NCR Voyix Reports Second Quarter Results and Announces Strategic Actions

• Enters definitive agreement to divest Digital Banking to Veritas Capital for purchase price of $2.45 billion plus contingent consideration of up to $100 million
• Executes outsourced design and manufacturing agreement with leading supplier Ennoconn Corp. to provide point-of-sale and self-checkout hardware manufacturing and support
• Implements multi-phase cost reductions program beginning with $75 million in annualized payroll costs as of the end of the second quarter of 2024

NCR Voyix Corporation (NYSE:VYX) ("NCR Voyix" or the "Company"), a leading global provider of digital commerce solutions, reported financial results today for the three and six months ended June 30, 2024.

"The strategic actions announced today support the continued realignment of our operating model to focus on our restaurant and retail customers and will enable us to improve our revenue and earnings growth over time," said David Wilkinson, NCR Voyix CEO.

Q2 2024 Financial Results

• GAAP Revenue was $876 million compared to $946 million in the prior year.
• Normalized Revenue was $876 million compared to $928 million in the prior year.
• Net loss from continuing operations attributable to NCR Voyix was $(74) million, compared with $(51) million in the prior year.
• Adjusted EBITDA was $144 million compared to $168 million in the prior year.
• Normalized Adjusted EBITDA was $145 million compared to $183 million in the prior year.
• Diluted EPS from continuing operations was $(0.54), non-GAAP diluted EPS was $0.09.
• Software & Services Revenue was $656 million compared to $679 million in the prior year.
• Normalized Software & Services Revenue was $656 million compared to $665 million in the prior year.
• Total Segment ARR was $2.2 billion compared to $2.1 billion in the prior year.
• Software ARR was $1.3 billion compared to $1.2 billion in the prior year.

Strategic Announcements

Today's announcements accelerate NCR Voyix's long-term strategic objective to optimize the Company's operations and drive shareholder value. The initial part of this multi-faceted plan was achieved in October 2023 with the completion of the spin-off of the Company's ATM business into an independent publicly traded company, NCR Atleos. Following the spin-off, the NCR Voyix Board continued efforts to streamline the business and sharpen the Company's focus to better serve its customers and drive value for shareholders.

The proceeds of the Digital Banking transaction will primarily be used to reduce leverage on NCR Voyix's balance sheet. The Company expects its net leverage ratio to be approximately 2.0x net debt/Adjusted EBITDA on a pro forma basis after the completion of the aforementioned transactions and the pay-down of a portion of its debt. The Company is also executing a multi-phase cost alignment program that began with the elimination of approximately $75 million in annualized payroll costs, including operational and capitalized costs, as of the end of the second quarter. Further work is underway to identify an additional $30 million of annualized non-payroll spend expected to be eliminated from operational and capital costs once the Digital Banking transaction has closed and the outsourced design and manufacturing agreement has been implemented. This program contemplates an ongoing assessment of all costs.

Together, it is anticipated that these actions will significantly reduce leverage, moderate the variability of hardware-related revenue beginning in 2025, align NCR Voyix's current operating costs to the new structure, and position the Company for accelerated revenue growth and margin expansion.

Sale of Digital Banking Business to Veritas Capital

• Veritas will acquire NCR Voyix's industry-leading Digital Banking business, which provides banks and credit unions with a fully integrated and seamless customer experience for consumer and business banking across channels, leveraging the largest independent platform of its kind in the United States. With over 1,600 employees across seven global facilities, the digital banking business generated $579 million in revenue in 2023 from approximately 1,300 financial institutions.
• The purchase price consists of a cash payment of $2.45 billion and contingent consideration of up to $100 million in cash based on the achievement of the buyer's return at the time of any future exit.
• The transaction is expected to close by year-end 2024, subject to customary closing conditions, including regulatory approvals.
• Goldman Sachs & Co. LLC served as financial advisor and King & Spalding LLP served as legal counsel to NCR Voyix.

New Commercial Agreement, Transitioning Point-of-Sale ("POS") and Self-Checkout ("SCO") Hardware to an Outsourced Design and Manufacturing ("ODM") Model

• NCR Voyix will transition its POS and SCO hardware business to an ODM model with leading hardware provider Ennoconn.
• Once the agreement is implemented, NCR Voyix will continue to sell hardware to its customers as a sales agent; however, all other aspects of the hardware sale, including design, manufacturing, and warranty of the hardware, will be fulfilled by Ennoconn.
• NCR Voyix expects to recognize only the net sales commissions related to hardware sales after the agreement is implemented.

