabilities we retained when the JetPay business was sold, back end processing and all the rest of, but what requires to be an acquirer is already resident in the company.

Yep, got it. That's super helpful. And then just quickly your comments around having two executives outside of the US, presumably to help with international enterprise clients. Was that an area of weakness? I mean, it's a big part of the organization, obviously, outside the United States. And so you called that on your prepared remarks, so I just figured I'd dive down on that one more time. Thanks. Yeah, I

don't think of Darren's week. Look, when you run global companies, and everything's oriented out of one market, it's one way of thinking. So we now have two executives that report to me that one of which has been here, I think Nick said six years. So the perspective of our customer base, which is not oriented entirely to the US, it's spread South America across Europe and Asia. We actually have another executive who's now oriented, who's been moved to or moved himself to Japan. So we are domiciling across our customer base. And I think it just helps as we make decisions as a company, understand the needs of our customers to have people that are embedded in those markets, as opposed to everything sitting in Atlanta. Was it an oriented plan? No. But Darren, as you well know, Darren and I have worked together since the global days and then Ivo. And he's a very accomplished executive. I'll never say that again out loud, but I'm saying it this time. And Nick has earned his stripes here. He's been here for six years, extremely well respected, as you can hear in his prepared remarks. He understands the business from the core level level up. And he's going to be a huge addition to what he described in his prepared comments, as we roll out the platform and the capabilities of the platform to our customers, all of which that I've spoken to are very excited about us finally getting to that point. It's been quite a journey. I know there's been, from a shareholder's perspective, a big investment in the platform. But as Nick said in his comments, there's plenty of other customers, companies that do this. And for us to remain viable in the marketplace, this is a great next step. And our customers are excited about getting access to it, some of which are already in market today operating.

That's great. Thank you very much. Yep. Thanks, Dan.

As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. One moment, please, while we poll for questions. Our next question comes from Eric Woodring with Morgan Stanley. Please proceed with your question.

Great. Thanks so much, guys. And good morning. Jim, I was wondering if you could maybe share a few more granular comments or thoughts on just the evolving macro backdrop, not necessarily anything related to tariffs, but obviously two end markets here that can be sensitive or prone to sensitivity related to the economy. Obviously, a lot of moving pieces creates a lot of uncertainty. Then again, there's a lot of recurring revenue in this business offset by some hardware and services dynamics. And so I'm just wondering, in your conversations, whether that was in March or now how it has evolved into the month of April and early May, what are you hearing? What are they saying? Is there any concerns? Is that impacting spending plans? We'd just love maybe a bit of more granular color there. And then a quick follow up, please. Thank you.

Okay. It's interesting. One of these, during our board meeting, one of the board members asked something similar about how our customers are feeling in light of the tariffs in particular and the impact kind of shock to the world economy. I would say part of what you just described, if you look at the customer base here, we're a B2B business as opposed to a B2C business. And as I said in our last call, our revenue attrition with our customers are extremely low. It's actually even lower this quarter than what we reported last quarter. So it's at 1%. So we have long standing relationships that are well embedded and they're trying to meet the needs of their customers. Many, if not all of them are on much older equipment that we would like them to be on. Equipment being the software, not just the hardware. And so I have not heard or seen in any of the conversations I've had with those 40 odd customers, nor has anybody sitting in the room with me had given feedback that there's a pullback that we're seeing with our customers. I think it's complete the opposite, that we had a good start to the year. It's still a decline on the hardware side. I was in here during COVID, but my last company, there was a lot of pull forward of hardware sales during the slowdown of COVID. And I'm sure NCR experienced some of that as well. And we're starting to see a little bit better demand still down on the hardware side. But in particular, what Nick described on the product side or the platform side, our customers are eager and signing new deals to be able to upgrade to that every month. And my expectation is that's going to continue for the year. Now, I think on the tariff side, I don't think any of us have a crystal ball except one guy that's not on the call. But my feeling is this is going to come ahead and it's starting to come to a head if we're starting to announce publicly the deals that are getting struck. So we feel like we're in a good space today. And as Brian outlined, we're maintaining our guidance largely because of the relations we're having with our customers, many of which go back 20 years, some 30 years. I think we're in very good space.

