VYX Q1 2025: Software Attach Rates Surge, Restructure Cost at $65M
- Strong Demand for Self‑Checkout and Platform Integration: Management highlighted that continued interest in self‑checkout systems is driving high software attach rates and providing valuable data for personalized pricing and loyalty solutions, indicating a foundation for recurring revenue growth.
- Effective Cost Management and Restructuring: Executives emphasized that their cost programs, including a restructuring initiative currently scaled at approximately $65 million, are on track to enhance margins and mitigate external headwinds like tariffs, supporting improved profitability.
- Resilient Global Customer Base and Leadership Transformation: With extremely low revenue attrition at 1% and the addition of key international leadership, the company demonstrated long‑term customer relationships and a robust platform rollout strategy that underpins future growth in both restaurant and retail segments.
- Higher restructuring spend: The Q&A revealed that restructuring expenses increased from an initial estimate of $55 million to about $65 million, potentially pressuring margins and cash flows.
- Uncertain tariff impact: The management acknowledged ongoing tariff challenges with mitigation plans that remain somewhat opaque, leaving open the risk of cost pass-through that could hit earnings.
- Incomplete transformation: Although most cost-cutting efforts are underway, executives admitted that full right-sizing to a stand-alone software business isn’t complete, which may leave enduring inefficiencies.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | –28% (from $862M to $617M) | Total Revenue dropped by 28% YoY as the current period’s lower top‐line figures were driven by significant declines in both Product and Service revenues. The Q1 2024 numbers were bolstered by higher revenue contributions—such as one‐time software license revenue and stronger hardware sales—that were not repeated in Q1 2025. |
Product Revenue | Approximately –31%* (from $232M to $153M) | Product revenue fell sharply due to a marked decline in SCO and POS hardware sales along with a drop in one-time software license revenue recognized previously. The Q1 2024 period benefited from one-off license recognition which inflated revenues relative to Q1 2025. |
Service Revenue | –26% (from $630M to $464M) | Service revenue declined by about 26% YoY as revenue from recurring service components—including professional, implementation, and hardware maintenance services—dropped. While previous periods had mitigating factors (like higher non-recurring and maintenance revenues), Q1 2025 saw reduced contributions even though there was some offset from increased payments processing revenue. |
Income from Operations | Shift from +$4M to –$20M | Income from Operations swung from a modest profit ($4M) to a $20M loss, reflecting deteriorating operating margins driven by the lower product and service revenues. This suggests that the cost structure in Q1 2025 was less able to absorb the revenue contraction that was partly cushioned in the previous period by higher one-time earnings. |
Net Income | Improved from –$41M to –$17M | Despite lower overall revenue, net loss narrowed from $41M to $17M as the company appears to have implemented cost reductions or benefited from better expense management. The improvement indicates that, while top-line pressures persisted compared to Q1 2024, strategic expense adjustments helped mitigate the impact on the bottom line. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue Guidance | FY 2025 | Currency-neutral revenue expected between $2.575B and $2.65B with a 6%–9% decline | No guidance provided | no current guidance |
Core Software and Services Revenue | FY 2025 | Expected to grow in the low single digits | No guidance provided | no current guidance |
ARR and Platform Sites | FY 2025 | Expected to increase in the mid‐ to high single digits | No guidance provided | no current guidance |
Adjusted EBITDA | FY 2025 | Expected between $420M and $445M—with a 21%–28% increase and margins of 16.3%–16.8% | No guidance provided | no current guidance |
Non-GAAP Diluted EPS | FY 2025 | Expected to be between $0.75 and $0.80 | No guidance provided | no current guidance |
Adjusted Free Cash Flow Unrestricted | FY 2025 | Expected between $170M and $190M, excluding certain adjustments | No guidance provided | no current guidance |
Pro Forma Net Leverage Ratio | FY 2025 | Expected to be maintained at or below two turns | No guidance provided | no current guidance |
Q1 2025 Revenue | Q1 2025 | Expected to decline in the mid‐teens | No guidance provided | no current guidance |
