NCR Voyix Corporation (VYX) Q1 2026 Earnings Report, Transcript and Summary

Thank you for standing by. My name is Kathleen, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Quarter 2026 NCR Voyix Corporation Earnings Conference Call. [Operator Instructions] And now I would like to turn the call over to Sarah Jane Schneider, the Vice President of Investor Relations. Please go ahead.

Good morning, and thank you for joining our first quarter 2026 earnings conference call. This morning, we issued our earnings release reporting financials for the quarter ended March 31, 2026. A copy of the earnings release that we will reference during this call is available on the Investor Relations section of our website, which can be found at www.ncrvoyix.com and has been filed with the SEC. With me on the call today are Jim Kelly, our Chief Executive Officer; Nick East, our Chief Product Officer; Darren Wilson, President, Retail and Payments; Benny Tadele, President, Restaurants; and Brian Webb-Walsh, our Chief Financial Officer. This call is being recorded, and the webcast is available 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, 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 our other reports filed with the SEC. 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. In addition, we will be discussing or providing certain non-GAAP financial measures today, which we believe will provide additional clarity regarding our ongoing performance. 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 morning and our supplemental materials available on the Investor Relations section of our website. With that, I would now like to turn the call over to Jim. Jim?

Good morning, and thank you for joining the call, where we will provide updates on our first quarter performance and our strategic priorities. Both total revenue and software and services revenue were essentially flat, while adjusted EBITDA increased 5%, driven by early sales momentum from the Voyix Commerce Platform applications, coupled with the ongoing cost actions implemented in 2025. Reflective of the growing demand for our Voyix Commerce Platform solutions, this year, we have conducted nearly 200 product demonstrations for new and existing retail and restaurant customers, including at NRF and other industry trade shows across key markets, including the U.K., Australia, Japan and Argentina. We have also upgraded our customer experience center in Atlanta to showcase our latest innovations, enabling both existing customers and prospects to experience their benefits across key verticals, including grocery, convenience and fuel, restaurants, department store and specialty retail and supply chain. These demonstrations will soon be available virtually via our website. As I mentioned in my concluding remarks on our earnings call in February, we would begin sharing additional financial insights pertaining to the company's Voyix Commerce Platform application sales initiated in early 2025 and including Q1 2026. While these new software sales represent less than 5% of our roughly 400 enterprise customers globally, we are seeing initial momentum across the U.S. and Europe as those were the first 2 regions where the new software applications were made available. Since its launch, the company has signed 21 new platform contracts through Q1 2026 with a remaining contract value for those customers of approximately $293 million, 13% of which relates to new customers. We are very encouraged by this early success, coupled with the ongoing engagement across our broader installed base and prospective customers. Turning to our ODM. We implemented our agreement at the end of the first quarter and as of April 1, now recognize only net commission revenue on hardware. Founded in 1885 as a hardware manufacturer, we had already outsourced all manufacturing, assembly and logistics by 2022 while continuing to carry inventory on our balance sheet. The Ennoconn transition completed at the end of March after more than a year of preparation, represented the final step in our evolution of coming a software and services-led business supported by payments and hardware sales. Finally, this March, we announced the sale of our Japan-based banking technology business for $32 million in sale proceeds. This business is now reflected in discontinued operations with the transaction expected to be completed by year-end. Inclusive of this divestiture, we generated nearly $2.5 billion in net proceeds since the spin-off of our ATM business. This includes the divestitures of our 4 noncore businesses between 2023 and 2026 and the anticipated working capital benefit from the ODM agreement. These sale proceeds enabled us to return capital to shareholders through common and preferred share repurchases, while also supporting debt reduction and targeted investments in our products and infrastructure. By year-end, we expect to have returned approximately 10% of the proceeds to shareholders post-spin. Building on our momentum, we continue strong customer validation of our Voyix Commerce Platform across both retail and restaurants with growing adoption of our integrated software payments and services offering. These wins reinforce our ability to convert innovation into durable multiyear growth. Darren and Benny will provide additional detail on this momentum in their remarks. And with that, I will turn the call over to Nick.

