Q4 2023 NCR Voyix Corp Earnings Call
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Operator: Greetings. Welcome to the NCR Voyage Q4 in full year 2023. At this time, all participants are to listen only to the audio.
Greetings and welcome to the NCR Gleeks Q4, and full year 2023 earnings call. At this time, all participants are in a listen only mode.
Operator: A question and answer session will follow the phone call. If anyone should require operator assistance during the conference, please press star zero on the button. I will now turn the conference over to your host, Alan Katz of Invest, and many others. Thank you.
And after the session. We'll solve this whole presentation, if anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad I will now turn the conference over to your host Alan Katz of Investor Relations you may begin.
Alan Katz: Good afternoon, and thank you for joining us for our fourth quarter and fiscal 2023 earnings. This afternoon, we issued our earnings release reporting preliminary financials for the quarter and year ended December 31st, 2023. A copy of the earnings release and the presentation that we will reference during this call are available on the investor relations section of our website, which can be found at www.ncrvoic.com, and has been filed with the SEC. Joining me on the call today are David Wilkinson, our CEO, and Brian Webb Walsh, our CFO. This call is being recorded and webcast 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 and 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 and other reports filed at the SEC. We caution you not to place undue reliance on these forward-looking statements during this call, which speak only as of the 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 afternoon and our supplemental materials available on the Investor Relations section of our website.
Alan Katz: Good afternoon, and thank you for joining our fourth quarter and fiscal 2023 earnings Conference call. This afternoon, we issued our earnings release reporting preliminary financials for the quarter and year ended December 31st 2023, 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.
Alan Katz: Be found at Www NCR works Dot Com and has been filed with the SEC.
Alan Katz: Joining me on the call today are David Wilkins, and our CEO and Brian Walsh our CFO.
Alan Katz: This call is being recorded and webcast on the Investor Relations section of our website.
Alan Katz: Before we begin please be advised our remarks today will contain forward looking statements. These forward looking statements are subject to risks and 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 other reports filed with the SEC.
Alan Katz: 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.
Alan Katz: In addition, we will be discussing or providing certain non-GAAP financial measures today, which we believe are more reflective of our ongoing performance for.
Alan Katz: 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 filed this afternoon and our supplemental materials available on the Investor Relations section of our website.
David Wilkinson: As a reminder, you will see the financials of the NCR outlea, spun off as an independent publicly traded company on October 16, 2023 in the discontinued operations line within the. With that, I would like to turn the call over to, Thank you, Allen. Welcome everyone to our fourth quarter and full year 2023 earnings call. I'll begin by saying that I'm proud of what our team accomplished in 2023.
Alan Katz: As a reminder, we will see the financials of the NCR out meals business, which was spun off as an independent publicly traded company on October 16th 2023, and the discontinued operations line within the P&L with that I would like to turn the call over to David.
David Wilkinson: Thank you Alan and welcome everyone to our fourth quarter and full year 2023 earnings call I'll begin by saying that I'm proud of what our team accomplished in 2023 with the spin off of the ATM business now behind US we are laser focused on driving growth from our software and service revenue streams.
David Wilkinson: With the spin-off of the ATM business now behind us, we are laser focused on driving growth from our software and service revenue. Our software solutions, which include our platform and physical point of sale technology and digital banking products, enable restaurants, retailers, and financial institutions to seamlessly transact and engage with their end user customers. Before commenting on our performance, I'd like to spend a moment on slide four to remind everyone of NCR Voix's market-leading position for each of our three segments. These reflect the global reach of our customer base coupled with our products and services across restaurant, retail, and digital banking. During our call today, I will discuss our strategy to invest in initiatives that support our sales and distribution networks, platform conversions, and technology innovation to drive growth for the company. Turning to slide 5, we've outlined the key strategic initiatives in place to support our long-term profitable growth. Today, we're a cloud-based platform-enabled software and services company, providing end-to-end digital solutions to our global customers.
David Wilkinson: Our software solutions, which include our platform and physical point of sale technology, and digital banking products enable restaurants retailers and financial institutions to seamlessly transact and engage with their end user customers.
David Wilkinson: Before commenting on our performance I'd like to spend a moment on slide four to remind everyone of NCR voice is market leading position for each of our three segments. These reflect the global reach of our customer base, coupled with our products and services across restaurant retail and digital banking.
David Wilkinson: During our call today, I will discuss our strategy to invest in initiatives that support our sales and distribution networks platform conversions and technology innovation to drive growth for the company.
Turning to slide five we've outlined the key strategic initiatives in place to support our long term profitable growth today, we're a cloud based platform enables software and services company, providing end to end digital solutions to our global customer base, placing customers at the center, we leverage our deep industry expertise and well established sales and.
David Wilkinson: Placing customers at the center, we leverage our deep industry expertise and well-established sales and go-to-market engine to drive platform adoption and new customer growth. We will continue to invest in innovation via our commerce and digital banking platforms to deliver best-in-class products and solutions to expand our existing portfolio and drive growth, and we continue to focus on expanding our relationship with our customers across all, Enterprise, Midmarket, and SMB through integrated merchant payment. Turning now to our 2023 performance for the full year, we delivered revenue and adjusted EBITDA results in line with expectations discussed at our Investor Day in September. Included in that performance, software and services revenue grew 5% on a normalized basis and today represents more than 70% of total company revenue.
Go to market engine to drive platform adoption and new customer growth.
David Wilkinson: We will continue to invest in innovation via our commerce and digital banking platforms to deliver best in class products and solutions to expand our existing portfolio and drive growth.
David Wilkinson: And we continue to focus on expanding our relationship with our customers across all segments enterprise mid market and SMB through integrated merchant payment offerings.
David Wilkinson: Turning now to our 2023 performance for the full year, we delivered revenue and adjusted EBITDA results in line with expectations discussed at our Investor Day in September.
David Wilkinson: Included in that performance software and services revenue grew 5% on a normalized basis and today represents more than 70% of total company revenue.
David Wilkinson: Brian will provide more details on the financials in his remarks. In 23, we added approximately 14,000 sites to our platform and signed more than 650 new customers to our growing book. Platform traffic and usage continue to increase, with the volume of API calls exceeding 100 billion last year, up 35% from 2020. During December 23 alone, our platform managed nearly 50 million loyalty transactions and 26 million mobile orders online, enabling thousands of restaurants and retailers to meaningfully transact with their end user customers and operate their business. Before I begin my discussion on the segment performance, I'd like to welcome Benny Tadella to the team as president of our restaurant segment. His growth orientation, technical background, global perspective, and customer-centric approach will be instrumental in driving our technology and go-to-market path forward as we look to expand our market share. Now, let's turn to the restaurant segment on slides.
Brian will provide more details on the financials in his remarks.
And 'twenty three we added approximately 14000 sites to our platform and signed more than 650, new customers to our growing book of business.
David Wilkinson: Platform traffic and usage continue to increase with the volume of API calls exceeding 100 billion last year up 35% from 'twenty to 'twenty two.
David Wilkinson: During December 'twenty three alone our platform managed nearly 50 million loyalty transactions and 26 million mobile orders online, enabling thousands of restaurants and retailers to meaningful transact with their end user customers and operate their businesses.
Speaker Change: Before I begin my discussion on the segment performance I'd like to welcome. Many today led to the team as president of our restaurant segment.
Speaker Change: His growth orientation technical background global perspective, and customer centric approach will be instrumental in driving our technology and go to market path forward as we look to expand our market share.
Speaker Change: Now, let's turn to the restaurant segment on slide six.
