NCR Voyix Corporation (VYX) Earnings Call Transcript & Summary

All right. Wow, I guess I don't have to speak too loud. I might not even need a mic. It's 9:00. I think we're going to get started. Thanks to everybody who is joining us today. For those who don't know me, my name is Chuck Nabhan. I cover the payments and fintech space here at Stephens. We're pleased to host NCR Voyix today. Joining me today from the company is CEO, David Wilkinson as well as CFO, Brian Webb-Walsh, Gentlemen, thank you for making the trip and joining us today.

Yes, thanks for having us.

Great. So it's been an eventful 2 years to say the least for the company. So just as a starting point for those not as familiar with the story. Can you walk us through that led -- the events that led up to the split and how you believe the split will add value for shareholders?

Sure. A couple of things. Probably worth just describing what we are now as a company. So NCR Voyix is a fintech platform led software and services company, supporting 3 key verticals. So think about banking, the retail bank branch, retail and restaurant. We're a market leader in those 3 verticals that we serve or those 3 market segments that we serve. The #1 provider of point-of-sale software in retail and restaurant. The leading independent digital banking application provider in the U.S. It's -- as you all know that market segment really well. It's a very large and growing market. We would tell you $25 billion and expanding to over $100 billion in total addressable market. After the separation, we're about a $4 billion top line company, just under $4 billion, with over half of that revenue is recurring revenue. So think about that as software and services to those -- into those industry verticals that we serve. And Chuck, back to the -- it's been a 2-year process for us. As you all know, NCR, we were very public about starting a strategic review process a couple of years ago. We explored every option under the sun through that process. So it was -- while it kept us all busy, it was a very fulsome process. We left no stone unturned. The outcome of that process was what led us to the split. And we believe that creating the platform-led software and services company NCR Voyix and then separating out what NCR Atleos, and I think our Atleos colleagues are running around here somewhere today, if you want to hunt them down and find them. But that was the ATM side of the business. And we believed in conversations like this in the past, we would have had a very different set of conversations where we would talk about 5, 6 segments, multiple market trends that were happening, multiple macroeconomic environments that we had to play into. And that was what was happening inside of the 4 walls of the company. So we really believe that the focus that we can create with NCR Voyix and NCR Atleos on the core verticals, the core solutions that we're providing, there's a different set of investments required to be a platform-led software and services company versus an ATM provider running an ATM network and a payments network. So for us, it's really about focus. It's the ability to continue to focus on our customers, continue to focus on building great products and then having more focused conversations around what we do as a company and how we're investing.

That's a good segue, David, because I want to drill into the concept of platform-led businesses, which you characterized retail and restaurant and such. Can you talk about what that means in a little more detail as well as what KPIs investors could look at to gauge progress on your initiatives?

Yes, absolutely. All of -- all 3 businesses are platform businesses. We use -- for all 3 of the businesses we leverage Google Cloud as our core platform provider. But you think about it in retail and restaurants. So in the legacy space, where I described we're the market leader in point-of-sale software. So the point-of-sale software is very sticky inside of retail and restaurants. And what all of these clients are looking for is adding new capability on top of the existing point-of-sale capability to create differentiated experiences in their store or their restaurant. And to do that, we add things like online ordering or loyalty or alternative payments or different payment forms. But you don't need to change out the core point of sale to do that. So our strategy is to take that installed base, connect our legacy point-of-sale applications to our platform, and you can cross-sell and upsell other modules or services on top of the platform that are delivered via the cloud. It could be run on-premise, but it's delivered through the cloud, and that's how we connect our cloud services. Online ordering is a good example of that, like what we did with Buffalo Wild Wings, where they're running our core point of sale and we connect them to the platform, unified their online ordering capabilities. Because it's really about leveraging a unified customer data, unified transaction data set and a unified inventory or menu, if you will. So the economics of that, really, if you look at our installed base, we're going to start describing how many people we have connected to the platform. So the penetration, we released that at Investor Day. We talked about in the restaurant space, we have about 20% of our installed base connected to the platform today. And then when we describe the number of connected lanes to the -- or sites to the platform, we'll also describe ARPU, or average revenue per unit. That's the average revenue per site. And what we're seeing is when we get you connected to the platform, we immediately see a 1.5x uplift in that platform. So I would tell you to track that penetration, the number of platform sites connected and then the ARPU for those sites. In retail, we're a little further behind. We just -- we just had a little bit later start. It doesn't mean that the market is not as receptive. We're about 10% penetrated in the retail market with a bigger backlog. There's a little longer time to renew. And on the digital banking side, it's really about number of active users connected to the platform. We'll also disclose ARPU, but that growth story is more about users.