Thanks, Jim. I'd like to begin by discussing the opportunities AI is creating for our business. On prior calls, we have discussed how we are using AI to accelerate the modernization of our global library of 40,000 unique retail and restaurant features into cloud-native applications on the Voyix Commerce Platform. Our ability to apply AI to migrate customers from legacy environments to an agile foundation for ongoing innovation is now translating into tangible commercial results. Recent customer wins, along with growth in remaining contract value for our VCP applications reinforce strong long-term customer confidence in our solutions. We have also been embedding intelligence directly into the workflows our customers depend on, such as with Picklist Assist, our self-checkout solution, which uses camera vision to identify items, reduce shrink and accelerate checkout. Picklist Assist is now live in nearly 60,000 lanes across the globe with consumer engagement and customer feedback exceeding our expectations. In 2 weeks, we'll be at the National Restaurant Association Show in Chicago, showcasing Aloha Next alongside a comprehensive portfolio of restaurant applications embedded within the VCP. For example, we will leverage computer vision and agentic restaurant operations to help restaurants increase sales and reduce waste, and we will demonstrate menu pricing informed by competitive intelligence and real-time analytics powered by generative AI. Both of these solutions deliver actionable insights directly into restaurant workflows and day-to-day decision-making. Given the heightened focus on AI and its impact on technology valuations, I want to articulate 4 core attributes of our platform offering that we believe underpin the durability of our model before turning the call over to Darren. First, our software revenue model is fundamentally tied to customers' physical sites, devices, transaction volumes and API usage. These are real-world operational drivers of value that are not being compressed by Agentic AI. Second, NCR Voyix software operates at the center of a highly regulated environment with significant compliance requirements, including fiscal and tax, PCI, fuel and weight and measure certifications. Our customers depend on us to maintain compliance as requirements evolve and to deliver a clear technology path forward without disrupting their daily operations. This regulatory complexity reinforces the critical role we play in their businesses. As we continue to go to market with our VCP applications, we will attach payments as a core component of our end-to-end offering. Over time, this will enable us to both scale our payments business and further entrench our solutions within our customers' regulatory and operational workflows. Third is the network effect created by third-party integrations into the Voyix Commerce platform, connecting our platform into customers' enterprise solutions such as supply chain, loyalty, ordering and accounting systems. Today, the VCP has more than 300 third-party integrations that power the daily operations of thousands of customers. As we continue to expand and open our APIs, agentic systems can more seamlessly integrate with the VCP, further increasing its value to customers and partners alike. And finally, data. As more transactions flow in from multiple channels and as more lanes, devices and third-party systems connect to the platform, its value compounds driving better performance, deeper insights and improved outcomes across our customer base. As an example, last month, for one customer alone, our platform processed around 115 million transactions and the related data of more than 900 million items sold. As we move through the balance of the year, we are focused on building on our momentum, deepening customer engagement, scaling adoption of our embedded VCP applications and converting our innovation road map into sustainable growth and long-term value creation. With that, I will turn the call over to Darren.

Thanks, Nick. Beginning with payments, our strategy is showing strong momentum. We're successfully updating our contracts for Voyix Connect, our proprietary gateway to be tied to transaction volume with revenue building as we scale this initiative. Turning to retail. In the first quarter, our retail business signed nearly 70 new customers, primarily mid-market. Our platform and payment sites increased 6% and 13%, respectively. Total recurring revenue increased 5%, with recurring software revenue increasing 8%. Market adoption of our enhanced platform offering continues to gain momentum as reflected in strong customer engagement across the sales cycle from initial demo through store rollout. Year-to-date, our product teams have delivered more than 130 demos to new and existing retail customers worldwide. These engagements showcase our end-to-end portfolio as customers continue to shift away from individual products and towards integrated solutions spanning software, payments and support services. We remain focused on the efficient deployment of our platform solutions to meet the needs of our enterprise customers. We recently completed our most significant deployment of Picklist Assist for a large enterprise retailer in the U.S. across more than 35,000 self-checkout lanes. For point-of-sale and self-checkout, we continue to advance deployments through a phased approach from lab testing to initial store launches and broad site deployment. Deployment velocity has already increased for 2 large grocers in the U.S. and Europe, and we look forward to continuing this momentum with additional customer rollouts. As announced in March, we signed a 5-year agreement with Pilot, North America's largest travel center operator. Under the expanded partnership, Pilot will deploy Voyix POS to CFR together with additional related platform capabilities. The microservices-based architecture of the Voyix Commerce Platform will enable seamless delivery across pilot locations and support the activation of new capabilities such as payments, further advancing Pilot's guest-centered strategy. We also signed a new platform contract with Stater Brothers as announced earlier this week, a regional grocer with nearly 170 stores across Southern California and existing NCR Voyix customer. Stater Brothers has chosen to adopt Voyix POS in an effort to support continued innovation for their business. With this win, we now have 22 signed contracts for our embedded VCP applications. Finally, turning to services. This quarter, we continued to expand our services relationship with enterprise customers across the globe. Beginning in the U.S., we signed a new 3-year agreement with a large discount retailer to support their phase remodeling plan, which includes hardware installation and remote support. In Europe, we expanded our long-standing relationship with Lidl, a large German-based grocery chain to both continue to provide installation services in Spain and now support their store openings in France. in Argentina, we secured a new service agreement with Carrefour, the largest retailer in the market to provide help desk and hardware maintenance support. Finally, in Japan, we secured a multiyear contract with a leading department store and a new NCR Voyix customer to provide hardware installation services across their store footprint. With that, I turn the call over to Benny.