David Wilkinson: 2023 was a strong year for our restaurants segment, as we signed over 500 new customers, platform sites, and payment sites increased 8% and 34%, respectively, led by our mid-market portfolio. Let me remind you that our restaurant segment is divided into enterprise, which is defined as businesses with more than 50 locations, and SMB, which we define as organizations with fewer than 50 locations. At NCR VOIX, our SMB division is keenly focused on what we call the mid-market, multi-site operators of 5 to 50 sites and increasingly complex, focusing on 2024 and beyond. The key component of our growth strategy is to better address the mid-market, as these businesses provide the greatest opportunity for growth. Historically, we've benefited from our mid-market customers, as they can ultimately grow into enterprise potential. In the quarter, we had several key customer wins in expansion that I'd like to highlight. One is the signing of a multi-year contract with Nautical Bowls, a rapidly growing acai bowl franchise that fits the profile of a target mid-market business. This was a competitive takeaway.
Speaker Change: 2023 was a strong year for our restaurant segment as we signed over 500, new customers our platform sites and payment sites increased 8% and 34% respectively led by our midmarket portfolio of customers.
Let me remind you that our restaurant segments is divided into enterprise, which has defined the businesses with more than 50 locations and SMB, which we defined as organizations with fewer than 50 locations.
Speaker Change: At NCR voyage, our SMB Division is keenly focused on what we call the mid market multi site operators of five to 50 sites and increasingly complex operations.
Speaker Change: Focusing on 'twenty 'twenty, four and beyond a key component of our growth strategy is to better address the mid market as these businesses provide the greatest opportunity for growth historically, we've benefited from our mid market customers as they can ultimately grow into enterprise businesses.
Speaker Change: In the quarter, we had several key customer wins and expansions that I'd like to highlight.
Speaker Change: One is the signing of a multi year contract with nautical bowls, a rapidly growing Asa E Bowl franchise that fits the profile of a target mid market business for us.
Speaker Change: This was a competitive takeaway here, we rolled out point of sale software via our platform to more than 30 of their locations in Q4 and have continue that rollout into Q1.
David Wilkinson: Here, we rolled out point of sale software via our platform to more than 30 of their locations in Q4 and have continued that rollout into Q1. This customer is leveraging multiple modules delivered via our commerce platform to drive revenue growth and improve efficiency. In our enterprise division, we expanded our long-standing relationship with Red Robin to add our kitchen solution across their chain of restaurants.
This customer is leveraging multiple modules delivered via our commerce platform to drive revenue growth and improve efficiency.
Speaker Change: Within our enterprise Division, we expanded our long standing relationships with Red Robin to add our kitchen solution across their chain of restaurants.
David Wilkinson: This is a long-standing relationship, and we're now in the process of implementing a multi-phase rollout of a comprehensive run-the-restaurant solution within their site. Our platform solution has continued to gain traction across our target customers. Our payments attached strategy for mid-market has resulted in us more than doubling the number of payment sites in our portfolio over the last two years, and we will continue to see strong interest in our capabilities, and we're investing to capture share in this segment. Let's move on to our retail segment on slide seven. We continue to make significant progress in converting customers to the platform, with platform sites increasing nearly 65% for the year. We signed deals with more than 125 new logos, including both enterprise and mid market customers, in the year and were named the number one point of sale software provider within the. We remain focused on converting the legacy base of on-prem customers to the commerce platform, giving them access to new functionality to run their
Speaker Change: This is a long standing relationship and we're now in the process of implementing a multiphase rollout of a comprehensive run the restaurant solution within their sites.
Speaker Change: Our platform solution has continued to gain traction across our target customer base.
Speaker Change: Our payments attach strategy for mid market has resulted in us more than doubling the number of payment sites in our portfolio over the last two years and we will continue to see strong interest in our capabilities and we're investing to capture share in this segment.
Speaker Change: Let's move on to our retail segment on slide seven.
Speaker Change: We continued to make significant progress in converting customers to the platform with platform sites, increasing nearly 65% for the year.
Speaker Change: We signed deals with more than 125, new logos, including both enterprise and mid market customers in the year and were named the number one point of sale software provider within the industry.
Speaker Change: We remain focused on converting the legacy base of on Prem customers to the commerce platform, which will provide them access to new functionality to run their stores.
David Wilkinson: This will enable us to offer best-in-class fast solutions, which would extend the longevity of our robust relationships and provide us with greater flexibility to seamlessly deliver new products, an example of upselling additional capabilities to a customer previously converted to the commerce platform. We implemented additional third-party mobile solutions for a large fuel and convenience retailer across his chain of more than 1000 sites in the United States. The enhanced solution we integrated into our platform enables an extension for card on file and tech wallet within our customer's mobile application. Further, the integration allows the retailer to offer loyalty promotions to their end consumers, driving increased mobile app and payment usage.
Speaker Change: This will enable us to offer best in class SAS solutions, which would extend the longevity of our robust relationships and provide us with greater flexibility to seamlessly deliver new products.
Speaker Change: An example of up selling additional capabilities to a customer previously converted to the commerce platform. We implemented additional third party mobile solutions for a large fuel and convenience retailer across this chain of more than 1000 sites in the United States.
Speaker Change: The enhanced solution, we integrated to our platform enables an extension for card on file and tech wallet within our customers mobile applications.
Speaker Change: Further the integration allows the retailer to offer loyalty promotions to their end consumers driving increased mobile app and payments usage.
David Wilkinson: We were able to quickly deploy this functionality following our customers' recent conversion to our. In addition to conversions, we're also focused on winning new customers. I'd like to highlight a new business win we secured in the quarter with a new brand of an existing enterprise relationship with one of the world's largest e-com retailers as they have launched new brick-and-mortar grocery stores over the past few years. This customer chose us to roll out self-checkout as they go live in new stores in the U.S. and the U.K. given our longstanding relationship with one of their other portfolio brands We also signed a new customer in our international business, a large fuel and convenience customer based in Australia. This was a competitive takeaway, and we look forward to serving this customer across their footprint of more than 600. Within the retail industry, we are a clear leader in the enterprise and mid markets.
Speaker Change: We were able to quickly deploy this functionality falling our customers' recent conversion to our platform.
Speaker Change: In addition to conversions, we're also focused on winning new customers.
Like to highlight a new business win we secured in the quarter with a new brand of an existing enterprise relationship with one of the world's largest E comm retailers as they have launched new brick and mortar grocery stores over the past few years.
Speaker Change: This customer chose us to rollout self checkout as they go live and new stores in the U S and the U K given our longstanding relationship with one of their other portfolio brands, coupled with our market leading position in self checkout.
Speaker Change: We also signed a new customer Internet and our international business, our large fuel and convenience customer based in Australia.
Speaker Change: This was a competitive takeaway and we look forward to serving this customer across their footprint of more than 600 sites.
Speaker Change: Within the retail industry, we are the clear leader in the enterprise and mid market spaces.
David Wilkinson: Our focus here continues to be signing new enterprise and mid-market customers as we also convert our customers to our commerce platform. We have demonstrated success in executing this strategy. And we see a healthy backlog of customers that have committed to moving on to the platform over the next 12, Upon their conversion, we will be able to drive additional value for these customers through cross-selling and up-selling value-added modules and other. Turning to slide 8, we included this slide to illustrate a brief overview of capabilities and functionality enabled by our cloud-based commerce platform, which supports both our retail and restaurant customers, giving us the benefit of operating syn NCR Voyage has invested in building a robust platform that can deliver leading solutions to all. Our shift to the platform will also enable us to move away from maintaining legacy on-premise applications which have limited functionality and are becoming increasingly cost inefficient for the customer.
Speaker Change: Our focus here continues to be signing on new enterprise and mid market customers. As we also convert our customers to our commerce platform.
Speaker Change: We have demonstrated success in executing the strategy and we see a healthy backlog of customers that have committed to moving onto the platform over the next 12 months.
Speaker Change: Upon their conversion, we will be able to drive additional value for these customers through cross selling and up selling value added modules and other services.
Speaker Change: Turning to slide eight we included this slide to illustrate a brief overview of capabilities and functionality enabled by our cloud based commerce platform, which supports both our retail and restaurant customers, giving us the benefit of operating synergies when delivering common solutions.