NCR Voyix management will discuss the transactions on its second quarter earnings conference call today at 8:00 a.m. Eastern Time, the details of which are described later in this release.

Financial Outlook

The Company is updating its full year 2024 guidance to reflect the strategic announcements described above, including the classification of our Digital Banking business as a discontinued operation beginning in the third quarter of fiscal 2024 as a result of the planned divestiture, which results in the removal of Digital Banking results from our outlook and results of operations for the full year and all prior periods, as follows:

In addition, the Company is providing the following supplemental full year 2024 outlook on a pro forma basis to give effect to the divestiture of the Digital Banking business and the application of the proceeds from the sale to pay down outstanding indebtedness, the ongoing expense reduction actions and the transition of the Company's POS and SCO hardware businesses to an ODM model, as if all such transactions and actions had occurred on January 1, 2024, in order to enhance investors' ability to evaluate and compare the Company's operations on a go-forward basis, reflecting the impact of these transactions and actions.

In this release, we use certain non-GAAP measures. These non-GAAP measures include "Adjusted EBITDA," "Adjusted EBITDA Margin," "Non-GAAP diluted EPS," "Adjusted Free Cash Flow-Unrestricted," "Conversion Rate," "Net Leverage Ratio," "Normalized Revenue," "Normalized Adjusted EBITDA," and "Normalized Adjusted EBITDA Margin," and others with the words "non-GAAP" or "normalized" in their titles. These non-GAAP measures are listed, described and reconciled for historic periods to their most directly comparable GAAP measures under the heading "Non-GAAP Financial Measures" later in this release. Our Adjusted EBITDA for historic periods after giving effect to the spin-off of NCR Atleos includes certain costs historically allocated to NCR Atleos that do not meet the definition of expenses related to discontinued operations for purposes of GAAP requirements regarding the reporting of discontinued operations. Accordingly, our guidance for Adjusted EBITDA in 2024 is more comparable to our historical Normalized Adjusted EBITDA, which includes an adjustment for these estimated costs. With respect to our Adjusted EBITDA outlook for full year 2024 on an actual and pro forma basis and our pro forma outlook for our anticipated Net Leverage Ratio, our Adjusted EBITDA Margin, our Adjusted Free Cash Flow-Unrestricted and our Conversion Rate, we do not provide a reconciliation of the GAAP measure because we are not able to predict with reasonable certainty the reconciling items that may affect the GAAP net income from continuing operations and GAAP cash flow provided by (used in) operating activities without unreasonable effort. The reconciling items are primarily the future impact of special tax items, capital structure transactions, restructuring, pension mark-to-market transactions, acquisitions or divestitures, or other events. These reconciling items are uncertain, depend on various factors and could significantly impact, either individually or in the aggregate, the GAAP measures. The Company also believes such reconciliations would imply a degree of precision that would be confusing or misleading to investors.

Second Quarter 2024 Earnings Conference Call

NCR Voyix management will host a conference call and webcast today at 8:00 a.m. Eastern Time to discuss the Company's results for the second quarter. Access to the webcast and the accompanying slides are available on the Investor Relations section of the Company's website at https://investor.ncrvoyix.com. Participants may access the live call by dialing 877-407-3088 (United States/Canada Toll-free) or +1 201-389-0927 (International Toll) and requesting to be connected to the conference call. A replay of the audio webcast will be archived on the Company's website following the live event.

More information on the Company's second quarter earnings is available on the NCR Voyix Investor Relations section of the Company's website at https://investor.ncrvoyix.com.

About NCR Voyix

NCR Voyix Corporation (NYSE:VYX) is a leading global provider of digital commerce solutions for the retail, restaurant and digital banking industries. NCR Voyix transforms retail stores, restaurant systems and digital banking experiences with comprehensive, platform-led SaaS and services capabilities. NCR Voyix is headquartered in Atlanta, Georgia, with customers in more than 30 countries across the globe.