Thanks, Darren. In the first quarter, our restaurant business signed 100 new customers. Platform and payment sites increased 9% and 1%, respectively. For enterprise and mid-market, recurring revenue increased 6% as recurring services revenue increased 13% and recurring software revenue was flat. Offsetting the performance of our mid-market and enterprise businesses was the continued softness in SMB. We expect this trend to begin to moderate with the launch of Aloha Next for SMB, our restaurant-in-a-box solution later this year. In 2026, we have continued to execute contract renewals across our enterprise customer base, including with Shipley Do-Nuts, California Pizza Kitchen and Pei Wei, reinforcing the durability of our relationships. While these customers have renewed with our existing Aloha point-of-sale technology, they have expressed strong enthusiasm for Aloha Next with very positive feedback on its ability to maintain their same capabilities and interface. As such, these renewal agreements include plans for the customers to begin engaging with Aloha Next in lab environments over the coming months positioning them for implementation as it becomes broadly available. Additionally, we are continuing to expand our enterprise restaurant business internationally. As I discussed on our third quarter call in November, we signed a multiyear agreement with Marco's Pizza, one of the fastest-growing pizza chains in the United States to support its global expansion efforts. Following an initial rollout in Mexico, we have continued to win additional international Marco's Pizza locations, most recently signing their business in the Bahamas. Turning to our mid-market business. Our ability to equip operators with enterprise-grade capabilities, including software, payments and services continue to differentiate NCR Voyix. As a partner that helps emerging brand scale, we believe our position will be further strengthened by the launch of Aloha Next. For example, this quarter, we executed an agreement with Gyro Hut, a Mediterranean fast casual brand with locations in Texas to provide point-of-sale and add-on capabilities such as kitchen display systems, inventory management and multiunit reporting and data. Wins like Gyro Hut are central to our expanding mid-market strategy. By partnering early in a brand's growth curve, we can grow alongside them. The momentum behind Aloha Next continues to build, and we currently have several enterprise RFPs in flight with it as a core component of our bid. We're very encouraged by the response of the nearly 60 demos and early labs we have conducted this year. Customer feedback has been very positive, particularly around our market-leading modern architecture, which brings faster deployment speed, ease of management and a reduced total cost of ownership. I attended the Restaurant Leadership Conference at the end of April and met with both current customers and prospects, all of whom echoed the same sentiment. They're energized by the innovations they are seeing, including our AI-powered features that make intelligence the new standard. With that, I will turn the call over to Brian. Brian?