Speaker Change: NCR voyage has invested in building a robust platform that can deliver leading solutions to all customers are shipped to the platform will also enable us to move away from maintaining legacy on Prem applications, which have limited functionality and are becoming increasingly cost inefficient for the customer before I begin my discussion of our digital banking.
David Wilkinson: Before I begin my discussion of our digital banking performance on slide 9, I'd like to welcome Brendan Tanzel as President of Digital Banking. Brennan has served as a successful leader in the financial technology industry for more than 10 years and has extensive experience working with financial institutions, both of which align with our digital strategy. In the fourth quarter, digital banking had strong sales activity that included 13 new relationships with financial institutions and 25 renewables. For the full year 2023, we signed 39 new customers and renewed 76 relationships, which represents approximately 10% of our base. Our registered users grew 4% to more than 28 million, and the number of active users grew 3% to more than 19 million. We are making solid progress accelerating growth for the segment by deepening our existing relationships, selling our value-added services, and creating a pipeline of new deals, which together demonstrate the value our partners see in our The highlight We signed a new agreement with Nicolet Bank out of Wisconsin.
Speaker Change: Performance on slide nine I'd like to welcome Brendan Pandal as president of the digital banking segment.
Brendan Pandal: Brendan has served as a successful leader in the financial technology industry for more than 10 years and has extensive experience working with financial institution, both of which align with our digital banking objectives.
Brendan Pandal: In the fourth quarter digital banking had strong sales activity that included 13, new relationships with financial institutions and twenty-five renewals.
Brendan Pandal: For the full year in 2023, we signed 39, new customers and renewed 76 relationships, which represents approximately 10% of our base.
Brendan Pandal: Our registered users grew 4% to more than $28 million and a number of active users grew 3% to more than $19 million.
Brendan Pandal: We are making solid progress accelerating growth for the segment by deepening our existing relationships selling our value added services and creating a pipeline of new deals, which together demonstrate the value of our partner see in our solutions.
Brendan Pandal: The highlight.
Brendan Pandal: We signed a new agreement with Nikolay bank out of Wisconsin.
David Wilkinson: They selected our platform solution to deepen relationships, attract new customers, and gather new deposits. This again was a competitive takeaway from a large legacy player in the space given our capabilities within retail. We also continue to experience strong cross-cell and up-cell momentum across our multiple platform solutions. One recent example is Old National Bank, a top 30 bank in the US that renewed its existing contract and added business banking as part of its go-to-market initiatives to attract new profitable customers and retain its best small business relationships.
Brendan Pandal: They selected our platform solution to deepen our relationships attract new customers and gather new deposits.
Brendan Pandal: This again was a competitive takeaway from a large legacy player in this space given our capabilities within retail banking.
Brendan Pandal: We also continue to experience strong cross sell and upsell momentum across our multiple platform solutions.
Brendan Pandal: One recent example is the old National Bank, a top 30 bank in the U S that renewed its existing contract and added business banking as part of their go to market initiatives to attract new profitable customers and retain their best small business relationships.
David Wilkinson: Lastly, we had a competitive takeaway by signing Cadence Bank, a leading banking franchise across the South and Southwest, who will implement our digital account opening technology. We included slide 10 to provide a brief overview of our cloud-based digital banking platform, which is separate and distinct from our commerce platform serving our restaurants and retail customers. Capabilities across the platform enable our banking partners to access a wide variety of leading-edge proprietary and third-party solutions for their customers. We have made significant investments in our platform over the last three years to offer end-to-end solutions that have allowed us to win in the, as reflected in our As illustrated on the slide, we offer cloud-based, platform-enabled digital banking for both consumer and business banks. In addition, we offer add-ons to enable sales and account opening, along with transactions and servicing solutions that provide banks and credit unions with a fully integrated consumer experience across the digital and physical channels.
Brendan Pandal: Lastly, we had a competitive takeaway signing cadence bank, a leading banking franchise across the south and southwest who will implement our digital account opening technology.
Brendan Pandal: We included slide 10 to provide a brief overview of our cloud based digital banking platform, which is separate and distinct from our commerce platform, serving our restaurants and retail customers.
Brendan Pandal: The capabilities across the platform enable our banking partners to access a wide variety of leading edge proprietary and third party solutions for their end users.
Brendan Pandal: We have made significant investments in our platform over the last three years to offer end to end solutions that have allowed us to win in the marketplace as reflected in our leading digital footprint and the 39, new customer relationships, we signed in 2023.
Brendan Pandal: As illustrated on the slide we offer cloud based platform enabled digital banking for both consumer and business banking. In addition, we offer add ons to enable sales and account opening along with transactions and servicing solutions that provide banks and credit unions with our fully integrated consumer experience across the digital and physical.
Brendan Pandal: Handles these.
David Wilkinson: These solutions can either be bundled or offered standalone, while leveraging our cloud-based architecture and our open API toolkit to provide flexibility for third-party integration. These provide a customized experience for our customers, including access to our existing partner network of more than 200 partners. Before I turn the call over to Brian, I'd like to reiterate how excited I am about the opportunities that lie ahead of NCR Voice. While the spin-off provided both the company and NCR Atlios with the benefit of operating independently, it was, without question, a huge undertaking that required the entire team.
Brendan Pandal: These solutions can either be bundles are offered standalone, while leveraging our cloud based architecture and our open API toolkit to provide flexibility for third party integrations.
Brendan Pandal: These provide a customized experience for our customers, including access to our existing partner partner network of more than 200 partners.
Speaker Change: Before I turn the call over to Brian I'd like to reiterate how excited I am about the opportunities that lie ahead of NCR Voya X, while the spin provided both the company and NCR at Leos the benefit of operating independently. It was without question a huge undertaking that required the entire team's attention.
David Wilkinson: I would like to thank the NCR Voyage team once again for their hard work. With that milestone behind us, we are now acutely focused on the initiatives I've outlined today. I am confident in this team's ability to drive growth and plant efficiencies across all of our plants as we continue to invest to support our customers. Now I will turn it over to Brian, who will take you through the financial results and our outlook. Thank you, David, and good afternoon, everyone.
Brian Walsh: I would like to thank the NCR vortex team once again for their hard work.
Brian Walsh: With that milestone behind US we are now acutely focused on the initiatives I've outlined today I am confident in this team's ability to drive growth and plant efficiencies across all of our businesses as we continue to invest to support our customers' needs now I will turn it over to Brian who will take you through the financial results and our outlook for 'twenty 'twenty four.
Brian Walsh: David and good afternoon, everyone I will note that the spinoff of NCR Alios has created some level of noise in our Twenty's twenty-three reported results due to discontinued operations. Therefore, we are providing normalized growth rates to exclude the impact of certain spin and divestiture related items. Some of my commentary will focus on these normalized results.
Brian Webb: I will note that the spinoff of NCR Alios has created some level of noise in our 2023 reported results due to discontinued operations. Therefore, we are providing normalized growth rates to exclude the impact of certain spin and divestiture-related items. Some of my commentary will focus on these normalized, Please turn the slides.
Brian Webb: Fourth quarter total revenue was $963 million, flat as reported, and up 1% on a normalized basis. Pull Your Revenue was $3.83 billion, up 1% as reported, and up 2% on a normalized basis. This 2% is consistent with the range we gave during the investigation.
Brian Walsh: Please turn to slide 12.
Brian Walsh: Fourth quarter total revenue was 963 million flat as reported and up 1% on a normalized basis full year revenue was 3.83 billion up 1% as reported and up 2% on a normalized basis. This 2% is consistent with the range. We gave at Investor day as David highlighted in addition to.
Brian Webb: As David highlighted, in addition to total revenue, we will now report a new metric, software and services revenue, which includes software, services, and payments revenue and excludes hardware. We believe this metric is a better indication of the strength and progress of our business. It removes point of sale and self checkout hardware, which although important to providing our customers with a complete solution, fluctuates from period to period depending on refresh cycles and large rollouts.
