NCR Voyix Corporation — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. The company provides digital commerce solutions for retailers, restaurants and financial institutions. Comparatives reflect NCR Atleos as discontinued operations following its October 2023 spin-off; Q1 2023 results were recast and revised.
Financial performance
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Total revenue | $862 million | $916 million |
| Product revenue | $232 million | $291 million |
| Service revenue | $630 million | $625 million |
| Gross margin | $196 million; 22.7% of revenue | $230 million; 25.1% |
| Operating income | $4 million; 0.5% margin | $26 million; 2.8% |
| Continuing-operations loss attributable to NCR Voyix | $40 million | $66 million |
| Net loss attributable to common stockholders | $44 million; diluted EPS $(0.31) | Net income $3 million; diluted EPS $0.02 |
| Adjusted EBITDA (non-GAAP) | $120 million; 13.9% margin | $124 million; 13.5% |
| Cash from operating activities | $(35) million | $311 million |
| Adjusted free cash flow-unrestricted (non-GAAP) | $(66) million | Not presented as comparable |
Recurring revenue rose 1% to $536 million, or 62% of revenue, while software and services revenue increased 2% to $666 million. Hardware revenue fell 26%. Retail revenue declined 7% to $491 million, Restaurants declined 4% to $202 million, and Digital Banking grew 7% to $147 million. Segment Adjusted EBITDA increased in all three segments: Retail $86 million, Restaurants $55 million and Digital Banking $54 million.
Liquidity, debt and financial position
- Cash and cash equivalents were $246 million; total debt was approximately $2.7 billion, including $2.658 billion of long-term debt and $15 million of short-term borrowings. Revolver availability was approximately $282 million.
- Cash, cash equivalents and restricted cash totaled $269 million at quarter-end. Current assets of $1.238 billion were below current liabilities of $1.335 billion.
- Stockholders’ equity was negative $36 million. Series A convertible preferred stock had a $276 million redemption amount and carries a 5.5% cumulative annual dividend; $4 million was paid in Q1.
- Operating cash flow was lower year over year, which management attributed to the quarterly loss, working-capital movements and employee-related payments. Capital expenditures, including capitalized software, were $61 million.
Material changes, outlook and risks
- Revenue fell 6%, primarily due to lower product and hardware sales, including self-checkout and point-of-sale hardware. Service revenue increased 1%, supported by cloud, professional services and hardware maintenance; divestitures weighed on payment-processing revenue. Gross margin declined, with management citing lower payment-processing margins following divestitures.
- Interest expense decreased to $39 million from $83 million, primarily reflecting lower total debt outstanding. Other expense increased to $20 million, including a $15 million net loss from changes in the Lebanese pound and Egyptian pound and related currency effects.
- No quantified full-year financial guidance is provided in the supplied filing text. Management said it believes current cash, operating cash generation and financing arrangements will meet expected needs, while noting cash generation depends on economic and competitive conditions and other risks.
- In February 2024, the company identified fraudulent ACH disbursements totaling $34 million cumulatively, of which $11 million occurred in Q1. It had recovered approximately $12 million by March 31 and is pursuing further bank, law-enforcement and insurance recoveries; additional recovery is not assured. Prior interim periods were revised, though the company concluded the errors were not material to previously issued statements.
- Management identified material weaknesses in controls over unauthorized ACH disbursements and accounts-receivable/accounts-payable clearing accounts. Disclosure controls were not effective as of March 31, 2024; remediation is ongoing and the weaknesses are not yet considered remediated.
- The Kalamazoo River environmental reserve was $142 million, net of expected contributions. A dispute with the EPA over remediation scope could substantially increase costs; under assumptions management does not currently consider reasonably estimable, the reserve could more than double. Expected co-obligor and indemnitor contributions are $70 million to $155 million.
- The company incurred $6 million of additional costs related to the 2023 ransomware incident in Q1 and recorded a $17 million insurance receivable as of March 31. It continues to pursue recoveries and acknowledges possible additional costs.
- Other cited exposures include foreign-exchange and macroeconomic volatility, cybersecurity and service disruption, leverage and covenant compliance, and uncertainty around environmental and other contingencies. The senior secured credit facility’s leverage-ratio limit is 4.75x through Q3 2024, then tightens in scheduled steps.
Key facts for investors to verify
- Whether recurring revenue growth and segment EBITDA gains can offset continued hardware weakness and lower consolidated gross margin.
- Cash-flow and working-capital trends, actual revolver availability, debt maturities and leverage-covenant headroom.
- Amounts ultimately recovered from the ACH fraud and ransomware incident, and progress in remediating the disclosed control weaknesses.
- Developments in the Kalamazoo River scope dispute, reserve adequacy and expected third-party contributions.
- How the Atleos spin-off, remaining country transfers and commercial agreements affect the comparability of subsequent periods.