Thank you, Benny, and good morning. Our results for the quarter were in line with our expectations and demonstrate the progress we have made to streamline our organization, including the recent sale of our Japan banking business, which is now reflected in discontinued operations. For the quarter, total revenue decreased 1% to $606 million. Both recurring software and recurring services revenue increased 4%, while nonrecurring hardware and installation services revenue declined. Platform sites increased 7% to 83,000 and payment sites increased 3% to 8,500. Going forward, we'll be highlighting recurring revenue rather than ARR. However, we will still continue to report ARR in our metrics file. Adjusted EBITDA increased 5% to $78 million as margin expanded 80 basis points to 12.9%, driven by cost actions. Non-GAAP EPS increased 25% to $0.10 per share due to a lower-than-expected tax rate this quarter. However, we still anticipate our tax rate for the year will be approximately 21%. GAAP EPS was a loss of $0.04 per share in the quarter, driven by costs incurred due to the hardware ODM implementation. As Jim mentioned, we ended the first quarter with 21 customer contracts for our embedded VCP software applications, generally structured as 5-year subscription agreements at market terms. These contracts represented $293 million of remaining deal value, up 75% year-over-year and 15% sequentially. Turning to our Retail segment results. Total revenue increased 2% to $427 million and recurring revenue increased 5% to $279 million, primarily driven by the increase in our VCP application sales and payments pricing initiatives implemented in the second half of 2025. Retail adjusted EBITDA increased 20% to $78 million as margin increased 280 basis points year-over-year to 18.3%, driven by software and payments revenue growth, coupled with our cost initiatives. Turning to restaurants. Total segment revenue of $179 million declined 6%, which reflects lower hardware sales, onetime services and declines in our SMB business. Restaurants recurring revenue increased 1%, driven by growth from our mid-market and enterprise business. Restaurant adjusted EBITDA decreased 8% to $54 million and margin decreased due to lower revenue. Lastly, corporate expenses increased $4 million to $54 million, driven by our exit of the TSAs. Adjusted free cash flow before restructuring was $71 million versus use of cash in the prior year. This year benefited from favorable changes in working capital, cash inflows related to the implementation of the ODM agreement and a delayed tax refund received in the first quarter. Cash flows related to the ODM are recognized under GAAP as cash from investing activities and included in our definition of adjusted free cash flow. Restructuring was $41 million in the quarter as previously discussed. We invested $36 million in capital expenditures during the quarter, a decrease of $3 million versus the prior year. We continue to expect our CapEx for the year to be similar to 2025. Following the incremental repurchase authorization we secured at the end of February, we repurchased approximately 9 million of common shares in the first quarter. We ended the quarter with a net leverage position of 2.1x based on our net debt as of March 31 and the last 12 months of adjusted EBITDA. Turning to our 2026 outlook. We're updating our full year guidance originally provided in February to reflect the divestiture of the Japan banking business as detailed in today's outlook table. Importantly, after normalizing both 2025 actual results and our initial 2026 guidance, to exclude the Japan Banking business, we now expect full year 2026 revenue of $2.188 billion to $2.303 billion and adjusted EBITDA of $432 million to $447 million, representing pro forma revenue change of approximately a decline of 2% to 3% growth and adjusted EBITDA growth of approximately 3% to 7% year-over-year. We have also included a schedule in our metrics file that adjusts historical 2025 results for the impacts of Japan and hardware, providing a clearer view of the pro forma business. Based on this updated profile, we expect 2026 seasonality for revenue to be broadly consistent with 2025. For adjusted EBITDA, we anticipate year-over-year growth to be more weighted towards the fourth quarter relative to the second and third quarters as our sales momentum builds and cost initiatives take hold. I will now turn the call over to the operator for Q&A.

[Operator Instructions] And your first question comes from the line of Will Nance of Goldman Sachs.

If I could just maybe pick up where you left off there on the shape of the year. I was wondering if you could provide a little bit more color on just how you're thinking about the cadence of margins across the 2 segments as we progress through the year.

Thanks, Will. What I would say about the segments and the rest of the year, we expect continued good performance in retail, driven by the software and payments initiatives. And we expect EBITDA to be strong as well like we saw in Q1. And then on restaurants, we expect the revenue and EBITDA declines to moderate as we go through the year. And if I think about margin, we'd expect after we normalize for that hardware, the retail margins would improve year-over-year and the restaurant margins for the full year would be pretty stable year-over-year.

Okay. That's great. That's very helpful. And then I appreciate all the details on Ennoconn and the pro forma in the prior year. We'll take a look at that. If I could just ask a question on some of the disclosures around remaining contract value from the new platform. I was wondering if you could just talk about time lines around how this will translate to revenue over time and when we could start to see some of this coming through the P&L.

Yes. I would just say that if you look at the remaining deal value, our contract value, typically, those are 5-year agreements, and they would ramp as the deployments ramp. So just keep that in mind as you're modeling it. But obviously, the strong growth year-over-year would indicate that it's contributing to the P&L.

Will, and while those -- while we showed the aggregate balance that's currently under contract, some of that is in the P&L this year, and it will continue to grow over time. So what we're showing is we're having very strong momentum. We didn't disclose the numbers last year. We're waiting for annualizing of the contracts, but they continue to ramp. The reaction from the marketplace continues to be very strong. We had 6 customers here last week seeing demos. So we are very optimistic. That's why we talked about it at the end of last quarter or at the year-end last month in February, excuse me, and then we'll start sharing more as the time moves on.

Great. Well, congrats on the milestone there.

And your next question comes from the line of Dan Perlin.

I wanted to just follow back up on the VCP platform disclosures as well. Jim, is there just any context you can give us kind of as we think about what it previously looked like? I mean, obviously, 21 new contracts is fantastic and then the $293 million kind of rolling through. I'm just trying to think about how that obviously, it's up a lot, but like how that ramped? It feels like it ramped pretty quickly in the past, I guess, maybe a quarter or 2.