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Cautionary Statements

This release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (the "Act"). Forward-looking statements use words such as "expect," "target," "anticipate," "outlook," "guidance," "intend," "plan," "confident," "believe," "will," "should," "would," "potential," "positioning," "proposed," "planned," "objective," "likely," "could," "may," and words of similar meaning, as well as other words or expressions referencing future events, conditions or circumstances. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Act. Statements that describe or relate to the Company's plans, goals, intentions, strategies, or financial outlook, and statements that do not relate to historical or current fact, are examples of forward-looking statements. Examples of forward-looking statements in this release include, without limitation, statements regarding: our expectations of the announced strategic actions, including the divestiture of our digital banking business, the transition of our hardware business to an outsourced design and manufacturing model, and additional cost alignment initiatives, the anticipated benefits of such actions (including the achievement of our financial objectives) and the expected time period to realize the benefits of such actions, our anticipated future performance and expected debt pay-down, and statements regarding our pro forma capital structure. Forward-looking statements are not guarantees of future performance, and there are a number of important factors that could cause actual outcomes and results to differ materially from the results contemplated by such forward-looking statements, including those factors relating to: challenges with transforming and growing our business, including our ability to attract new customers, increase use of our platform by existing customers and cross-sell additional products and solutions; development and introduction of new, competitive solutions on a timely, cost-effective basis; our ability to compete effectively against new and existing competitors; our ability to maintain a consistently high level of customer service; our ability to successfully manage our profitability and cost reduction initiatives; integration of acquisitions and management of other strategic transactions; the potential strategic benefits, synergies or opportunities expected from the Spin-Off may not be realized or may take longer to realize than expected; any unforeseen tax liabilities or impacts resulting from the Spin-Off, requests, requirements or penalties imposed by any governmental authorities related to certain existing liabilities; domestic and global economic and credit conditions; downturn or consolidation in the financial services industry; difficulties and risks associated with developing and selling complex new solutions and enhancements, including those using artificial intelligence; risks and uncertainties associated with our payments-related business; disruptions in our data center hosting and public cloud facilities; any failures or delays in our efforts to modernize our information technology infrastructure; retention and attraction of key employees; defects, errors, installation difficulties or development delays; failure of third-party suppliers; a major natural disaster or catastrophic event; geopolitical and macroeconomic challenges or events or acts of terrorism; environmental exposures from historical manufacturing activities; the impact of cybersecurity incidents on our business, including the April 2023 ransomware incident, and efforts to prevent or mitigate such incidents and any related impacts on our operations; efforts to comply with applicable data protection and data privacy laws; our level of indebtedness; the terms governing our indebtedness; incurrence of additional debt or other liabilities or obligations; access to the capital markets and other sources of financing; our cash flow sufficiency to service our indebtedness; interest rate risks and increased costs of borrowings; the terms governing our trade receivables facility; the impact of certain changes in control relating to acceleration of our indebtedness; our obligations under other financing arrangements, or required repurchase of our senior unsecured notes; any lowering or withdrawal of the ratings assigned to our debt securities by rating agencies; unforeseen tax liabilities or changes in tax law; our failure to maintain effective internal control over financial reporting and disclosure controls and procedures and our ability to remediate material weaknesses in our internal control over financial reporting; the write down of the value of certain significant assets; allegations or claims by third parties that our products or services infringe on intellectual property rights of others, including claims against our customers and claims by our customers to defend and indemnify them with respect to such claims; protection of our intellectual property; changes to our tax rates and additional income tax liabilities; and uncertainties regarding regulations, lawsuits and other related matters; rights preferences and privileges of holders of our Series A Convertible Stock compared to the rights of our common stockholders; impact of the terms of our Series A Convertible Preferred Stock relating to voting power, share dilution and market price of our common stock; actions or proposals from stockholders that do not align with our business strategies or the interest of our stockholders; and other factors presented in "Item 1A-Risk Factors" of our most recent Annual Report on Form 10-K for the year ended December 31, 2023 and subsequent filings we make with the U.S. Securities and Exchange Commission ("SEC"), including our Quarterly Reports on Form 10-Q, which we advise you to review.

Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those set forth in the forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made and should not be relied upon as representing our plans and expectations as of any subsequent date. The Company does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Non-GAAP Financial Measures

Non-GAAP Financial Measures. While the Company reports its results in accordance with Generally Accepted Accounting Principles in the United States, or GAAP, in this release the Company also uses the non-GAAP measures listed and described below. The Company's definitions and calculations of these non-GAAP measures may differ from similarly-titled measures reported by other companies and cannot, therefore, be compared with similarly-titled measures of other companies. These non-GAAP measures should not be considered as substitutes for, or superior to, results determined in accordance with GAAP.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) and Adjusted EBITDA margin. The Company determines Adjusted EBITDA for a given period based on its GAAP net income from continuing operations attributable to NCR Voyix plus interest expense, net; plus income tax expense (benefit); plus depreciation and amortization (excluding acquisition-related amortization of intangibles); plus stock-based compensation expense; plus other income (expense); plus pension mark-to-market adjustments and other special items, including amortization of acquisition-related intangibles, separation-related costs, cyber ransomware incident recovery costs (net of insurance recoveries), fraudulent ACH disbursements costs, transformation and restructuring charges (which includes integration, severance and other exit and disposal costs), acquisition-related costs, foreign currency devaluation related costs, and strategic initiative costs, among others. Separation-related costs include costs incurred as a result of the spin-off. Professional and other fees to effect the spin-off including separation management, organizational design, and legal fees have been classified within discontinued operations through October 16, 2023, the separation date. The Company also uses Adjusted EBITDA margin, which is calculated based on Adjusted EBITDA as a percentage of total revenue. The Company uses Adjusted EBITDA and Adjusted EBITDA margin to manage and measure the performance of its business segments. The Company also uses Adjusted EBITDA and Adjusted EBITDA margin to manage and determine the effectiveness of its business managers and as a basis for incentive compensation. The Company believes that Adjusted EBITDA and Adjusted EBITDA margin provide useful information to investors because they are indicators of the strength and performance of the Company's ongoing business operations, including its ability to fund discretionary spending such as capital expenditures, strategic acquisitions and other investments. Adjusted EBITDA and Adjusted EBITDA margin should not be considered as substitutes for, or superior to, net income from continuing operations attributable to NCR Voyix or net profit margin, respectively, under GAAP.

Normalized Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Normalized Adjusted EBITDA) and Normalized Revenue. The Company determines Normalized Adjusted EBITDA for a given period by further adjusting its Adjusted EBITDA for estimated costs historically allocated to NCR Atleos that do not meet the definition of expenses related to discontinued operations for purposes of GAAP requirements regarding the reporting of discontinued operations. Normalized Adjusted EBITDA and Normalized Revenue also removes revenue and for Normalized Adjusted EBITDA the costs associated with the transfer or pending transfer of NCR Atleos-related operations in all foreign countries that have not occurred by March 31, 2024 from Adjusted EBITDA. In addition, Normalized Adjusted EBITDA and Normalized Revenue adjusts for all divestitures that occurred in prior periods that are not treated as discontinued operations under GAAP. The Company uses Normalized Adjusted EBITDA and Normalized Revenue to estimate the performance of the continuing business following the spin-off. The Company believes that Normalized Adjusted EBITDA and Normalized Revenue provide useful information to investors because it is an indicator of the strength and performance of the Company's ongoing business operations following the spin-off and allow for more easy comparisons period over period.

Non-GAAP Diluted Earnings Per Share (EPS). The Company determines Non-GAAP EPS by excluding, as applicable, pension mark-to-market adjustments, pension settlements, pension curtailments and pension special termination benefits, as well as other special items, including amortization of acquisition related intangibles, stock-based compensation expense, separation-related costs, cyber ransomware incident recovery costs, fraudulent ACH disbursements costs, strategic initiative costs, foreign currency devaluation costs, costs related to the disposal of businesses, and transformation and restructuring activities, from the Company's GAAP earnings per share. Due to the non-operational nature of these pension and other special items, the Company's management uses these non-GAAP measures to evaluate year-over-year operating performance. The Company believes this measure is useful for investors because it provides a more complete understanding of the Company's underlying operational performance, as well as consistency and comparability with the Company's past reports of financial results.