Brian Walsh: Total revenue, we will now report a new metric software and services revenue, which includes software services and payments revenue and excludes hardware. We believe this metric is a better indication of the strength and progress of our business. It removes point of sale and self checkout hardware, which although important to providing our customers with a complete <unk>.
Brian Walsh: Solution fluctuate from period to period, depending on refresh cycles, and large rollouts software and services revenue also generates the vast majority of the company's EBITDA and cash flow normalized software and services revenue increased 4% for the fourth quarter and 5% for the full year for the full year each of our segments contributed to this growth full year.
Brian Webb: Software and services revenue also generates the vast majority of the company's EBITDA and cash flow. Normalized software and services revenue increased 4% for the fourth quarter and 5% for the full year. For the full year, each of our segments contributed to this growth. Full year hardware revenue was $1.08 billion, down 6%, driven by higher demand in 2022 as a result of COVID and supply chain dynamics. Q4 adjusted EBITDA was $134 million, down 19% as reported and down 24% normalized, largely due to dissynergies and prior year labor benefits.
Brian Walsh: Hardware revenue was 1.08 billion down 6% driven by higher demand in 2022 as a result of Covid and supply chain dynamics Q4, adjusted EBITDA was $134 million down, 19% as reported and down 24% normalized largely due to dis synergies and prior year labor benefits fully.
Brian Webb: Full Year Adjusted EBITDA was $618 million, up 4% as reported and up 2% normally. However, these results contain certain prior year non-recurring positive labor items and a $25 million non-recurring software payment across Q2 and Q3 of 2023. Excluding these items, our year-over-year growth would have been 14 points higher.
Brian Walsh: <unk> adjusted EBITDA was $618 million up 4% as reported and up 2% normalized. However, these results contain certain prior year nonrecurring positive labor items, and a $25 million nonrecurring software payment across Q2, and Q3 of 2023, excluding these items our year over year growth would've been four.
Brian Walsh: 14 points higher full year margin expanded 40 basis points driven by growth in software and services, coupled with cost initiatives normalizing for the spin and divestiture related items, our adjusted EBITDA and adjusted EBITDA margin met our 2023 Investor Day outlook. Please turn to slide 13, which details our segment results Q4 restaurants.
Brian Webb: Full-year margin expanded 40 basis points, driven by growth in software and services, coupled with cost initiatives. Normalizing for the SPIN and divestiture-related items, our adjusted EBITDA and adjusted EBITDA margin met our 2023 Investor Day Outlook. Please turn to slide 13, which details our segment results. Q4 restaurants revenue increased 2% compared to the prior year, reflecting a 7% increase in software and services revenue.
Brian Walsh: <unk> increased 2% compared to the prior year, reflecting a 7% increase in software and services revenue. These results were driven by platform and payments sites service desk ramp and price increases full year restaurant revenue increased 3% and software and services revenue increased 10% largely driven by the same factors that pause.
Brian Webb: These results were driven by platform and payment sites, the service desk ramp, and pricing. Full year restaurant revenue increased 3%, and software and services revenue increased 10%, largely driven by the same factors that positively impacted Q4. Q4 Restaurant Adjusted EBITDA increased 22% and Margin Expanded 360 Basin. Full year of restaurant adjusted EBITDA increased 23% and margin improved 350 basis points. Both Q4 and full year results were driven by the positive impact of revenue mix and efficiency. Q4 retail segment revenue declined 3% as a result of a 1% decline in software and services as well as a decline in hardware.
Brian Walsh: <unk> impacted Q4 Q.
Brian Walsh: Q4 restaurant and adjusted EBITDA increased 22% and margin expanded 360 basis points full year restaurants, adjusted EBITDA increased 23% and margin improved 350 basis points, both Q4 and full year results were driven by the positive impact of revenue mix and efficiency initiatives.
Brian Walsh: Q4 retail segment revenue declined 3% as a result of a 1% decline in software and services as well as a decline in hardware and software and services revenue decline reflects the impact of lower maintenance revenues.
Brian Webb: The software and services revenue decline reflects the impact of lower maintenance revenue. Full year retail revenue was flat, which reflects 3% growth in software and services, primarily offset by lower hardware revenue. Software and services growth was driven by platform sites and the $25 million non-recurring software. Q4 retail and adjusted EBITDA declined 14% as a result of hardware declines, spin-to synergies, and prior year labor benefits.
Brian Walsh: Full year retail revenue was flat, which reflects 3% growth in software and services, primarily offset by lower hardware revenue software and services growth was driven by platform sites and the 25 million dollar nonrecurring software payment.
Brian Walsh: Q4, retail and adjusted EBITA declined 14% as a result of hardware declines spin dis synergies and prior year labor benefits full year retail adjusted EBITDA increased 7% and margin expanded 130 basis points. These results reflect revenue mix cost initiatives and our software payment.
Brian Webb: Full year retail adjusted EBITDA increased 7% and margin expanded 130 basis points. These results reflect revenue mix, cost initiatives, and the software. Q4 digital banking revenue increased 8%, and full year digital banking revenue increased 6% as we continue to sign new customers and demonstrate strong cross-sell momentum. In Q4, digital banking adjusted EBITDA was flat, while margin declined 290 basis points to 37.1%.
Brian Walsh: Q4, digital banking revenue increased 8% and full year digital banking revenue increased 6% as we continued to sign new customers and demonstrate strong cross sell momentum Q4 digital banking adjusted EBITDA was flat while margin declined 290 basis points to 37.1% full year digital banking adjusted EBITDA declined six.
Brian Webb: Full year digital banking adjusted EBITDA declined 6% and margin declined 480 basis points to 37.8%. The company made strategic investments in sales and technology throughout the year. Please turn to slide 14. We ended the year with 3.7 times net leverage, $2.6 billion of debt, $263 million of cash, and had $333 million available under our revolver. Leverage at year-end was slightly higher than the investor-day modeling because of spin and investor-related issues.
Brian Walsh: <unk> percent and margin declined 480 basis points to 37.8%.
Brian Walsh: The company made strategic investments in sales and technology throughout the year.
Brian Walsh: Please turn to slide 14.
Brian Walsh: We ended the year with 3.7 times net leverage 2.6 billion of debt 263 million of cash and had $333 million available under our revolver leverage at year end was slightly higher than the investor day modeling because of spin and divestiture related items, 89% of our debt is fixed and our average rate is five.
Brian Walsh: 0.5%, we do not currently have any significant maturities until 'twenty 'twenty eight.
Brian Walsh: We remain focused on driving cash flow, maintaining a healthy balance sheet and reducing leverage.
Brian Webb: 89% of our debt is fixed, and our average rate is 5.5%. We do not currently have any significant maturities until 2022. We remain focused on driving cash flow, maintaining a healthy balance sheet, and reducing leverage. Finally, I'd like to outline our 2024 guidance on slide 15. One note before I start: our 2024 guidance and normalized growth rates do not include revenue and adjusted EBITDA associated with delayed payments at Leo's country. While these delayed countries are not in our guidance, they are currently in our historical financial crisis.
Brian Walsh: Finally, I'd like to outline our 'twenty 'twenty four guidance on slide 15, one note before I start our 20th twenty-four guidance and normalized growth rates do not include revenue and adjusted EBITDA associated with delayed at Leos country transfers. While these delayed countries are not in our guidance. They are currently in our historical financials. Once these transfers or <unk>.
Brian Walsh: Please to continuing operations view of the business will be updated to exclude these amounts. Additionally, our 'twenty 'twenty four guidance now only includes $20 million of revenue from commercial agreements with Atlas, which is lower than our investor day assumption of $50 million.
Brian Walsh: With that we expect total revenue to be between 3.6, and $3 7 billion for the year down 1.5% at the midpoint on a normalized basis. This reflects lower hardware revenue for the year.