Well, I would -- as we've described, so last -- if we started -- when I started last year, we really had one customer of size that had a few stores in. Today, they're well over 10 stores. I think in the aggregate, we have 100 with 500 lanes that are operating today. So it's no longer the idea. It's actually in production in the stores as I just described. I think in terms of the ramp, a lot of it, and Darren can speak to it, a lot of it came during the fourth quarter -- third and fourth quarter of last year. And then it's obviously rolled into this year as well. We just announced Stater Brothers this week. We also had Pilot, which was announced right after our February call. Prior to NRF, this was kind of presales type of engagements with customers, showing them labs -- demos and labs. But after NRF, which I think you were there, too, we shared with our investor base or the people that wanted to see it in person, it has definitely picked up. And as I just mentioned, we're seeing customers come in here at a rate that I've not seen in the last 2 years I've been involved in with NCR. And what really is compelling is that we have 400 very large customers spanning the globe in retail restaurants in all the verticals that we highlighted in the comments, we're able to give them exactly what they have, but in an architecture, which is not something there -- that they currently have, but it's definitely something they aspire to because of the speed at which they can then innovate going forward, and in particular, with AI becoming more prevalent in product. You put those 2 things together, they want a modern architecture now so that they can be -- continue to be relevant in the market. I think Nick wants to add some thoughts.

Yes. And if you kind of think about what happened in the past, this is a fairly typical move from a license and then maintenance revenue line to a subscription revenue line. And if you think of some of the customers who are now moving on to the VCP, they would have bought licenses some time ago, and that would have been a lump of revenue when the license was contracted. Now we're moving from a sort of ongoing software maintenance annuity to a subscription annuity. So you'd expect, particularly with large customers who want to go on a 5-year agreement because it's a major program, then you would see those larger subscription contracts. And in the past, we would have seen a software maintenance line rather than a full subscription line. So I think if you compare the contract value -- contract value now to what we have had in the past, that's one of the major shifts.

Yes. One other piece that I think Brian mentioned during his comments, Dan, is that in our revenue and earnings this year are some of the contracts that were signed last year. So they're starting to show up in the earnings, and they're going to continue to escalate. If you think of a funnel, what's going in is that 5-year contract, as Nick just said, what's coming out is a piece of that each year. We've moved away from what used to be here called PayGo, pay-as-you-go, where you get paid either through a license or you get paid when you open up a store when the store goes live. So it's more of a traditional SaaS structure going forward, recognizing there is a ramp in period. These customers, they take anywhere from 9 to 18 months to 2 years to ready themselves to do an upgrade. But the upgrade of this system is really on us, and it's very quick to implement. It's much different than what they've experienced in the past.

And your next question comes from the line of Parker Lane of Stifel.

In the prepared remarks, you highlighted the data advantage of VCP as a real differentiator. And obviously, you sit on a wealth of transaction history and data there. Can you just talk about how that data advantage is widening with VCP versus your historical platform and applications?

Yes. Thanks for the question, Parker. So yes, if you think about the previous platform, much of that work was done on-premise, the software resided on-premise and then went either into a customer's data center for the transaction volume or into a single-tenant hosted cloud environment. With our VCP, we have this cloud-native multi-tenant environment where all transactions flow for all of our customers. So we have visibility. The customer gets the benefit because they get real-time insights from the data directly as the transactions flow from all of their stores or restaurants. And obviously, all of that data flows through our platform, which gives us the ability also to provide customers with additional insight and also to learn more. And as you rightly point out, we have essentially an enormous distributed data set from every single point-of-sale, self-checkout, kiosk, restaurant system in 35 countries. So the more of our customers that migrate onto that platform, the more of the data flows into the platform, the more insights we can provide and the more integration benefit we can give to customers. Obviously, that also means we can benefit ourselves from providing insights and leveraging that data for our customers' behalf.

I just want to add, it's not specific to your question, but just as a point of clarification because years ago, when the company stood up the platform, so the platform is GCP. When they stood up the platform, they took legacy or we took legacy applications and engineered a way for the customers, our customers to be able to extract some level of data by what we refer to as attached to the platform. So sending transactions up to effectively aggregate amongst locations and then collate and have a report and insights. Today, what we've talked about, the $300 million that is referenced in the speech, the entire system, the application are sitting in the cloud at that point. So it's a completely different architecture from beyond the fact that it's in a microservices structure, we're no longer selling applications that are monolithic sitting on a point of sale in a restaurant or retail. And I think that's an important distinction because we talk to attach to the cloud, that is a different structure today where the applications are actually physically there. Go ahead.

Yes. And just maybe to draw out some of the benefits as well. So you mentioned that we mentioned in the prepared remarks, I think the example I gave was for one particular customer who in the month of April, we processed 150 million of their transactions, and that represented about 900 million items sold. So all of that data associated with what was sold flows through the platform, yes, the average basket size, the SKU count, the pricing, the promotions and so on, that all flows through the platform. And then if you think of the opportunity we have with AI on top of that data, which is what we'll be showing NRA in about 10 days' time, is you can then use both Agentic AI and generative AI to provide insights into the data. So it's not just the fact that we have the data flowing through the platform, which gives real-time value, it's what we can leverage with AI on top of that to be able to bring additional value to the customers.