Okay, that's really helpful. Thank you. And then Brian, maybe just a quick follow up for you or Darren, either one is just when I look at the retail business, obviously, there was a degree of hardware declines associated here that we can see. Is that really the explanation for the step down in growth and adjusted EBITDA margins? Was there anything else of note there, just up nicely, KPIs showing progress? So should we really just be thinking of that as hardware and kind of where does that dynamic go again, specifically on the margin front for retail? Thanks so much.

Yep. So starting with the software and services for the overall company, we had about a 7% decline in Q1. Two points of that roughly was driven by exiting the Allios commercial agreements. So that would be five if it wasn't for that two point impact. And we see that improving in Q2 as we ramp our new deals. So that's kind of a comment that crosses both restaurants and retail. When we look at the retail margin in Q1, it was impacted by the hardware decline, but also a mix of what we sold. Some of the especially third-product products has a lower margin. And so that mix really drove that margin down. We see that recovering in Q2 for the full year, we still think the margin will be 19 to 20% for retail. Awesome. Thank you guys. Good

luck. Thank you. Our next question comes from Will Nance with Goldman Sachs. Please proceed with your question.

Thanks for taking the question. Jim, I'm wondering if you could talk a little bit more about the pitch to retail clients on the well-paid partnership, just from a business perspective, which I know you know very well. I usually think about large retail customers as getting very, very low processing rates for the volume that they put through. And so I was wondering if you could maybe talk to it from a take-rate perspective and about the opportunity that Voyage has to share in that economics. How do you think about the overall processing rates and then the amount of the economics that you would take versus well-pay? Thanks.

Sure. So there's two components of this. So there's the processing relationship. So think of a point of sale processing relationship. There's a piece of software that the company created or created or bought back in 2014, which has historically been called connected payments. So connected payments, you would think of companies like FreedomPay, ACI, third parties that provide -to-point encryption, tokenization, a variety of payment-related capabilities. That has been resident here, like I said, dating back to 2014, and it's today well over six or seven hundred billion that process through it. So our point of sale, I think I said in the last call, if you look at all the point of sales globally, and Connect today is oriented to the US, although we have gateway-like capabilities in other markets, which we will normalize at some point over the next, I think we said six to 24 months as we stand up for our pay. So that application normalizes any changes we make at a point of sale to the processor. And in the past, the processor or all the name suspects that you would see in the US at scale that can process for petroleum or for supermarket, which are the two big drivers in that segment. So I think we have two conversations with our customers. I think we're having two conversations with our customers, one on the middleware piece, the Connect piece, as opposed to using a third party. You're using our capabilities, and most of them are, but a lot of them are on subscription. We're moving away from a one-time license or no fees. We're moving away from that as a structure. And then separately, which I think is the harder question, how do we win at the point of sale? We have a, I think, a very commercially reasonable relationship with WorldPay, and it was geared in the conversations I had with them as I handled this myself, recognized the customer base that we would be together processing for. So it's still early days, but in the end, I think we're going to be competitive. Will we win them all? That's my objective. I don't think that's going to happen. But I think the takeaway for the customer is you have one relationship, not just at the point of sale, but all the way through payments, because at the end, their point of sale is the only way the businesses operate. That's where the cash comes in. And changes at the point of sale versus changes at the processor, to the extent that there are changes that are not aligned, then you have outages. And so what we offer is a single solution. And you've seen this yourself over the last 10 years, 15 years in the payments and software space, any small ISV, they're all doing the exact same thing. There's a company called Toast that I've heard about, and I think they do the exact same thing. So it's not like we're doing something novel. We're probably more late to the party, but we have the capabilities already. And with WorldPay, we've extended those capabilities to what ultimately the customers need. Darren wants to add to something. Go, Aaron.

And Will, I think it's not just retail, it's restaurants as well that we're having these conversations with. And yeah, there will be probably some of the mega merchants that will be on very fine commodity-based pricing for standalone payments. But this actual, the pitch, as you requested in your question or covered in your question, really is a total value pitch. And much as Nick and I said at the first question, answer to Matt, was many customers are really looking at the whole -to-end integrated solution and a platform and a data play and an insight play. And joining the payments to the POS at the front end really does build a true -to-end holistic data and insight solution for loyalty, spend pattern, behavior pattern, et cetera. So this is a broader benefit pitch than purely where in our former life, my former life as an acquirer, you tend to be going in at a commodity-level price point. This is a much more value-add pitch, both in restaurant and retail. So that's helping the conversation.