Got it. Okay. So one external KPI you've discussed is the improvement in NPS scores across your business, which really is reflective of your standing with your customers. Can you talk about your initiatives and the progress you've made in that area?

Yes. It's -- we're proud of the team for what they've been able to accomplish and embarrassed almost to say what it used to be. So we started tracking NPS about 5 years ago. When we started tracking it, our NPS in retail and restaurants was negative. I don't think that was even possible. Apparently, it is, apparently it's just math at some point that -- but it is -- we had negative NPS in those segments. And when you have negative NPS and you're running point-of-sale applications like we do, they are mission-critical and very sticky, you end up with a bunch of customers that feel trapped. But the good news that what we learned in that process is that it is so sticky and people don't want to change out their point of sale. So even when they tell you they're not a promoter, they're actually a detractor, we were seeing that customers were sticking with us. They wanted us to succeed. They wanted us to be healthy and profitable and help -- and have an innovative solution. What we've done is we've got more focus on the customer. So what you saw us do is align more towards these vertically centric business units. So we had -- before we were hardware, software and services as a company, the customers lost in that mix. So now we have -- we have retail restaurants and our digital banking teams. We put support teams in line with those. We had specific product investments that we were making towards those segments. And what we saw is an increase in Net Promoter Score where we're north of 40, positive 40. And what we're doing is Net Promoter Score and we're not stopping there. I mean, we want to see that number get something more best-in-class. Our research would tell us it's closer to 60, but right now, we're in really good position with something that looks north of 40 from a negative 5 years ago. So it's a lot of work from the teams, a lot of, I'll say, basic blocking and tackling, road map management and investing in what matters to our customers.

Got it. So just to broaden that a little bit. Can you talk about the competitive landscape within retail and hospitality, and we'll get to digital banking in a second. Specifically, who you compete against? How you're differentiated? And maybe if you could touch on the market segmentation between SMB and enterprise? Because I think, obviously, Toast has become a household name in the space. However, the reality of it is they're more SMB versus enterprise.