And the case study I gave in the prepared remarks is the Picklist Assist, we've rolled out across 35,000 lanes. So the more we roll that out, which is essentially product recognition and self-checkout, the AI tools in terms of product recognition and return on investment across multiple retailers and in terms of the consistent product types really starts to accelerate the customer benefits.

Appreciate that feedback. And just looking back at this remaining contract value, obviously, really nice growth there in VCP to start. When you look at the customers that have taken a look at the demos or converted into a deal, are you finding that those are folks that would have otherwise been looking at an upgrade or renewal in the near term, and this is just a natural transition? Or are you also finding folks that maybe signed a contract in the last 2 or 3 years that just see a real opportunity to advance their operations on this platform, and they're going to go forward regardless of when they would have done an upgrade or renewal?

I think it's more of the former. I think they see the benefit of it. And one of the challenges our customers have is they're running on 20- and 30-year-old applications. And their customers, their end customers at a grocery store or a restaurant have different expectations of what will be available for them in terms of data or being able to run promotions, all the stuff that we take advantage of in our personal lives, it's not always as resident in some of the markets that we support. So my sense is that the market is very efficient. We've done some press releases. So that gets people's attention. NRF, I think, was a very good opportunity for us to showcase what the company has been working on for years, but we've also had a show in Europe. I was at one in Tokyo early in this year. There's another one coming in Singapore. So I think some of it is we're doing what we can without spending a massive amount in marketing to get the word out on the benefits of this product. And we've talked about it as a company for a number of years. It's what we have described the benefit of AI for us to be able to give to our customers exactly what they have. So you're not changing the way the store runs. You don't have to retrain your staff and your staff could be tens of thousands or 50,000 people to run these grocery stores or restaurants. That is -- that's an important selling feature, being able to put the customer back to where they are today, but in an architecture or a structure that enables them to move faster. It's one of the key features of the selling.

But it is with 130 demos and 22 customers signed as per my remarks, it's kind of all the above that you said. It's from new logos to existing customers accelerating the deployments quicker than they ordinarily would because the benefit of the tool is they can keep their existing hardware in store and essentially upgrade their infrastructure from a monolithic to a microservice application. So that's an enormous benefit for them in terms of accelerating the deployment schedule. And then we've got the standard kind of end of contract or annualizing of the contract process in terms of the renewals. So it's a combination of all the above. What I'm really pleased with is the sales cadence of all the sales teams across retail and restaurant in terms of proactive nature of sharing the message and the fundamentally different model now that we're deploying across the organization.

I guess the last is relative to one of your comment was we don't need to wait to a customers' existing contract comes to end. We're happy to step out of that contract into a new one. And I would say probably for most, if not all, the ones other than the new ones, they probably were already in the contract. And I think again, Benny's case on the restaurant side, where we're still earlier that sort of behind the retail side. To the extent somebody is renewing, they're renewing with the expectation they're going to see the new product in the lab sometime this year.

[Operator Instructions] And your next question comes from the line of Dillon Bandi of Northcoast Research.

Looking at chip and hardware costs have been kind of elevated. Have you guys seen any margin impact from that? And if you are seeing that, have you been able to pass those costs on to your customers?

So we are seeing higher chip costs and we are including that in our price to the customer. So it doesn't impact us. And we have seen relatively healthy volume levels for hardware.

No, go ahead, sorry. I was going to say as everybody is aware, we're also shifting out of the direct hardware business as of April 1. So we are still selling. And the nice thing is the software that we're selling that we've just talked about the new applications, we've been able to squeeze it into older hardware, as Darren was mentioning, so not to force customers. There's not a requirement to buy new hardware to be able to run the new software. depending on how old it is, that's not a requirement. We're trying to make it as easy as possible to transition to the new architecture.

Including hardware, that's not our own.

Yes. Yes. We're not -- I wouldn't say we're entirely hardware agnostic, but if somebody wants to use somebody else's hardware, we're not standing in the way of that.

But we're certainly seeing a change in customer behavior because chip and hardware costs across every channel is obviously increasing. So the buying pattern and trying to seek earlier delivery and certainty of delivery is kind of changing our dialogue with customers. So it is actually enhancing our process in terms of getting more confirmed quicker orders because they're wanting to beat the price hike. But as Brian said, we are firmly passing through any increased hardware chip or supply chain associated costs.

Great. That's really helpful. And then just kind of another line of thought here. Looking at your guys' recent wins, are you seeing greater traction in the retail or restaurants business? And then kind of how is the demand environment been different between those 2 verticals?