Q1 2025 Adjusted EBITDA | Q1 2025 | Expected to show high teens growth versus Q1 2024 reported results | No guidance provided | no current guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Revenue | Q1 2025 | Expected to decline in the mid-teens | 617 million USD, which is a 28% decline from the Q1 2024 revenue of 862 million USD | Missed |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Self-checkout & Platform Integration | Q4 2024: Launched new SCO solutions with global rollout and strong demand. Q3 2024: Emphasized strong demand for SCO systems even amid hardware softness and highlighted its data and software value. Q2 2024: Noted that hardware recovery hadn’t materialized while shifting focus to integration. | Q1 2025: Continued robust interest in self-checkout across markets with increased emphasis on linking SCO to the platform for data collection and enhanced integration; hardware agnostic approach reiterated. | Steady positive trend – Consistent customer demand with increasing focus on integrated data-driven solutions. |
Recurring Revenue & Subscription Shift | Q4 2024: Detailed transition from hardware/onetime licenses to recurring subscription models, targeting 60–75% recurring mix. Q3 2024: Emphasized conversion of legacy customers to a cloud-native, high-margin subscription model. Q2 2024: Outlined shift from hardware to subscription via new models. | Q1 2025: Continued efforts in transitioning to a recurring revenue model with rising recurring revenue percentages and targeted subscriptions; noted growth in platform sites and strategic customer engagement. | Accelerating transition – Deeper commitment to recurring and subscription revenue, with increasing focus on sustainable, high-margin offerings. |
Cost Management & Restructuring | Q4 2024: Reported cost initiatives driving a 25% decrease in corporate expenses and margin expansion of 560bps. Q3 2024: Shared a $105M cost-cutting program with significant expense savings and margin improvements. Q2 2024: Implemented a multiphase cost-alignment program with headcount cuts and non-payroll savings. | Q1 2025: Continued ramping of its cost program now sized at $100M with increased restructuring estimates and strong margin expansion (adjusted EBITDA up by 19%, margin +330bps); also noted ongoing tariff mitigation efforts impacting cost considerations. | Consistently disciplined – Ongoing restructuring and cost control measures are delivering improved margins and operational efficiency. |
ODM Model Transition | Q4 2024: Faced delays due to technology challenges between SAP and Oracle systems; emphasized extensive pilot testing to ensure smooth customer transition. Q3 2024: Positive customer feedback with decoupling of hardware and software decisions noted. Q2 2024: Established an agreement with Ennoconn for ODM-based hardware manufacturing. | Q1 2025: ODM transition is on track for a summer pilot with full operational deployment expected by year-end; focus now on installing a third‑party application for warehouse management indicates progress beyond earlier technical hurdles. | Evolving progress – Initial delays and technical challenges are being addressed; sentiment is shifting toward cautious optimism as implementation advances. |
Declining Hardware Market & Strategic Shift | Q4 2024: Reported significant hardware revenue declines in retail and restaurant segments with a strategic shift to outsource manufacturing via the ODM model. Q3 2024: Highlighted a 28% decline in hardware sales with service revenue partially offsetting the downturn. Q2 2024: Noted that customers were delaying hardware refreshes, prompting a move to the Ennoconn partnership. | Q1 2025: Continued reports of hardware softness with a 13% total revenue decline noted; reiterated strategic focus on mitigating hardware risk through tariff strategies and deeper reliance on recurring software and services revenue. | Persistent challenge – Ongoing hardware market weakness is reinforcing a strategic shift away from low‑margin hardware toward higher‑value recurring services. |
Enterprise Payments Expansion | Q4 2024: Introduced a 5‑year nonexclusive partnership with Worldpay to enhance payment capabilities and fill previous platform gaps. Q3 and Q2 2024: No discussion on payments expansion. | Q1 2025: Emphasized converting customers from JetPay to Worldpay and integrating end-to‑end payment solutions, building on the strategic partnership to diversify revenue. | Emerging focus – This new topic augments the company’s diversification efforts, providing a fresh revenue avenue by integrating robust payments services. |