Brian Webb: Once these transfers are complete, the continuing operations view of the business will be updated to exclude these. Additionally, our 2024 guidance now only includes $20 million of revenue from commercial agreements with Atlas, which is lower than our Investor Day assumption of $50. With that, we expect total revenue to be between $3.6 and $3.7 billion for the year, down 1.5% at the midpoint on a normalized basis. This reflects lower hardware revenue for the. We expect software and services revenue to Hardware revenue is expected to decline and range from $900 to $950 million due to the timing of customer refreshes and major projects. We expect our full-year adjusted EBITDA to be between 632 and 657 million, up 2% on a normalized basis at the midpoint of the. This includes absorbing 60 million of cumulative dissenter. Additionally, the prior year results contain the $25 million non-recurring software payment that I mentioned earlier.
Brian Walsh: We expect software and services revenue to be between 2.7, 2.75 billion, reflecting a normalized growth rate of 2% to 4%.
Hardware revenue is expected to decline and range from $900 million to $950 million due to the timing of customer refreshes and major projects. We expect our full year adjusted EBITDA to be between 632 and $657 million up 2% on a normalized basis at the midpoint of the range. This includes absorbing $60 million of cumulative.
Brian Walsh: Dis synergies.
Brian Walsh: Additionally, the prior year results contained a 25 million nonrecurring software payment that I mentioned earlier, excluding this item our year over year growth would be four points higher at the midpoint of the range.
Brian Walsh: Margin is expected to be between 17.5, and 17.7% up year over year and above the outlook, we shared at Investor day, our adjusted EBITDA guidance is underpinned by an efficiency program focused on three areas corporate hardware and services. This program is expected to deliver annualized run rate savings of $100 million.
Brian Walsh: By the end of the year and more than offset $60 million of cumulative dis synergies in 2020 for many of these actions have already been executed.
Brian Webb: Excluding this item, our year-over-year growth would be four points higher at the midpoint of the, Margin is expected to be between 17.5 and 17.7%, up year over year and above the outlook we shared at Invesco. Our adjusted EBITDA guidance is underpinned by an efficiency program focused on three areas, corporate, hardware, and service. This program is expected to deliver annualized run rate savings of $100 million by the end of the year and more than offset $60 million of cumulative dis-energies in 2024.
Brian Walsh: We expect our full year free cash flow to be between 155, and $185 million, which includes $250 million of Capex.
Brian Walsh: Revenue and adjusted EBITDA are expected to improve sequentially through the year, given our expectations for hardware seasonality and timing of our efficiency actions for this first quarter, we expect revenue to decline between three and 4% on a normalized basis driven by hardware declines we expect adjusted EBITDA margin to be relatively flat with normalized Q1 of <unk>.
Brian Walsh: 2023 and expect to use cash in the first quarter based on our seasonality.
Speaker Change: Before we move to Q&A I would like to call your attention to the disclosure in our press release that we filed this afternoon.
Brian Webb: Many of these actions have already been taken. We expect our full-year free cash flow to be between $155 million and $185 million, which includes $250 million of capital. Revenue and adjusted EBITDA are expected to improve sequentially through the year, given our expectations for hardware, seasonality, and timing of our efficiency actions. For this first quarter, we expect revenue to climb between 3% and 4% on a normalized basis driven by hardware. We expect adjusted EBITDA margin to be relatively flat with normalized Q1 of 2023 and expect to use cash in the first quarter based on our season average. Before we move to Q&A, I would like to call your attention to the disclosures in our press release that we filed this afternoon.
Speaker Change: In early February of this year the company identified certain ACTH debit transactions from one of our bank accounts, which were upon further investigation fraudulent.
Speaker Change: While the investigation is still ongoing we believe the impact of this fraud through year end was 23 million all of which was recorded in 'twenty twenty-three further we expect to record up to an additional $5 million of expense net of recoveries in Q1, 'twenty 'twenty four related to a C. H debit transactions that incurred in Q1 before we discovered this issue.
Speaker Change: And disabled Ath debit functionality for this account.
Speaker Change: 23 million was reported as a non-GAAP adjustment to adjusted EBITDA in our press release to the extent possible. We are pursuing direct recovery of the fraudulent disbursements and insurance coverage for this matter.
Speaker Change: We are filing a 15 day extension for our 10-K and <unk> and expect to file before the end of the extension period. The 10-K will also include details about two material weaknesses in internal controls over financial reporting that we identified during the investigation along with our remediation plans I will now turn the call over to the operator to beat.
Brian Webb: In early February of this year, the company identified certain ACH debit transactions from one of our bank accounts that were, upon further investigation, fraudulent. While the investigation is still ongoing, we believe the impact of this fraud through year-end was $23 million, all of which was recorded in 2023. Further, we expect to record up to an additional five million of expense net of recoveries in Q1 2024 related to ACH debit transactions that occurred in Q1 before we discovered this issue and disabled ACH debit functionality for this. 23 million was reported as a non-gap adjustment to adjusted EBITDA and our press release. To the extent possible, we are pursuing direct recovery of the fraudulent disbursements and insurance coverage for this matter. We are filing a 15-day extension for our 10-K and expect to file it before the end of the extension period.
Speaker Change: A question and answer session operator.
Operator: Thank you at this time, we will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
Operator: Confirmation tone will indicate your line is in the question queue. You May press star two she would like to remove your question from the queue for participants using speaker equipment. It may be necessary to get your handset before pressing the star keys.
Speaker Change: Our first question comes from the line of.
Speaker Change: <unk> Tandon with Needham <unk> Company. Please proceed with your question.
Vikram Tandon: Thank you good evening.
Vikram Tandon: David Bryan I wanted to start with your.
Vikram Tandon: Your key growth metric here or could you talk about how that trended across the various segments in 2023 and your expectations for what it might trend like in 'twenty 'twenty four just to get a better gauge on the momentum in the business.
Operator: The 10-K will also include details about two material weaknesses in internal controls over financial reporting that we identified during the investigation, along with our remediation. I will now turn the call over to the operator to begin our question and answer session. Operator. Thank you. At this time, we will be conducting a question and answer session, and if you would like to ask a question, please press star one. A confirmation tone will indicate your line is in the question. You may press star two if you would like to remove your question.
Vikram Tandon: Yeah, Mike This is David.
As you described is an important metric for us and really reviewing.
Vikram Tandon: Reviewing the health of the overall strategy, we saw <unk>, 5% and 23, that's a total and we saw.
David: Banking was at 8% restaurants at 12 and retail was at 1%.
David: We look forward.
David: This year, we see that growing across the company at mid to high single digits with that mid to high single digit growth rates across all three of the segments. So that's really a testament to the platform strategy.
Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing these. Our first question comes from the line of Mayank Tandem with Needham & Company. Pleased to see you with your...
David: And our acquisition of new customers with payments.
David Wilkinson: Thank you. Good evening, Dave and Brian. I wanted to start with your Growth Metric, ARR. Could you talk about how that trended across the various segments in 2023 and your expectations for what it might trend like in 2024 just to get a better gauge on the momentum in the business? Yeah, Mike. This is David.
Speaker Change: Got it very helpful and if I could just ask about competition. So it's been obviously only a few months since the spin but have you seen a change in your win rates early on in terms of how you are competing with some of the incumbents or any change in the dynamics in the market that you can call out across your three segments.
David Wilkinson: ARR, as you described, is an important metric for us and really measures the health of the overall strategy. We saw ARR grow 5% in 23. That's in total.
Speaker Change: I wouldn't call it out due to the spin itself I think for US we feel like we're I'll say in fighting shape and the ability to get very focused on the segments that we serve.