Yes. On the retail and restaurant businesses, I'll combine those for a second to talk about enterprise. So when we say enterprise in the restaurant world, we say 50 sites or more. In the retail world, it's basically -- we have very little SMB, less than -- I mean it's very little SMB business, what we call SMB in the retail space. So most of our business in both of those segments, 80% of the restaurant business and 95% plus of the retail business is enterprise, what we would classify as enterprise. So think of those as the retail side. It's heavily weighted towards grocery. 70% percent of our business is grocery, another 15% convenience and fuel. So very durable, resilient, mission-critical or economy critical businesses. And they're household names, people like Circle K, Pilot, Whole Foods, Sainsbury's. Woolworths and Coles in Australia, have nothing to do with the Woolworths and Coles of the old U.S. Those are the 2 largest grocery chains in Australia. But -- so we have really big household names, Starbucks, Wendy's, McDonald's, Chipotle, Buffalo Wild Wings. I mean those are our core customers. The value and the differentiation that we see in that space, why people choose NCR Voyix is both the tech. So not only we're the largest installed base and what I described is they run our software likely today. We have feature-rich applications that -- we understand their businesses. We have depth of industry within our teams. And then we couple that tech with services. And when we put services on top of that, we can provide a complete set of capabilities. And every one of those clients that I mentioned, they're all looking to simplify their lives. They want fewer vendors to provide the capabilities they need. And they want to be able to apply more energy towards differentiating the customer experience and less energy towards either managing a bunch of tech vendors or by default becoming the systems integrator to stitch together a bunch of bespoke start-up sets of technologies that we're providing specific tasks within the store or the restaurant. So our value is really the ability to stitch all of that together and create a holistic experience. On the SMB side, in restaurant, it's about 20% of our restaurant business. We're pretty selective about how we're taking share there. We are taking share still in the restaurant space, and we're doing it where we have more complex SMBs, so less than 50 sites or ones that are growing at a higher growth rate. So think about somebody with 5, 10, 15 sites, they're still classified as what we would call in our segments an SMB. But they get little more complicated and they decide, they wake up one day and think they need an IT person or a tech team but they really can't afford it and they know that their core competency is not tech, it is running restaurants. And so that's when they call us and that's where we add a lot of value in that space. So yes, we have the competition that you describe Toast and others in that SMB space. We feel like our customers value the differentiation we bring from a full service, not just the tech, but the tech and the services. And then it's a fragmented set of competitors in retail and restaurant. Retail we have a -- if you look at our self checkout as a product within the retail segment, we've been the market leader for 20 years, double that of the nearest competitor. So you would think of the normal competitors, TOSHIBA, Fujitsu, Diebold in Europe, still for self-checkout and point-of-sale. There's companies like Fluid and GK and you'll see a little bit of TOSHIBA still on the restaurant side at the higher end in QSR. In enterprise, you'll see PAR Brink and the ones that you described, but for the most part, our differentiation is the broader set of capabilities.

Got it. Yes. So we'll get to self checkout in a second. But one of those vendors, in many cases, is your payment processor. You've started to attach payments as part of your low-hub bundle. Could you maybe touch on that opportunity?

Yes. For us, payments, we still believe in the opportunity. So we start the payment at the point of sale. We do all the encryption work that goes to the pin pad. We typically route it through our gateway out to the payment processor. The last little piece of the payment processor is the piece that we need -- we believe we can add. And we believe that, that simplifies the lives of our clients. So in my conversations with CEOs and the like, I'll pick the restaurant space. I was just with in California a 500 restaurant chain CEO, and they want us to do the payments end-to-end because we already started. They just want us to finish it. They don't want to have to go figure out how to negotiate with payments, pick pin pads, do all the things that have to be done in that ecosystem. It just simplifies their lives. So we're going to continue to add payments. It's part of the ARPU expansion. So you'll see us -- payments to us becomes another module or another product that we add on when we get you attached to the platform. So you'll see that start to play out. And ARPU, we'll still announce payment sites as we have been doing. But we think that's still a critical part of our strategy. We need to expand it more -- it's -- we lead with that in the SMB space, so 90% attach in that SMB world in restaurants. We're expanding into the enterprise side of restaurant and then we'll start to get capabilities in retail. Retail grocery payments are a little more complicated. So we have a little bit of work to do on the offering, but we'll bring that online through 2024. And we -- I know -- for those of you that follow us for a while, you'll say you've talked about payments for a long time. You haven't made the progress that you wanted to make. And you're right, we got delayed based on some of the priority investments that we wanted to make. So I probably pushed that out a year based on what we thought we would originally do.

Got it. I want to switch gears to digital banking. One question we receive is how that business fits in with the rest of NCR Voyix. Can you comment on that and how you think about the strategic optionality and the fit of that business?

Yes. The reason we chose to put digital banking in with those other businesses I described, they're all platform software businesses. So they have similar skill set, similar investment requirements, a similar mission in life in terms of allowing our clients in that space to create a differentiated consumer experience. So in all those cases, there's an experiential factor in terms of how you as a consumer interact with technology that creates some commonality. That's where the commonality stops. There are different sales teams. We're running those businesses differently. We'll have a president of each of those 3 different businesses. We're setting them up independently for a lot of different reasons. We -- yes, we believe that, that business has been extremely undervalued inside of the old perimeter of NCR, yes. We think the exposure of what we're doing, exposing the growth rate of that business and talking about how we're winning share now, the 36 net new customers that we've seen over the trailing 12 months, the low double-digit growth rate that we expect in next year. I mean that -- and it's very profitable. So we want to expose the strength and the velocity of that business. And then like all of our other businesses, we'll evaluate all options to make sure that we're unlocking shareholder value.

