NCR Voyix Corp(VYX) - 2025 Q2 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements NCR Voyix's financial statements for the period ended June 30, 2025, reflect decreased total revenue primarily from lower product sales, a shift from net loss to slight net income from continuing operations due to reduced expenses, a decrease in total assets driven by reduced cash, and negative operating cash flow heavily impacted by a large tax payment related to the Digital Banking Sale Condensed Consolidated Statements of Operations For the second quarter of 2025, total revenue decreased to $666 million from $722 million in Q2 2024, an 8% decline driven by a 24% drop in product revenue, yet the company improved its operating results to $14 million income from operations and achieved breakeven net income attributable to NCR Voyix, a significant improvement from prior-year losses Consolidated Statements of Operations Summary (Q2 & H1) | In millions, except per share data | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $666 | $722 | $1,283 | $1,432 | | Product revenue | $185 | $244 | $338 | $465 | | Service revenue | $481 | $478 | $945 | $967 | | Income (loss) from operations | $14 | ($34) | ($6) | ($53) | | Net income (loss) attributable to NCR Voyix | $0 | ($73) | ($17) | ($113) | | Diluted net income (loss) per common share | ($0.03) | ($0.53) | ($0.18) | ($0.84) | - The company successfully reversed its operating loss from the prior year, achieving $14 million in operating income for Q2 2025, compared to a $34 million loss in Q2 2024, primarily due to reductions in cost of services, SG&A, and R&D expenses[12] Condensed Consolidated Balance Sheets As of June 30, 2025, NCR Voyix's total assets decreased to $3.98 billion from $4.45 billion at year-end 2024, primarily due to a significant reduction in cash and cash equivalents, while total liabilities also decreased to $2.84 billion, and total stockholders' equity saw a slight decline Balance Sheet Summary | In millions | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $1,222 | $1,671 | | Cash and cash equivalents | $276 | $722 | | Total assets | $3,984 | $4,452 | | Total current liabilities | $1,054 | $1,420 | | Long-term debt | $1,099 | $1,098 | | Total liabilities | $2,841 | $3,245 | | Total stockholders' equity (deficit) | $867 | $931 | - The company's cash position decreased substantially by $446 million during the first six months of 2025[16] Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, the company experienced a net cash outflow of $284 million from operating activities, a sharp reversal from the prior year due to a significant tax payment, with investing activities using $75 million and financing activities using $86 million, resulting in an overall $440 million decrease in cash, cash equivalents, and restricted cash Cash Flow Summary (Six Months Ended June 30) | In millions | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | ($284) | $27 | | Net cash provided by (used in) investing activities | ($75) | ($81) | | Net cash provided by (used in) financing activities | ($86) | $15 | | Effect of exchange rate changes | $5 | ($14) | | Increase (decrease) in cash, cash equivalents, and restricted cash | ($440) | ($53) | | Cash, cash equivalents and restricted cash at beginning of period | $758 | $285 | | Cash, cash equivalents and restricted cash at end of period | $318 | $232 | - Financing activities included $69 million for repurchases of common stock in the first half of 2025, a change from zero repurchases in the prior-year period[18] Notes to Condensed Consolidated Financial Statements The notes detail significant corporate actions including the completed spin-off of NCR Atleos and the sale of the Digital Banking business, both now discontinued operations, alongside the transition of its hardware business to an outsourced model, segment information for Retail and Restaurants, approximately $1.1 billion in debt obligations, and ongoing commitments and contingencies, notably significant environmental liabilities related to the Kalamazoo River - The company completed the spin-off of NCR Atleos on October 16, 2023, and the sale of its Digital Banking segment on September 30, 2024, with both now reported as discontinued operations[24][26] - NCR Voyix announced a commercial agreement with Ennoconn to transition its self-checkout and point-of-sale hardware businesses to an outsourced design and manufacturing (ODM) model[27] - As of June 30, 2025, the company's remaining performance obligations were approximately $1.1 billion, with over three-quarters expected to be recognized as revenue in the next 12 months[40] - The company has a total reserve of $134 million for the Kalamazoo River environmental matter as of June 30, 2025, but notes that potential liability could more than double this amount[117][118] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the 8% YoY revenue decline in Q2 2025 to $666 million, primarily due to lower hardware sales, offset by 4% recurring revenue growth and a 20% increase in Adjusted EBITDA to $95 million, while liquidity was impacted by a $284 million tax payment leading to negative operating cash flow, with strategic focus on an outsourced hardware model and software/services-led offerings Overview NCR Voyix, a global provider of digital commerce solutions for retail and restaurants, has undergone significant transformation, completing the spin-off of NCR Atleos and the sale of its Digital Banking business, transitioning its hardware business to an outsourced model, and continues to manage the financial impact of a 2023 cyber ransomware incident and fraudulent ACH disbursements - The company completed the spin-off of NCR Atleos on October 16, 2023, and the sale of its Digital Banking business on September 30, 2024, with both now treated as discontinued operations[153][154] - The company is transitioning its self-checkout and point-of-sale hardware business to an outsourced design and manufacturing (ODM) model with Ennoconn, which will change its revenue recognition for hardware to a net commission basis[156] - As of June 30, 2025, the company has incurred $47 million in expenses related to a 2023 cyber ransomware incident and has recovered $36 million through insurance[160] - Fraudulent ACH disbursements totaling $34 million were identified in February 2024, with approximately $16 million recovered as of June 30, 2025[161] Results of Operations For Q2 2025, total revenue fell 8% YoY to $666 million, and 10% for H1 2025 to $1.28 billion, driven by a significant drop in product revenue, though service revenue grew 1% and