David Wilkinson: And we saw digital banking was at 8%, restaurants at 12, and retail was at 1%. When we look forward into this year, we see that growing across the company at mid to high single digits with that mid to high single digit growth rate across all three of the segments. So that's really a testament to both the platform strategy and our acquisition of new customers with payments. Got it very helpful. And if I can just ask about competition, so it's obviously only been a few months since the spin. But have you seen a change in your win rates early on, in terms of how you're competing with some of the incumbents, any change in the dynamics in the market that you can call out across your three segments? I wouldn't call any out due to the spin itself.
Speaker Change: And what we've seen is that as we not only serve our enterprise existing customers, but then move into mid market on our focus areas. It really our differentiators are around a core tech platform and our ability to service those customers end to end so as our clients have increasing complexity, we differentiate even further.
Speaker Change: You'll see us continue to grow in the mid market space, but I don't know that the dynamic has changed as much as we feel more focused on how we are looking for growth from new sites and the mid market.
Speaker Change: I think our existing enterprise customers to the platform for cross sell up sell.
Speaker Change: Got it I'll get back in queue. Thank you so much.
David Wilkinson: I think for us, we feel like we're in fighting shape and have the ability to get very focused on the segments that we serve. And what we've seen is that as we not only serve our existing enterprise customers but then move into the mid market in our focus areas, our differentiators are really around the core tech platform and our ability to service those customers end to end. As our clients' needs increase in complexity, we differentiate even further. So you'll see us continue to grow in the mid market space. But I know that the dynamic has changed, as much as we feel more focused on how we're looking for growth from new sites in the mid market and connecting our existing enterprise customers to the platform for cross-sell and upsell. I'll get back in the queue.
Thank you.
Speaker Change: Yes.
Speaker Change: Thank you. Our next question comes from the line of Eric Woodring with Morgan Stanley. Please proceed with your question.
Erik William Richard Woodring: Hi, This is Sabrina on fact wagering. Thank you for taking the question you know our first one as you had previously talked about that day. She is growing call it 1% to 3% in 'twenty 'twenty four but now guidance implies that revenues going to fall I think 1% normalize. So so what are the drivers of this change in outlook and more broadly like what are the <unk>.
Erik William Richard Woodring: Macro trends, you're hanging from customers right now in terms of propensity to spend on larger capex purchases by segment.
David Wilkinson: Thank you so much. Thank you. Thank you. Our next question comes from the line of Erik Woodring with Morgan Stanley. Hi, this is Sabrina Ahn for Erik Woodring.
Erik William Richard Woodring: Yes.
Erik William Richard Woodring: Yes.
Speaker Change: So within the number and being flat to down three of the positive aspect of that is the recurring revenue is growing six to seven and the software and services is up growing 3% at the midpoint of the range.
Operator: Thank you for taking the questions. You know, our first one is that you'd previously talked about the business growing, call it one to 3% in 2024. But now guidance implies that revenue is going to fall, I think 1% normalized. So what are the drivers of this change in outlook?
That's the positive and that's in line with Investor Day expectations, we were having some volatility is with our hardware demand that we know is lumpy given our large enterprise customers and their projects and refresh schedules at the time of Investor Day, We believe some of these cyclical projects would be back.
Brian Webb: And more broadly, like what are the macro trends you're hearing from customers right now, in terms of propensity to spend on larger CapEx purchases by segment? Yes, so within the number of being flat to down three, the positive aspect of that is the recurring revenue is growing six to seven, and the software and services are growing 3% at the midpoint of the range. So that's the positive.
Speaker Change: Typically have visibility to these projects by now or just not seen it. So we're guiding hardware revenue to be down 12% at the midpoint.
Speaker Change: And if we exclude hardware you would've been up 1% to 2%, which is in line with Investor day.
Speaker Change: Yeah, I'll, just add Brian I think that the hardware expectations. We have are in line with what we're seeing in the broader market for hardware demand.
Brian Webb: And that's in line with Investor Day expectations; where we're having some volatility is with our hardware demands, which we know won't be given our large enterprise customers and their projects and refresh schedules. At the time of Investor Day, we believed some of these cyclical projects would be back. And we would typically have visibility into these projects by now, and we're just not seeing it.
Speaker Change: And coming out of the poll.
Speaker Change: <unk> Covid I'll call rebound from a year and a half two years ago and then some of the dynamics that we saw in the market last year. So.
Speaker Change: We're seeing that in line with market.
Speaker Change: Understood. That's Super helpful. And then maybe just just one more you talked about wanting to better serve the mid market in the restaurant segment I guess what are the pillars of your shot Aegean and what are you changing within that segment and then how much of that is baked into your long term guide. Thank you.
Brian Webb: So we're guiding hardware revenue to be down 12% at the midpoint. And if we exclude hardware, we would have been up one to 2%, which is in line with investor expectations. I'll just add Brian, I think that the hardware expectations we have are in line with what we're seeing in the broader market for hardware demand coming out of the post COVID, I'll call it a rebound from a year and a half, two years ago, and then some of the dynamics that we saw in the market last So we're seeing that in line with the market. understood. That's super helpful. And then maybe just, just one more.
Speaker Change: Yes, let's start with the end its all baked into our long term guide that's why we feel confident in that guidance.
Speaker Change: As I described our mid market definition in restaurants, it's really five to.
Speaker Change: 50 sites, so think about a multi side operator that is growing into more more sites overall are trying to grow either a geographic region or across the country.
David Wilkinson: You talked about wanting to better serve the mid-market in the restaurant segment. I guess, what are the pillars of your strategy and what are you changing within that segment? And then how much of that is baked into your long-term strategy? Thank you. Transcribed by https://otter.ai. Let's start with the end.
Speaker Change: Got it.
Speaker Change: Our approach is payments led in that space. So as we build out additional payment capabilities Youll see that show up in that space as well and then it's really our service differentiation.
David Wilkinson: It's all baked into our long-term guide. That's why we feel confident in that guidance. As I described our mid-market definition for restaurants, it's really 5 to 50 sites.
Speaker Change: Also adds to what we're building on the tech side of the platform will also simplify our product a little bit in terms of how our customers use it and think about it and then really the real changes to our go to market focus we are going to juice up our go to market in that space with some additional salespeople.
David Wilkinson: So think about a multi-site operator that is growing into more sites overall or trying to grow either in a geographic region or across the country. Our approach is payments-led in that space. So as we build out additional payment capabilities, you'll see that show up in that space as well. It's really our service differentiation that also adds to what we're building on the tech side of the platform. We'll also simplify our product a little bit in terms of how our customers use it and think about it. And then really, the real change is, you know, our go-to-market focus. We are going to juice up our go-to-market in that space with some additional sales people. Great, thank you, Thank you. Our next question comes from the Kartik Mehta with North Coast Research.
Speaker Change: Great. Thank you.
Speaker Change: Thank you. Our next question comes from the line of Kartik Mehta with Northcoast Research. Please proceed with your question.
Speaker Change: Thanks.
Dave and Brian as you look at the guidance and the outlook for the businesses obviously.
Kartik Mehta: Where is dragging a lot of.
Kartik Mehta: Dragging out apologize dragging down a lot of revenue growth.
Kartik Mehta: But as you look at the digital banking piece.
Speaker Change: Would you anticipate.
Speaker Change: That will continue to grow as it did in 'twenty three or.
Speaker Change: Is it a little bit more difficult to grow at that rate considering the size of the business now.
Speaker Change: Yes, so we anticipate digital banking being up 7% this.
David Wilkinson: Please proceed with your, Thanks. Dave and Brian, as you look at the guidance and the outlook for the businesses, obviously, hardware is dragging a lot of, dragging, I apologize, dragging down a lot of revenue growth. But as you look at the digital banking piece, would you anticipate that that will continue to grow as it did in 23? Or, you know, is it a little bit more difficult to grow at that rate, considering the size of the business now? Yeah, so we anticipate digital banking being up 7% this year as we add new customers and continue to cross out. And even the margin for that segment, we think it will be flat at 38%.