Adjusted Free Cash Flow-Unrestricted and Conversion Rate. NCR Voyix management uses the non-GAAP measure called "adjusted free cash flow-unrestricted" and "conversion rate" to assess the financial performance of the Company. We define free cash flow as net cash provided by (used in) operating activities less capital expenditures for property, plant and equipment, less additions to capitalized software, plus/minus net reductions or reinvestments in the trade receivables facility due to fluctuations in the outstanding balance of receivables sold, restricted cash settlement activity, NCR Atleos settlement activity, net cash provided by (used in) environmental discontinued operations plus acquisition-related items, and plus pension contributions and settlements. NCR Atleos settlement activity relates to changes in amounts owed to and amounts due from NCR Atleos for activity related to items governed by the separation and distribution agreement. Activity from the commercial and transition services agreements are not included in this adjustment. We define conversion rate as adjusted free cash flow-unrestricted divided by Adjusted EBITDA. We believe adjusted free cash flow-unrestricted and conversion rate information is useful for investors because it relates the operating cash flows from the Company's continuing and discontinued operations to the capital that is spent to continue and improve business operations and the Company's ability to convert Adjusted EBITDA into free cash flow. In particular, free cash flow indicates the amount of cash available after capital expenditures for, among other things, investments in the Company's existing businesses, strategic acquisitions, and repayment of debt obligations. Free cash flow does not represent the residual cash flow available for discretionary expenditures, since there may be other non-discretionary expenditures that are not deducted from the measure. Free cash flow and conversion rate do not have uniform definitions under GAAP, and therefore the Company's definitions may differ from other companies' definitions of these measures. These non-GAAP measures should not be considered a substitute for, or superior to, cash flows from operating activities under GAAP.

Net Debt and Net Leverage Ratio. NCR Voyix management uses non-GAAP measures called "net debt" and "net leverage ratio" to assess the financial performance of the Company. We define net debt as total debt minus cash and cash equivalents. NCR Voyix's management considers net debt to be an important measure of liquidity and an indicator of our ability to meet ongoing obligations. Net leverage ratio is calculated as net debt divided by last-twelve-months Adjusted EBITDA. NCR Voyix's management considers net leverage ratio to be an important indicator of the Company's indebtedness in relation to its operating performance. The Company's definition of net debt and net leverage ratio may differ from other companies' definitions of each measure, and each measure should not be considered a substitute for, or superior to, comparable GAAP metrics.

Non-GAAP Pro Forma Outlook. The supplemental non-GAAP pro forma financial outlook in this press release is not necessarily indicative of the operating results of the Company were the divestiture of the Digital Banking business and the application of the proceeds from the sale to pay off outstanding indebtedness, the ongoing expense reduction actions and the transition of the Company's POS and SCO hardware businesses to an ODM model effected as of or before January 1, 2024 or of the operating results of the Company in the future. The supplemental non-GAAP pro forma financial outlook included in this press release is not pro forma information prepared in accordance with Article 11 of Regulation S-X of the SEC, and the preparation of information in accordance with Article 11 would result in a different presentation. The Company will publish historical pro forma financial information in accordance with Article 11 of Regulation S-X of the SEC to give effect to the divestiture of the Digital Banking business in connection with the closing of the transaction.

Use of Certain Terms

The term "recurring revenue" includes all revenue streams from contracts where there is a predictable revenue pattern that will occur at regular intervals with a relatively high degree of certainty. This includes hardware and software maintenance revenue, cloud revenue, payment processing revenue, interchange and network revenue, and certain professional services arrangements, as well as term-based software license arrangements that include customer termination rights.

The term "annual recurring revenue" or "ARR" is recurring revenue, excluding software licenses (SWL) sold as a subscription, for the last three months times four. In addition, plus the rolling four quarters of term-based SWL arrangements that include customer termination rights.

The term "Software ARR" includes recurring software license revenue, software maintenance revenue, SaaS revenue, standalone hosted contract revenue, professional services recurring revenue and payments revenue.

The term "Software & Services Revenue" includes all software, services and payments revenue and excludes hardware revenue.

The term "ARPU" means average recurring revenue per active user (digital banking).

The term "platform sites" includes all sites for which we bill for use of our Commerce platform.

The term "payment sites" includes all sites which utilizes NCR Voyix's payment processing capabilities.

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