And today, as we said several times, WorldPay is not up and running yet, but I don't think that's far away. We've had a bank relationship this company bought an ISO called JetPay years ago. So the infrastructure was already here. It's that we're starting from scratch. And we already have, because of Connect, we already have a connection with WorldPay. So I think that the effort is not, as you would expect, when I would have acquired something at Global or Evo, it took a long time. We already have a lot of the plumbing in place. I'll just add one small, but on the enterprise side, Benny's team was a renewal or customer. Renewal, renewed and enterprise restaurant relationship with all the components of what we've been talking about, escalators, subscription, Connect in the middle, and payments, which today's JetPay will be, will pay after. So the fact that we have all those capabilities, they don't have to go to three or four different vendors. And in some instances, that's the case, because I've had enough conversations to understand what people have been using in the past. The challenge NCR had historically is they were not a payments company, they were a software company. And so today we have enough executives that do both that were credible to have conversations to offer, as Aaron was saying, a value-added solution so that they have one relationship instead of many.

No, that's very helpful, very comprehensive answer. So I guess one quick follow-up on that. When you look at the retail opportunity and the restaurant opportunity, and I appreciate that comment, so thank you for that. Where do you envision the lowest hanging fruit and where do you think the bulk of the success will be if we look out maybe two to three years? Do you see this as being more retail and more restaurant and more in the market space already?

Well, I have high expectations that restaurants are going to continue to get bigger and bigger

as

we've invested heavily in that. So I think Benny and the team, Miguel, the rest of them, they're going to grow the pie bigger, not just domestically, but internationally. And while we've had wins, most of them, Ben, have been more service wins internationally on restaurant. And I'm expecting that's going to change, especially with Aloha Cloud coming to market. But if you look at the pie, the vast majority, I'm just guessing 65, 70 percent of the volume runs through fuel, which is both commercial, includes commercial, and then grocery. And there's a lot of transactions running through our systems today, running through Connect, not as an acquirer, but just switching transactions domestically. And that's the same footprint internationally. So I think it's going to orient to the retail side, but I have high hopes for Benny and his team to get restaurants as well.

Yeah, maybe to add to what Jim was saying on the restaurant side, I know you asked specifically orientated towards payments and payments to Connect, which will be a big pillar of our growth. But there are three things that's making me really bullish about the future, next few quarters, next few years. One is, yes, we'll continue to execute on our global services capability, which is a massive differentiator for us. We talked about some of the wins last quarter that we've had internationally, that will continue. The second is the platform rollout that Nikai Latin is prepared comments is a massive differentiator for us. When you look at customers like Raising Canes, Brinker we talked last time, out existing customer based Converting Connecting the platform, that is a lot of flexibility, growth, innovation that restaurants are seeing value in the platform. And products like Aloha Menu, products like Smart Manager, that we continue to roll out through the remainder of the year, we expect to see massive impact. The third one, which Jim mentioned the name Miguel, is the go to market transformation. We've had about six to nine months vacant roll for our enterprise, as I transformed the sales organization, one of the things that we've done is completely changed the leadership. In Q1, Miguel started, was the head of our enterprise sales, already having impact, completely restructured sales. About a year ago, you probably heard rumors that we heard, but for a while we lost. And now 12 months later, not only renew the relationship, but we've expanded that relationship. So we are seeing early successes and early wins, that gives me a lot of confidence in the future.

I see the exact same thing really on both sides. We have new leaders almost in every one of our markets below Darren, other than Latin America, which has been doing terrific. But we have a new leader here in the US, we're hiring in the UK, and we have new leadership in Japan, on the retail side. So it's a new team, they're moving at a different pace, maybe than in the past. You know, before it was a conglomerate, lots of different moving parts. Now we're a much slimmer company, very focused on getting the platform rolled out, getting the new products rolled out, and growing

the company. Got it. Appreciate you taking the question. Yep, thank you.

We have reached the end of the question and answer session. I'd now like to turn the call back over to Jim Kelly for closing comments.

Thank you, operator, and thank you all for continued interest in NCRVoyage. Have a good day.

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