Speaker Change: This year as we add new customers and continue to cross sell in EBIT margin for that segment, we think will be flat at 38%, Yes, Kartik I would add that.
Speaker Change: As we described in our prepared remarks, we've had 39.
Speaker Change: Net new wins in that space over the last 12 months.
Speaker Change: And we believe that's an undervalued crown jewel within our portfolio.
Speaker Change: You look at the overall.
Kartik Mehta: Customer wins that we're seeing we're taking share in that space and we have a very competitive product. So we like the growth prospects in that business and even though we are.
David Wilkinson: Yeah, Kartik, and I would add that, as we described in our prepared remarks, we've had 39 Net New Wins in that space over the last 12 months, and we believe that it's an undervalued crown jewel within our portfolio. We, you know, when you look at the overall customer wins that we're seeing, we're taking share in that space, and we have a very competitive product. So we like the growth prospects in that business, and even though it's a large business for us, it's also very profitable, you know, already breaking the rule of 40 in this space.
Kartik Mehta: It's a large business for us it's also a very profitable already breaking the rule of 40.
Kartik Mehta: In this space. So we feel really good about that business in the long term growth prospects.
Kartik Mehta: And then just Brian on.
Brian Walsh: On the cash flow conversion.
Brian Walsh: Maybe I'm, assuming 'twenty 'twenty four obviously had.
Brian Walsh: Separating from NCR, and there's probably lots of Oh takes the ins and outs associated with it I'm wondering over the next few years, what you would expect conversion to be.
David Wilkinson: So we feel really good about that business and the long-term growth prospects. And then just Brian, on the cash flow conversion, you know, maybe 2024 obviously has you're separating from NCR and there's probably lots of takes, you know, ins and outs associated with it. I'm wondering, you know, over the next few years, what you'd expect the cash flow conversion to be?
Brian Walsh: Yeah. So so conversion is impacted this year by still some 25% to $50 million of cash separation costs that are impacting us. We also have some restructuring associated with our cost takeout. So those things are pressuring cash conversion a bit but as we go forward those things.
Brian Walsh: Come down and will continue to improve margin and generate more cash flow, we have a working capital improvement baked in for this year as well and we think there's opportunity to continue that in the future years. So we see cash conversion improving in line with what we said at Investor Day as we go forward.
Brian Webb: Yeah, so cash conversion is impacted this year by probably 25 to 50 million in cash separation costs that are impacting us. We also have some restructuring associated with our cost takeout, so those things are pressuring cash conversion a bit.
Brian Webb: But as we go forward, those things will, you know, come down, and we'll continue to improve margin and generate more cash flow. We have a working capital improvement baked in for this year as well, and we think there's opportunity to continue that in future years. So we see cash conversion improving in line with what we said on investor day. Thank you very much. I really appreciate it.
Speaker Change: Thank you very much I really appreciate it.
Speaker Change: Thank you. Our next question comes from the line of Dan Perlin with RBC. Please proceed with your question.
Speaker Change: Yes, good evening, it's at Roswell on for Dan two questions I guess first when you. When you were looking at the SMB focus and which sort of either product or sales force investments are we thinking about for this year.
Brian Webb: Thank you. Our next question comes from the line of Dan Perlin with RBC. Please proceed with your, Yes, good evening, it's Matt Roswell on behalf of Dan.
Speaker Change: Yes, you say SMB I'll, just redirect a little bit to mid market.
David Wilkinson: Two questions, I guess first, when you're looking at the SMB focus and what sort of either product or Salesforce investments are we thinking about for this year? Yeah, you say SMB. I'll just redirect a little bit to the mid market. We are focused on that five, that kind of multi-site operator, both restaurant and retail. The product, we feel, is in good shape.
Speaker Change: Yes.
Speaker Change: Our focus on that five that kind of multi side operator, both rest.
Restaurant and retail the product we feel is in good shape. So we're going to work on process in terms of making it easier for our sellers to quote and onboard those customers with the payments led offering and on the sales side. If I look at it overall, we're investing about $15 billion across the whole company and selling and so when I think about.
David Wilkinson: So we're going to work on processes in terms of making it easier for our sellers to quote and onboard those customers with the payments-led offering. And on the sales side, if I look at it overall, we're investing about $15 million across the whole company in sales. And so when I think about where growth will come across all three businesses, it will be in that mid-market segment across all three businesses. So we're going to make more investments in sales to get more feet on the street. And that's where we think the impact will show up. Okay, and then on the digital banking piece, you're yet another number of net new wins in the quarter and year. And I was wondering, who are you taking share from? Is it mainly legacy players or homegrown solutions?
Speaker Change: Where the growth will come across all three businesses. It will be in that mid market segment across all three businesses, So where we're going to make more investments in sales to get more feet on the street and that's where we think the impacts will will show up.
Speaker Change: Okay, and then on the digital banking piece here yet.
Speaker Change: Net new wins in the quarter.
Speaker Change: In the year and I was just wondering who are you taking share from is it mainly legacy players or.
Speaker Change: Hum.
Speaker Change: Homegrown solutions.
Speaker Change: It's mainly the legacy players that we're seeing.
Speaker Change: Okay I'll call it as the donor pool.
Speaker Change: Okay.
Speaker Change: Okay. Thank you very much.
Speaker Change: Thank you. Our next question comes from the line of Ian Zaffino with Oppenheimer and company. Please proceed with your question.
Ian Alton Zaffino: Hey, good afternoon. This is <unk> on for Ian Thanks for taking the questions.
David Wilkinson: It's mainly the legacy players that we're seeing in the, I'll call it, the donor pool. Okay. Okay, thank you very much.
Speaker Change: My first one on the cost side could you talk about labor and component hardware costs and your expectations for the year. The EBITDA margin guidance certainly Sean So just trying to understand the cost saving measures you've talked about and you've already taken.
David Wilkinson: Thank you. Our next question comes from the line of Ian Zaffino with Oppenheimer & Company. Please proceed with your question. Hey, good afternoon. This is Isaac Salazan on behalf of Ian.
Brian Webb: Thanks for taking the questions. On the cost side, could you talk about labor and component hardware costs and your expectations for the year? The EBITDA margin guide is certainly strong. So just trying to understand the cost saving measures you talked about and you've already taken and maybe how that flows through for the year. Yep, thank you. 100 million is the annualized cost we're taking out this year. And it's split between the three areas I talked about, the first being hardware, which is simplifying how we design our products. And those changes have been made.
Speaker Change: How that flows through for the year.
Speaker Change: Yes. Thank you $100 million is the annualized cost we're taking out this year and it's split between the three areas I talked about the first being hardware, which is simplifying how we design our products and those changes have been made and as we go through our inventory that'll start to impact the P&L and it's starting to impact the P&L. So we'll get more.
Speaker Change: Are the savings in this year and Thats worth $25 million. The next area is services.
Around using our remote self capability more hiring skill set that matches that and share boyack skill set needed versus the overall go ex im sorry, the overall NCR need and also structural changes to get rid of overlaps between the organizations that we're about halfway through $50 million is what we're targeting there we've taken about 25 million of actions we.
Brian Webb: And as we go through our inventory, that'll start to impact the P&L and is already starting to impact the P&L. So we'll get most of the savings this year, and that's worth 25 million. The next area is services, and that's around using our remote self capability more, and hiring a skill set that matches our NCR VOIX skill set need versus the overall VOIX, I'm sorry, the overall NCR need. And also structural changes to get rid of overlaps between departments.
Speaker Change: Anticipated taking more before we end this quarter and so a lot of that will be behind us and then the last area is our real estate footprint.
Speaker Change: And our corporate footprint and now we're focused on reducing resources shifting to lower cost strategic value centers and closing down some facilities and thats underway, we are probably 60% of that behind us. So this year, we expect at least $70 million in your savings related to this program and we're trying to drive more.
