Software-Led Commerce And Payments Shift Will Support A Stronger Long-Term Outlook

Catalysts

About NCR Voyix

NCR Voyix provides software led commerce, payments and services solutions for retailers and restaurants globally.

What are the underlying business or industry changes driving this perspective?

• The shift to a software led model, with hardware outsourced to Ennoconn through the ODM arrangement, is set to lower capital intensity and concentrate resources on higher margin software and services. This can support margins and earnings over time.
• The Voyix Commerce platform, built on cloud based microservices and open APIs and already supporting approximately $1.4 trillion of transaction volume, positions the company to benefit as retailers and restaurants modernize store technology. This can support software ARR and total recurring revenue.
• Deep domain expertise in retail and restaurants, more than 50 proprietary applications and an edge native engine that is hardware agnostic create a broad, integrated offering. This can increase win rates with large enterprises like Chipotle and HEB, supporting revenue durability and visibility.
• Integrated payments capabilities, including Voyix Connect and entry into commercial fuel payments with partners like Corpay and WEX, give NCR Voyix exposure to roughly $1.3 trillion to $1.4 trillion of U.S. payment volume. This can expand addressable revenue and support recurring transaction based earnings.
• Embedded AI in development, deployment and support, together with cloud native microservices across both retail and restaurant platforms, can shorten implementation cycles and lower support costs. This may contribute to operating efficiency, adjusted EBITDA margin and free cash flow.

Assumptions

How have these above catalysts been quantified?

• This narrative explores a more optimistic perspective on NCR Voyix compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming NCR Voyix's revenue will decrease by 9.2% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 1.6% today to 0.6% in 3 years time.
• The bullish analysts expect earnings to reach $11.9 million (and earnings per share of $0.07) by about August 2029, down from $42.0 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $4.9 million.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 238.0x on those 2029 earnings, up from 28.3x today. This future PE is greater than the current PE for the US Software industry at 29.9x.
• The bullish analysts expect the number of shares outstanding to decline by 0.31% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.32%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The company is in the middle of a complex transition to an outsourced hardware model with Ennoconn, and management has already acknowledged prior technology challenges and revised timing. Any further execution issues or customer disruption during the planned 90 day facility switch could weigh on hardware related revenue and offset the benefit of lower capital intensity in earnings and free cash flow.
• A meaningful portion of revenue still comes from hardware and onetime software and services, and the latest quarter showed a 3% revenue decline driven by weaker hardware and onetime activity. If the mix shift toward higher margin recurring software and payments slows or customers defer platform migrations, overall revenue and segment EBITDA margins could remain under pressure longer than bullish expectations assume.
• The company is introducing price escalators and moving some contracts to transaction volume based pricing after a history of inconsistent escalator use and billing. If large enterprise customers push back on higher pricing or seek competing offers, that could limit the uplift from renewals and weigh on revenue growth and earnings from software and payments.
• The growth story in unified commerce and payments rests on capturing a share of an estimated US$1.3t to US$1.4t of U.S. payment volume across fuel and retail, but this requires displacing entrenched processors and intermediaries. If adoption of Voyix Connect and new fuel payment offerings is slower than hoped, transaction based revenue and margin expansion tied to payments could fall short.
• Management is investing heavily in modernizing legacy applications into cloud based microservices and edge native architecture, with accelerated product investments and capital expenditures of about US$160m in 2025. If the expected ramp of new platform customers and migrations into 2026 does not materialize, the company could face a mismatch between elevated spend and revenue, which would pressure net margins and free cash flow.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for NCR Voyix is $15.0, which represents up to two standard deviations above the consensus price target of $12.12. This valuation is based on what can be assumed as the expectations of NCR Voyix's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $15.0, and the most bearish reporting a price target of just $9.75.
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2029, revenues will be $2.0 billion, earnings will come to $11.9 million, and it would be trading on a PE ratio of 238.0x, assuming you use a discount rate of 11.3%.
• Given the current share price of $8.64, the analyst price target of $15.0 is 42.4% higher. Despite analysts expecting the underlying business to decline, they seem to believe it's more valuable than what the market thinks.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.