Yes. Let's talk about that strength for a little bit because if I recall that business was originally acquired in 2013 when Mike Hayford came on in 2019. One of his initial initiatives was to really invest and turn around that business. And it's been quite a remarkable turnaround story from both the growth and customer retention standpoint. So can you maybe touch on that and some of the initiatives that led to the turnaround within digital banking?

Yes. Mike knew that we had an asset. He had experience in that digital banking space, and he knew we had that asset sitting there that was being under invested in and was quite honestly being picked off. It was the carcass on the side of the road or the donor pool or whatever that would allow the Q2s and the Alchemys of the world. The product was unreliable. It wasn't feature rich and it was old and not being invested in. And the original strategy when that was acquired by NCR was to fold it into the ATM sales team and try to get them to be able to cross-sell digital from the -- through the ATM channel. And it didn't work. It was a bad idea. When Mike came on board, we decided to invest in the product. So it took almost 2 -- almost 3 years to get the product back to, I'll call it, healthy. These aren't easy things to fix. It takes a while to have an old product and make it new. So that investment had been taken over the -- starting 5 -- 4, 5 years ago. The product is really strong today. It's modern. We finished last year moving all -- almost 20 million users into Google Cloud. We've opened the APIs. We've created a partner network of over 200 partners that allow -- that create that open ecosystem to create functionality for all these financial institutions as they fight for deposits. Their whole battleground is deposits. And it's a very bloody battleground today for them. So they need more capabilities and more features. And what this partner network does is allows us to embed them into the digital banking app, and they can do things like peer-to-peer payments or bill pay or card management. And we take our [ share ] off of that as it flows through our platform, but then it creates -- we don't have to build every set of new capabilities or functionality within the app. We will build or buy capabilities like we did with Terafina to add account opening. So we're seeing those types of -- where we see trends in the market where account opening became huge. Obviously, as you're trying to fight for deposits, you need to be able to open accounts. It reduced the time to open and reduce the number of audits and the quality of the accounts coming through. So those are the kind of things that we'll continue to invest in. But that -- and then once we got the product fixed, we started to pour the go-to-market -- turn the go-to-market back on. And that's what we're seeing in the -- when I described those 36 net new wins. That's where you're seeing the power. And we're asking the team what more do they need, how do we continue to grow, because right now, we want to pour gasoline in terms of go-to-market on to that fire because we have a great product that's winning.

Great. Switching to financials, could you talk about the leverage profile of the business and how investors should think about free cash flow generation and target leverage over time?

Sure. So starting with leverage, we're targeting to be around 3.5 turns at the end of this year and then getting that to 3 turns of leverage by the end of next year. And then long term, we've said we want to be within 2 to 3 turns of leverage, and we think that's the right amount of debt for our recurring revenue model and our business profile. When we think about cash conversion, one other point on the debt, it's attractive debt. We inherited the legacy NCR debt. So the average rate is 5.4%, and it's 90% fixed. So it's relatively attractive. Free cash flow next year, we're targeting 25% to 30% conversion on adjusted EBITDA. And then that goes up to 40% to 45% by the time we get to 2027. And the things that drive that improvement are margin improving, CapEx as a percent of revenue coming down as we scale our revenue. We think that can go from 7% today to 6% as we go through 2027. And then the absence of separation cash cost, we still have some costs next year that won't be there after next year. So that's how we get to that cash flow conversion.

Got it. That's super helpful. Could you also talk about the revenue and EBITDA targets you laid out in your recent disclosures and specifically, how we should think about recurring -- the recurring revenue headwind in the near term because that's obviously a relevant point there?