Brian Webb: That we're about halfway through 50 million is what we're targeting there. We've taken about 25 million actions, and we anticipate taking more before we end this quarter. So a lot of that will be behind us. And then the last area is our real estate footprint and our corporate footprint. And there we're focused on reducing resources, shifting to lower cost strategic value centers, and closing down some facilities. And that's underway. We have probably 60% of that behind us.
Speaker Change: And I would just say that all of those cost savings.
Speaker Change: Net numbers, we're going to reinvest some of that if you look at the Q4 exit run rate. That's what we're reinvesting back and go to market sales just to make sure. We can continue to grow the business, while we're making the strategic <unk>.
Speaker Change: Savings in certain areas there are I'll say, a little more surgical as we look at the foundation of all of US that Brian described.
Brian Webb: So this year, we expect at least 70 million in in-year savings related to this program, and we're trying to drive more. And I would just say that on those cost savings, those are the net numbers; we're going to reinvest some of that if you look at the Q4 exit run rate. That's what we're reinvesting back and going to market and sales just to make sure we can continue to grow the business. While we're making the strategic, savings, and in certain areas, they're, I'll say, a little more surgical as we look at the foundational elements that Brian described. Where we're not making cuts is things like customer support, product innovation, and investment, and sales and go to market. We're continuing to invest. Okay, that's very helpful.
Speaker Change: Where we're not.
Speaker Change: Cuts as things like customer support product innovation and investment in sales and go to market, we're continuing investment there.
Speaker Change: Okay. That's very helpful. And then just as quick follow up regarding free cash flow for the year.
Speaker Change: Maybe if you could talk about your capital allocation priorities.
Speaker Change: 3.7 times, you know, what's the pace you'd like to move down to the two to three times long term debt.
Speaker Change: That leverage target.
Speaker Change: Yes, so for this year, it's going to be investing in our Capex, which is $250 million and then from there like the free cash flow add to our cash balance to bring down that debt and we think we can get that leverage to three three to three four turns by the end of the year and that that's our focus for this year.
Brian Webb: And then just as a quick follow-up regarding free cash flow for the year. Maybe if you could talk about your capital allocation priorities, you know, at 3.7 times, what's the pace you'd like to move down to the two to three times long-term net leverage target? Yeah, so for this year, it's going to be investing in our CapEx, which is $250 million. And then from there, letting the free cash flow add to our cash balance to bring down net debt. And we think we can get net leverage to 3.3 to 3.4 turns by the end of the year. And that's our focus for this year. Okay, great. Thank you so much.
Speaker Change: Okay, great. Thanks, so much.
Speaker Change: Thank you and our next question comes from the line of Alex <unk> with Stephens.
Alex: <unk> was your question.
Alex: Alright, Thanks for taking the question just within the retail business can you just give us a sense of how much the plant platform sides are contributing to that segment and then when we could see.
Alex: That moves the needle just from a growth standpoint.
Alex: Yeah.
Yes, we're seeing good growth in the platform sites. I mean, you saw you saw the numbers and they are contributing to overall growth. So if I take my original question around <unk> and I look at that growth that we're expecting to see in the.
Brian Webb: Thank you. And our next question comes from the line of Alex Neumann with Stephen. All right, thanks for taking the question.
Alex: Mid to high single digits.
David Wilkinson: Just within the retail business, can you just give us a sense of how much the platform sites are contributing to that segment? And then when we could see that moving the needle just from a growth standpoint? Yeah, we're seeing good growth in the platform sites. I mean, you saw the numbers, and they are contributing to overall growth.
Alex: 24, that's all coming from platform connected sites, if I break that down even further and think about software specific related air are in that business.
We'll see software specific air or get into the low <unk>.
Alex: Double digit growth in 'twenty, four and that's all about connecting these sites to the platform. So if you remember when we connect the size of the platform, we're getting an uplift in our view when we make that connection and it allows us to cross sell and up sell so as these cohorts are aging.
David Wilkinson: So if I take my original question around ARR and I look at that ARR growth that we're expecting to see in the mid to high single digits, in 24. That's all coming from platform connected sites. If I break that down even further and think about software specific errors in that business.
Alex: Starting to see that benefit our recurring revenue streams and Thats, what youll see these growth numbers again.
Alex: All numbers are a little muted because of hardware in retail, but the rest of the software business and recurring revenue streams are growing nicely.
Brian Webb: We'll see software specific ARR get into low double digit growth in 24. And that's all about connecting these sites to the platform. So if you remember, when we connect these sites to the platform, we're getting an uplift in ARPU; we make that connection, and it allows us to cross sell and upsell. So as these cohorts are aging, we're starting to see that benefit our recurring revenue streams. And that's what you'll see in these growth numbers. Again, the overall numbers are a little muted because of hardware and retail, but the rest of the software business and recurring revenue streams are growing nicely. Okay, and then just given some of the lumpiness associated with hardware, you know, if you can provide any color on the expected cadence and revenue and 24 within the retail and restaurant segment, we can help. Sure.
Alex: Okay.
Alex: Just given some of the lumpiness associated with hardware.
Speaker Change: You can provide any color on the expected cadence and revenue in 'twenty four within the retail and restaurant segment would be helpful.
Speaker Change: Sure. So for restaurants, we expect to be flat to up 1% overall, but that's made up of software and services growing 5% and hardware being down and then reach out the decline is declining roughly 4% and that's due to hardware software and services is growing 1% and if I adjust for the $25 million.
Speaker Change: Nonrecurring software payment that I mentioned.
Speaker Change: It would be up 3%. So we're seeing growth in all three businesses on the software and services line. It's just hardware is putting pressure, especially on retail.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Thank you and we have reached the end of the question and answer session I will now turn the call back over.
Brian Webb: So for restaurants, we expect to be flat up 1% overall, but that's made up of software and services growing 5% and hardware being down. And then in retail, the decline is declining, roughly 4%. And that's due to hardware, software, and services growing 1%. And if I adjust for the $25 million non-recurring software payment that I mentioned, it would be up 3%. So we're seeing growth in all three businesses on the software and services lines. It's just hardware is putting pressure on retailers, especially on retail.
G E R. David Wilkins influence those remarks.
David Wilkinson: Yes in closing I'd like to thank our customers again for the Tri state, but in US every day to help them achieve their strategic objectives. I'd also like to thank again, our NCR vortex colleagues for their contribution to our success up to now and our investors for their ongoing support.
David Wilkinson: As I stated earlier, we remain committed to serving our existing clients and bringing them on the platform journey our platform investments over the past years have provided real value to our customers and we're going to continue to connect them to the platform. We've built a solid foundation for growth within our base and growth with new.
Brian Webb: Thank you. Thank you. And we have reached the end of the question and answer session.
David Wilkinson: I'll now turn the call over to CEO David Wilkinson for a closing remark. In closing, I'd like to thank our customers again for the trust they put in us every day to help them achieve their strategic objectives. I'd also like to thank again our NCR Voyage colleagues for their contribution to our success up to now and our investors for their ongoing support. As I stated earlier, we remain committed to serving our existing clients and taking them on the platform journey. Our platform investments over the past years have provided real value to our customers, and we're going to continue to connect them to the platform. We've built a solid foundation for growth within our base and growth of new customers, specifically in the mid market. While we're proud of where we are, we need to do better at turning this foundation into growth, and this focus will show up in our results. I believe in the plan we have outlined today, and I believe in this management team's ability to execute it.
David Wilkinson: Tumors, specifically in the mid market.
David Wilkinson: While we're proud of where we are we need to do better at turning this foundation and to grow and this focus will show up in our results.
David Wilkinson: I believe in the plan, we have outlined today and I believe in this management team to execute.
Speaker Change: Thank you all for joining the call.
Speaker Change: And this concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.
Yeah.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: [music].
Operator: Thank you all for joining the call. And this concludes today's conference, and you may disconnect your lines. Thank you for your participation.