You want to start, Ben?

Yes. I'll start off by saying from what you said in my prepared remarks, we're very encouraged with the growth we're seeing actually before I even talk about the demand in the enterprise and mid-market segments. That is very consistent to the conversations we've been having over the past few quarters. And on top of that, as I said in my remarks, the demos that we've conducted about 60 demos, a number of actually labs that we have in enterprise space. And then on top of that, the number of RFPs that we have, significant growth than what we've seen in the past couple of years. So that gives me a lot of confidence that the demand is not just stable, but growing. And the feedback we've been getting is very positive on Aloha Next. As Jim just mentioned, we are a little bit earlier in the product rollout cadence compared to retail. But already the positive remarks that we're getting is not just the positivity, but also the quality of the feedback has been around resiliency and speed. And when I think about speed, it's not just speed of deployment, but it's also the speed at which the restaurants can keep up with their configuration, management, pushing down promotions, managing their menu. And then the overall cost structure of their technology management, right, really reduced. So all of this is driving a lot of speed. And Darren talked about the cadence of deployment that how the retailers are pushing faster migration because they want to recognize this value. We're seeing the same thing. So demand remains very high. In mid-market, we announced one of the wins today. And again, there, a very similar theme to the data question that you heard. We are talking to a lot of customers that in today's environment with the new entrants that they've been using in their space as they try to grow, they're actually faced with challenge to access data. And in this current environment where they're trying to manage their cost structure, analytics, multiunit management, all of these remain very fast. So we're seeing healthy demand, very encouraged to what we're seeing in the second half as we prepare to launch Aloha Next.

Yes. Similar story to Benny. On the retail side, obviously, the sales cycles are very long in enterprise, but they're shortening dramatically as the message around the demos about the core solution and the adjacencies in terms of speed, loyalty, data, insights, micro services, flexibility, leveraging existing hardware or third party, those hooks and levers are truly landing in terms of speeding up the more greater efficiency, lowering the friction with our retailers. So we're seeing very strong demand across all markets, all territories. across the retail business. So we're very pleased with the demand and the sales approach of the team.

Yes. Maybe to add on, I think in that question, there's also this theme hidden that is how is the market at least in restaurants, we're seeing, yes, food costs stabilizing as you've seen, consumer probably demand returning, people are visiting restaurants more and more, but what they're not doing is that discretionary spend hasn't returned yet. People are not buying that extra drink or ordering dessert and so on. So what restaurants are faced with is how do I manage my cost structure. Labor costs still remain high. So anything that drives efficiency, anything that allows them to improve their margin. The data and AI remains very important, I think, not necessarily just to augment employees, but also to really optimize the cost structure is really important. So I'm excited again to what we're going to showcase that NRA that Nick talked about that really starts to address this, and this is driving a lot of the demand that we see.

And your next question comes from the line of Matt Summerville of D.A. Davidson.

A couple of questions. Just getting back to the remaining contract value, given that that's sort of a new statistic, where would you like to see that number kind of exiting 2026 and building into '27? Is there any way to help us dimensionalize that? And then underpinning that, is there a way that you can quantify the magnitude of funnel that supports that go-forward view on the RCV? And then I have a follow-up.

So I guess to answer your first question. [indiscernible] I expect it to be bigger. Look, it's early stages. We didn't do this last year for just that reason because we didn't really have compares. Now the compare also is against the first quarter of last year. And so it's still very early last year in the sales cycle. I see it accelerating. It is really all we're doing right now. The GC is sitting in the room, and she's constantly complaining about all the RFPs and stuff that we're working on. I have customers coming in that, I would say, last year had a completely different view on NCR. And for me, it's nice to feel. It's a completely different conversation than what I experienced last year. And the mindset for our customers has shifted because in the past, it was, well, I have this 20- and 30-year-old application. As I said to them, how many people have a 20- or 30-year-old car they're trying to keep running and running and running. And I think our customers have been successful in as we in keeping this going for a very long period of time. But they would like to see something new. And NCR, while it acquired a lot of things over the years, this is the first time we're really bringing something of scale to the market that we built ourselves in-house with an amazing engineering team. So yes, I think it's going to continue to grow. I guess if we took the uplift that Nick was talking about, as we say market terms, it's what's the new price off of what we historically charge for software maintenance. We feel that, that market, I think we've done well in terms of the investment in this product is pretty significant over the years. But I think it's still early for us to kind of give a long-range view on it. But I think the trend -- I mean I don't know that it's going to grow at 70% quarter after quarter. And I don't think that's a failure if it doesn't because these are our existing and new customers. They go through -- most of them are RFP cycles because they're enterprise. So there could be some ups and downs to it. But yes, I expect that number to only get bigger and bigger and bigger over time. The cadence, I think this will be a good year. That's why we went ahead and put the numbers out there that we're off to a good start, and I expect that to continue.