Yes. So if we look at the growth targets on the top line, 4% to 6% CAGR, '27 compared to '23 with more modest growth this year and next year, 1% to 2% this year and then 1% to 3% next year. And part of the reason is the recurring headwind as we shift upfront license revenue to a subscription model that puts pressure on the overall revenue growth. And we believe that's a 2-point headwind next year. And then that starts to normalize in our growth rates in '25, and it's no longer a headwind. And then we'll see restaurant and retail specifically start to accelerate growth. The other thing, as David was talking about, today, we have roughly a little over 10% of our retailers connected to our platform, 20% of restaurants, that's going to improve as we go forward, and we can cross-sell and upsell as we connect more of our customers to our platform. So those things will get the retail and restaurant segments accelerating '25, '26, '27. And then the good news is digital banking has already accelerated. In the most recent quarter, we grew 7%. We expect Q4 next year to be high single digit, low double digit and that growth to continue into the future years. So that's how the revenue model works. And then EBITDA is going to grow faster than revenue, 10% to 12% CAGR. We're going to expand margin 400 to 500 basis points. At the high end of that, the 500 basis points, 300 comes from mix shift. So digital banking growing faster than retail and restaurants. And then within retail and restaurants software, services and payments growing faster than hardware. So that's 300 basis points of the margin improvement. The other 200 basis points comes from cost takeout and that's already started. That's going to help us offset next year, the $45 million to $55 million of the synergies we have by being our own company. So we expect to be able to maintain the 17% margin this year and keep margins flat through our cost programs. And then from there, they'll start to contribute into the margin improvement. And if I just break out the cost program a little bit, there's 3 major components. One is our corporate costs, where we're looking at our real estate footprint and exiting some underutilized facilities. We're looking at where we have our skills and taking advantage of lower cost strategic value centers and just making sure we have the right-sized corporate team for the Voyix business. The second work stream is around our hardware and simplifying how we design our products and our hardware. In the past, legacy NCR had a joint engineering team with ATMs, SCO and point of sale, and that caused us to overdesign some aspects of our hardware. So we already have a program that's well underway. That's been in place for multiple months to simplify the design and we'll start to get benefits from that next year. And then lastly, our Services organization. There's a big program around moving more resources to strategic value centers, reducing some overlap we have between our different services organizations and then making sure we have the right skill set because, again, just having to deal with POS and SCO, the skill set is less complex than when we -- in the legacy world, had to also service ATMs. So that's how we're going to drive the margin improvement and grow EBITDA faster than revenue.

That's great. Appreciate that. And just to touch on the 2-point headwind and I think it was 3 points this quarter, but 2 points for next year. Have you disclosed where that -- where that's concentrated in terms of the segments?

Yes. It's -- there's some impact in all segments. In the retail and restaurant segments, it's the corporate average is the impact to those 2 segments.

Got it. Okay. Okay. And again, you touched on the mix of hardware and software and services. Could you give us a sense for where -- what it looks like today and what it could look like down the road?

Yes. So from a hardware mix, 28% of our hardware in Q3, 28% of our revenue is hardware, and that's a little bit higher in retail, a little bit lower in restaurants, and it doesn't exist in digital banking. We expect that to grow low -- or I'm sorry, to decline low single digit while the recurring revenue in Software and Services and Payments grows at a much faster rate. And so the mix of hardware by the time we get to 2027 will hopefully be around 20% to 25% of revenue, so it will improve. And that helps the margin.

Yes. And just to kind of put a finer point and solidify our understanding of it. You're not always replacing the POS. Once you get customers on the platform, you're cross-selling new software as software and services, and that's really what's driving the mix shift. Is that a fair way to characterize it?

Absolutely, yes.