Customer Relationships & Leadership | Q4 2024: Highlighted long-term relationships (98% retention), platform growth, and leadership transformation with a new CEO. Q3 2024: Reported strong net site additions, key new customer wins, and significant debt reduction following digital banking divestiture. Q2 2024: Noted strong customer signings and alignment with strategic cost and balance sheet improvements. | Q1 2025: Reported extremely low revenue attrition (1%), engaged over 40 large customers across geographies, introduced new leadership roles (e.g., Chief Product Officer), and expanded share repurchase efforts to bolster balance sheet strength. | Continually strong – Consistently robust customer retention and proactive leadership transformations are driving balance sheet improvements and future growth. |
Tariff Impact Uncertainties | Q4 2024: Discussed upcoming tariffs on Mexico, Canada, and China with a “wait and see” approach, emphasizing their potential to affect low-margin hardware. Q2/Q3 2024: No mention of tariffs. | Q1 2025: Reintroduced tariff uncertainties with surcharges noted from China-based suppliers and active mitigation by sourcing alternative suppliers; guidance maintained despite variability. | Fluctuating focus – Tariff concerns appear intermittently; while significant in Q1 and Q4, they were absent in mid–year calls, indicating ongoing uncertainty and variable impact. |
Digital Banking Divestiture & Growth Diversification | Q2 2024: Announced the divestiture to Veritas Capital for $2.45B as a strategic move to optimize operations and reduce debt. Q3 2024: Emphasized completion of the sale, debt reduction, and strategic simplification to focus on core segments. Q4 2024: Highlighted the divestiture’s resource diversion in 2024 and its role in funding accelerated product investments for growth. | Q1 2025: No discussion of the digital banking divestiture, indicating the company’s focus has shifted solely to its core retail and restaurant business strategies. | Phased out – Once central to strategic repositioning, the divestiture is now treated as a historical event providing a platform for future growth focus. |
In‑house POS Software Threat | Q4 2024: Raised as an emerging risk where some large retailers might consider developing in‑house solutions; however, skepticism was expressed regarding the feasibility and sustained impact of such initiatives. Q3/Q2 2024: Not mentioned. | Q1 2025: Not mentioned in the current discussion, suggesting that the concern did not gain traction or significant influence on strategic direction. | Short‑lived concern – Emerged briefly in Q4 2024 but quickly faded, implying that it is not perceived as a major or lasting threat to the business model. |
-
Cost Program
Q: Restructuring cost and tariff actions?
A: Management reported that the cost program is being ramped up over the year with restructuring spending now estimated at about $65 million—up from an initial $55 million—while they actively pursue tariff mitigation through supplier diversification, ensuring overall guidance remains on track. -
Payments Integration
Q: When will WorldPay integration complete?
A: The team is converting from JetPay to WorldPay, with training underway and the expectation that the integrated, end-to-end payments solution will be fully operational by the end of summer, streamlining the customer experience. -
Retail Margins
Q: What’s driving retail margin decline?
A: Retail margins were impacted by lower hardware revenue and a product mix leaning toward lower-margin third-party products, though management expects a recovery in Q2 and full-year margins to reach around 19%–20%. -
Payment Economics
Q: How will integrated payments capture value?
A: The firm is leveraging its end-to-end solution to offer integrated payments that bundle software and processing, aiming to deliver a value-added experience rather than competing solely on fee-based pricing, thereby enhancing overall processing economics. -
Growth Prospects
Q: Which segment shows most growth potential?
A: While retail provides the bulk of volume, management is particularly bullish on the restaurant segment—expecting it to expand significantly through enhanced platform rollouts and service innovations, bolstered by renewed, multi-year contracts. -
Self-Checkout Trends
Q: Is self-checkout demand improving?
A: Management noted that self-checkout continues to generate strong interest across all markets, with ongoing conversations reinforcing that its integration with the platform is key to unlocking additional software attached revenue, even through reusing existing hardware. -
Macro Backdrop
Q: How are macro trends affecting customers?
A: Despite economic uncertainties and past hardware pull-forwards, customers remain loyal with extremely low attrition, and initial signs point to improving demand in hardware and platform upgrades, reflecting a stable long-term outlook. -
International Leadership
Q: Why add executives outside the U.S.?
A: The addition of two executives based outside the United States underlines the company’s commitment to aligning more closely with its global customer base by bringing local market insights into strategic decision-making.
Research analysts covering NCR Voyix.