And I think you said about the quality of quantifying the funnel. All I can say is the discipline of driving a proper sales management funnel. Our sales support team has been very busy in building those processes to ensure there is ruthless discipline in the customer engagement, both in restaurants and retail across all our existing customers and a discipline in terms of the RFP approach in terms of the new product messaging in terms of core and adjacencies that we're focused on. So those demos and the follow-through and the discipline and the engagement and the touch points and the sales discipline is firmly there. Our entire kind of sales ecosystem is driven around driving up the remaining contract value funnel and pipeline to drive that delivery momentum over the next few years. So there's a lot of dedicated effort on that funnel management.

The other piece is the contracts we have today, on a very limited basis, do we end to service something, mainly a branch of an existing application because we're trying to bring it back to the mothership instead of continuing to support these bespoke solutions. But that is kind of the next horizon for us, which will cause customers to be more interested if they're trying to stay with what they have for one reason or another. At some point, we're going to end to service. We have a lot of resources against keeping these old products running. And it's better for the customer. It's better for us if we come to an end sooner rather than later. But we haven't come out with specifics yet. I think that will be later this year, and I think that will spur some additional growth.

Got it. And then just 2 final ones. Can you remind me what -- how sort of the cost-out cadence looks as you move through the year and ultimately, what the aggregate net cost-out number is? And then just quickly on restaurants, when does the SMB headwind begin to flip to a tailwind for you guys specifically?

So I'll start on the cost side, Matt. So our cost program is about $90 million this year. A lot of those actions are already behind us. They're either taken last year or at the early part of this year. And most of it's around labor. And there are some initiatives in development, product development and services that do continue. And so we'll get a little bit more benefit as we get into Q4, but a lot of it is behind us already in terms of actions taken.

Just to give you an order of magnitude, since the spin, the company has taken out 20% of payroll cost through the end of last year. So it's -- it was kind of a byproduct as I get feedback internally as a $2 billion becoming an $8 billion company, you're going to add a lot of cost, but the opposite also happens. So an $8 billion becoming a $2 billion company. That's one of the reasons that we've gone through the announcements that we have, but you never say it's completely over. But at this stage, that's not a focus of the company. The focus of the company, the divestitures are largely, if not entirely behind us. So the focus is entirely on bringing product to market to new and existing customers.

And then on the SMB, I mean, again, I'll start off by saying very encouraged with the growth that we're seeing on enterprise and mid-market. That will continue. And overall, including for SMB, the inflection point that in restaurants we're seeing is tied to the Aloha Next launch. Specifically for SMB, it is tied to Aloha Next for SMB, which is restaurant in a box. Again, we're not seeing a demand challenge. We actually see really good signals as we prepare for that launch. As I have said, we have been talking to both our direct SMB customers as well as in the dealer channel, which remains a very interesting channel for us. We've shown to some of our dealer channel, the larger ones as well as customers in that segment, very positive feedback. The internal mechanics that Darren talked about the sales operation, not just for enterprise, but also on the SMB side, there's a lot of work being done to prepare for that. So to your question of when does that inflection happen, it's really in that second half as we launch Aloha Next going into next year, we'll start to see that because it's going to be all about ease of deployment, ease of management of the solution as well as the overall economics, the package economics with embedded payments, the early signal tells us that, that will be the inflection point.

I want to add to that, Matt. So in the enterprise space, very hard to switch out. A much different competitor profile in enterprise or even mid-market than in the SME space. Coming from payments, as you know, I did, lots of [indiscernible], software companies running around the SME space, lots of small merchants that turnover quite high as it is and restaurants in particular, was fairly high. So having an application, which we do, even Aloha Cloud, which I think is fit for some segments, but not all of the SME space. Part of our challenge is just the product, having a competitive product in the marketplace. It's not a performance. It's not the sales force. It's -- Aloha Cloud didn't meet the needs of the market. We had this massive investment in this platform that we've been talking about. We weren't taking advantage of it. on the restaurant side. During last year, Nick, Benny, myself finally came to a conclusion that we needed to pivot. And it's one of the reasons that SME is a little bit behind, but I have confidence that Benny, Miguel, the rest of the team are going to catch up really quickly. And engineering is laser-focused on getting a product for the market by the second -- early second half of next year. My year is confused.

Okay. There are no further questions at this time. I will now turn the conference back over to Jim Kelly, the CEO, for the closing remarks.

Thank you, operator, and thank you all for your continued interest in NCR Voyix.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.