Yes, and the headwind doesn't count. We're not doing hardware as part of that bundle. So don't -- the headwind is not a hardware onetime shift to -- in the SMB space, we might bundle hardware, in some cases, we do. But in the enterprise side, self-checkout or point of sale, that headwind is not a headwind like we would have seen on the Atleos side when they're moving to ATM as a service. This is it's the software onetime recurring revenue, the license revenue that you have got on a perpetual basis that is creating that headwind.

So to ask the obligatory macro question. We could start with digital banking and move through the segments. And just on a high level, there's obviously macro-related headwinds. But at the same time, there are some secular tailwinds and your solutions, whether it's banking or hospitality do position your customers to compete in the current environment and meet changes in customer demand. So I mean, I guess, with that in mind, could you -- starting with digital banking, could you maybe talk about what you're seeing from an IT spending standpoint within your customer base? And how your solutions, whether it's Terafina or just a platform in general, position banks to gather deposits and compete?

Yes. So we have the macro banking environment, we have not seen an impact to spend. The battle for deposits, I'll say, is trumping the -- maybe some of those macro underlying negative sentiment. We had our digital banking conference here in Nashville, I was going to say in Nashville, but we are in Nashville. So we had it here 4 weeks ago, 5 weeks ago, we had a record number of attendees, both prospects and existing customers, close to 1,000 people in the room. And when we're sitting talking with all of the financial institutions of all sizes in the room, they all described how the budgets within the bank are moving to the digital channels. So in the past, it would have you had an infrastructure team, a retail branch. The branch team would have a budget, then it would be kind of a corporate thing, and there was this digital budget, the marketing team had this digital budget. That digital team is kind of taking over the way that they think about the retail face of the bank to the consumer. So they're getting a lot more power, and they're looking for solutions that help unify the channel. And that's exactly what our solutions, whether it's our core digital banking application, new account opening. We have a channel services platform that unifies the 4 main channels of a bank, whether that's the digital channel, the ATM channel, the call center or the physical teller. So we have some capabilities to stitch that together. It's what we built for U.S. Bank. It's what we're doing with Citi. There are some trends that are moving towards creating that digital experience on the front end, and we're well positioned and that's where we're investing.

Yes. And I want to sort of bridge what might appear to be a disconnect on the surface in that for those that follow the bank space, you hear about efficiency, you hear about cost containment. They're not going on the calls and talking about how much money they're spending. But at the same time, it sounds like there are branches being contracted, efficiencies gained in other areas of the bank that are being reallocated towards digital. Is that -- is that a fair characterization because I think that's an important point to make for those that continuously hear about efficiencies in the bank space?

Yes, absolutely. Absolutely. The shift -- I mean, you think about peeling off more of the transactions and more of the capabilities into a digital world versus the physical world because you're right, as the -- you still -- the functions of a bank still have to exist. I still have to apply for loans, I still have to get an application for new products or services. All of those things still exist. So digitizing that entire experience end to end is where we're focused and creating -- peeling more of that off of the physical branch because we know that either the branch footprint is going to get smaller or they're going to look for alternative ways to do that or neo banks are going to come in and compete differently. So allowing the local banks to be able to compete better is what we're all about.

And remind us where your sweet spot is in terms of like asset size or market segment.

Yes, it's pretty wide. So we've done a purposeful job of expanding that. The core digital banking product, the old DI product that you described would be $500 million to $25 billion in assets. We have a more modular product that was another acquisition called D3 that allows us to go into that $25 billion and above class and CSP is really playing in that higher-end asset class as well. So mean we -- the sweet spot for our core digital banking app is that $500 million to $25 billion, but I would give you the full wide berth of -- exclude the money center banks, and we're probably -- we can butt up against, like I said, U.S. Bank and Citi and others. SECU, we signed, they're the largest credit union in the U.S. So the -- there are some limits in terms of when you get really big, you start to kind of roll your own or build your own technology in some of those cases. And so that's the those big -- the money center banks are where we have not seen a lot of success.

Got it. You talked about Q2 and Alchemy earlier. I assume you still see those guys as well as the Jack Henry's and the FISs and Fiservs of the world.