recurring revenue increased 4% to 63.4% of total revenue, while gross margin improved to 23.0% and operating expenses decreased, leading to a $14 million operating income in Q2, reversing a prior-year loss Q2 2025 vs Q2 2024 Performance | In millions | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Total revenue | $666 | $722 | (8)% | | Product revenue | $185 | $244 | (24)% | | Service revenue | $481 | $478 | 1% | | Total gross margin | $153 | $126 | 21% | | Income (loss) from operations | $14 | ($34) | n/m | - Recurring revenue grew 4% in Q2 2025 to $422 million and now constitutes 63.4% of total revenue, up from 56.2% in the prior year, highlighting the company's strategic shift[175] - The Retail segment's revenue decreased by 12% in Q2 2025 due to lower hardware and software license sales, while the Restaurants segment's revenue increased by 2%, driven by payments processing and hardware maintenance[220][221][222] - Adjusted EBITDA for Q2 2025 was $95 million, a 20% increase from $79 million in Q2 2024[178][182] Financial Condition, Liquidity and Capital Resources As of June 30, 2025, the company held $276 million in cash and $1.1 billion in total debt, with liquidity significantly impacted by a $284 million tax payment that led to negative $284 million operating cash flow and negative $40 million adjusted free cash flow, though $478 million remains available under its revolving credit facility, providing sufficient liquidity for obligations Liquidity Position as of June 30, 2025 | In millions | Amount | | :--- | :--- | | Cash and cash equivalents | $276 | | Total debt | $1,100 | | Borrowing capacity under credit facility | $478 | - Operating cash flow was negative $284 million for the first six months of 2025, compared to a positive $27 million in the prior year, driven by a $284 million tax payment on the Digital Banking Sale[229] - The company repurchased $69 million of its common stock during the first six months of 2025 under its share repurchase program[231] - Adjusted free cash flow for the six months ended June 30, 2025 was negative $40 million[233] Quantitative and Qualitative Disclosures about Market Risk The company is primarily exposed to market risks from foreign currency exchange rates across approximately 25 functional currencies, managed through hedging, and interest rates, with approximately 100% of borrowings at a fixed rate as of June 30, 2025, minimizing interest rate risk, while credit risk from customers is monitored with no significant concentrations reported - The company has exposure to approximately 25 functional currencies and uses financial instruments like forward contracts to hedge its main transactional exposures[248] - As of June 30, 2025, approximately 100% of the company's debt was on a fixed-rate basis, mitigating exposure to interest rate fluctuations, with no interest rate derivative contracts outstanding[251] - A sensitivity analysis showed that a hypothetical 10% appreciation of the U.S. dollar would decrease the fair value of the hedge portfolio by $2 million, while a 10% depreciation would increase it by $3 million[249] Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, ensuring timely and accurate reporting of SEC-required information, with no material changes to internal control over financial reporting during the second quarter of 2025 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[255] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[256] Part II. Other Information Legal Proceedings The company is involved in various legal proceedings, including a pending appeal in a class-action lawsuit concerning deferred compensation plans where a court ruled against it, and manages significant environmental liabilities from historical operations, notably the Kalamazoo River, for which it holds a $134 million reserve, with NCR Atleos obligated to contribute 50% of costs for certain matters after an annual threshold - A court entered a final judgment against the company in a class-action lawsuit regarding deferred compensation plans, and the company has appealed the decision and filed a $45 million supersedeas bond to stay the judgment[98][101][102] - The company retains responsibility for historical environmental liabilities, with NCR Atleos obligated to contribute 50% of costs for certain matters (including the Kalamazoo River) after an annual $15 million funding threshold is met[103] - The reserve for the Kalamazoo River environmental matter was $134 million as of June 30, 2025, and the company notes that the ultimate liability could potentially more than double this amount[117][118] Risk Factors There have been no material changes to the company's risk factors from those described in its Annual Report on Form 10-K for the year ended December 31, 2024, and investors are advised to consider the previously disclosed risk factors - The company states that there have been no material changes in its risk factors from those described in the 2024 Annual Report on Form 10-K[260] Unregistered Sales of Equity Securities and Use of Proceeds On May 6, 2025, the Board amended the company's share repurchase program, increasing total authority to $200 million and expanding it to include Series A preferred stock, under which approximately 0.83 million shares were repurchased for about $7.3 million during Q2 2025, with $200 million remaining available for future repurchases as of June 30, 2025 - On May 6, 2025, the Board amended the share repurchase program, increasing the total aggregate authority to $200 million and expanding it to include both common and Series A preferred stock[261] Share Repurchases (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Program | Remaining Authority (in millions) | | :--- | :--- | :--- | :--- | :--- | | April 2025 | 830,385 | $8.86 | 825,808 | $28 | | May 2025 | 32,456 | $10.56 | — | $200 | | June 2025 | 2,129 | $10.82 | — | $200 | - The company's ability to repurchase stock is subject to restrictions under its credit facilities and senior note indentures, which are based on formulas including consolidated net income and leverage tests[264] Other Information During the fiscal quarter ended June 30, 2025, no director or officer of the company adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the second quarter of 2025[266] Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including certifications by the principal executive and financial officers and the Interactive Data File (iXBRL) - The exhibits include CEO and CFO certifications pursuant to the Sarbanes-Oxley Act and the company's financial statements formatted in iXBRL[269]