Yes, we -- our data based on the wins that we're seeing would tell us that where we're taking share is from the Jack Henry's and the Fiservs and the FIS of the world. The -- what we heard at our banking conference was that where we're investing in that digital front end and the new experiences in this open ecosystem is what they're looking for. And they're -- I don't think those companies are bad or doing the wrong thing. The banks, our customers are telling us, they're just not investing in the things that are most important to them in the digital side of things. So that's where we see we're able to differentiate is how we're investing. I think there's going to -- and that's why I said, right now, I think we can strike while the iron is hot in terms of getting more feet on the street to go win more -- those -- will Jack Henry and FIS and Fiserv figure stuff out, sure. I just know how long it took us to get our product modern. So I think we got a little bit of head start.

Got it. I'm going to stop there and see if there's any questions in the audience.

[indiscernible]

Yes. So think about $40 million of revenue coming out, $25 million of EBITDA, but the growth rates and the margin being relatively the same. Because it just -- it's so small, it doesn't change the overall growth rates of the company or the overall margin targets.

[indiscernible]

Yes. The absolute. And the baseline and then the growth rates, yes, take it out of all periods, kind of like Atleos is being taken out of the NCR Voyix results, take that divestiture out and then the same growth rates apply going forward and the same margin rates.

Can you just talk about strategically why [indiscernible]?

So I just -- I want to clarify, it wasn't the merchant portfolio. It was a set of payment -- oh, repeat the question. Okay. He's asking about the -- why do we sell the payment divestiture that was done? Why did we do that? So the -- It was I said noncore assets. It was -- there were more contracts and customers in verticals that were part of an acquisition that NCR made of some payment capabilities. It had nothing to do with our ability to attach payments to retail and restaurant. So it was -- we'll say, very concentrated sets of customers and noncore verticals that there was renewal risk, investment required, it was just in our effort to focus, we decided this is a really good time to divest of that. The next question -- because you all will ask what questions didn't we ask, I'll go ahead and preempt that one. You say, why were you guys so stupid and sell it for so little? We didn't. We ran a full process on that. So I assure you that we maximize the amount that the market would pay for those assets. And that just speaks to the kind of nonstrategic nature of what was actually part of that sale.

That transaction closed in the third quarter?

Third quarter.

Yes. It actually closed in early fourth quarter.

Oh, did it?

Yes.

Okay.

So pre-spin or post spin?

I believe it was post spin.

And then just a follow up question [indiscernible]?

Yes. So again, at Investor Day, we described our net debt and 3.5 turns of leverage as our target. So that's still what we plan on ending the year out around that. And in Voyix balance sheet and cash flow statement and continuing ops, discontinued ops view will be available when we file for the fourth quarter when we do the 10-K in February. So then you'll get a complete view of Voyix.

Okay. We can [indiscernible]?

It's not as simple as doing that because of the way carve-out accounting works versus discontinued ops accounting works. So it's not as simple as that, unfortunately.

Yes. Brian has some work to do.

Always.

So I guess staying with a macro theme and shifting over to -- shifting over to the restaurant segment, could you maybe talk about the segmentation of that business by enterprise and SMB as well as how consumer behavior may or may not affect?

Yes. For us, the -- as I described, the SMB segment, 50 sites and less, we're in that higher end where we have more complex growing SMBs. So we haven't seen as much of that macroeconomic impact. On the enterprise side, I was just out Sunday or Monday, I guess, in California, meeting with Brian at Chipotle, the CEO of Chipotle. And he's growing like -- I mean, Chipotle is growing like crazy. They're a great customer of ours. We do their online ordering through our platform. And when I talk to Todd at Wendy's, he'll say, we're the fastest-growing burger chain in the world. So when we look at the quick service restaurants that are our customers, the conversations that we have with them are all about growth. All about growth. And even in a kind of an economic downturn in the longest forecasted recession not to happen or whatever is going to happen, we feel like that our customer set being grocery, enterprise, quick service and fast casual and convenience and fuel have all seen kind of -- they all see pretty steady demand. And the outlook they all have is pretty positive on what they're doing and they're all expanding. And in a lot of cases, the enterprise clients that I've described, like in convenience and fuel are actually rolling up some of the smaller players that are subscale. So we feel like our -- the markets that we serve are very scaled, they're looking for efficiencies. Because they've now passed the point of passing on higher food costs and other things to the -- to you as a consumer. So they've got to get more efficient because they can -- because they've got to continue to expand margin as well. And that's where we come in with a simplified message of let us take on a little bit more, we can save you some money, and we can do it more efficiently.

Got it. Okay. So I want to circle back to capital allocation. You touched on the leverage target. And obviously, the near-term priority is deleveraging. Atleos has said they're going to establish a dividend that's not just focus for Voyix. However, M&A has been part of the strategy historically. Could you maybe talk about your go-forward capital allocation strategy over the medium to long term after you reach that target?

Yes. So to your point, in the near term, it's investing in our products, so continuing our CapEx investments, which are 90% software. And it's getting to the leverage targets we talked about. Beyond that, it's looking at tuck-in acquisitions, if we can buy something versus building it ourselves and then opportunistically looking at share repurchase. That's kind of how we think about it in the medium term. And I don't know if you'd add about acquisitions.

I think the acquisition target or the acquisition strategy will remain very consistent with what we've done in the past for retail and restaurant banking, it'll be more tuck-in. So if you think about the platform, once we get you connected to the platform and start that cross-selling and upselling, if there are capabilities that are easy to, I'll say, attach to the platform. So if you think about what we do on a platform sale, we have an existing customer that was on a perpetual software license that was paying maintenance on that software license. When we connect them to the platform, we change the contract with that customer. We move them to our subscription or SaaS master contract. That SaaS master contract serves as the vehicle that we can just add new capabilities. So if we have -- if there's some technology out there, if we see a market trend growing, we can -- and it can add on to that platform, that's the kind of tuck-in we'd like to do. We're not in a position right now with what we want to do with leverage to look to buy a bunch of revenue growth or transformative types of things. Never say never. That's not what we're doing right this second. We'll evaluate all options if the dynamics of the market changes or the appetite for leverage changes as well.

Got it. Okay. Any other questions?

So on the retail side you talked about some of the software modules that you're going into cross-sell that is increasing that ARPU? Because I can understand from the restaurant side, you're adding inventory management, menu management, online ordering but on the retail side, what are those additional software modules that you need to add?

Yes. It's -- I would describe it as there's some similarities. So I would add payments to some cases, self-checkout becomes a platform module as well that we can add on if we're running our existing point of sale. We have the ability to do -- speaking of tuck-in acquisitions, we acquired a small company that a handful of years ago, 3 years ago, 4 years ago, we can do mobile ordering for grocery. So think about now giving the -- I'll pull my phone out, but the -- the grocer more power over their brands. So instead of using a third party that's going to disintermediate their brand, we have an application that's an add on to the platform that gives them full mobile ordering capability, picking, delivery, that whole capability, put it in their own -- put it back into their own hands. Loyalty, promotions, e-mail marketing. We have another product where we do virtualized applications at the Edge, where that's been big in the convenience and fuel space. That's what we've done with Circle K and Pilot. That's allowed us to do some things around continuous available technology, upgrading the technology at the pumps faster. So there's -- it's a broad portfolio. In the Investor Day deck on one of the pages, we had an infographic that described we'll call it kind of a menu of capabilities. So we can point you back to that as well, and that describes it really well in terms of what we're doing more broadly, a little bit of inventory, some replenishment. So the portfolio is very broad in terms of the capabilities that we can do. And a lot of that in the old world would have been built into the core point of sale, which was why everything was so inflexible because that's the way we built software 20 years ago for these industries.

All right. I think it's all the time we have today. Gentlemen, thank you for joining us. I really appreciate it, and thanks, everybody, in the audience and listening online. Have a good day.

Thanks, Chuck.

Thank you.