NCR Voyix: $2.5 Billion Sale to Veritas Verifies Digital Banking’s Long-Term Potential

Publicly traded companies are marked to market each and every day. And when quarterly results roll in, investors parse the data, the top line and the operating margins, and often measure success with each and every earnings report.

For NCR Voyix, the company’s sale of its digital banking platform business to Veritas Capital for roughly $2.5 billion helps eschew the vagaries of a volatile stock price, and as Doug Brown, chief product officer, and Brendan Tansill, executive vice president and president, both of NCR’s digital banking unit, told Karen Webster, invest for the long term.

And the long term, they told Webster, includes a product and service roadmap that stretches out over years, not quarters, with a digital-first mindset that helps financial institutions (FIs) bring digital capabilities into branch settings.

The announcement and the interview with Webster came on Tuesday (Aug. 6), the same day that NCR Voyix reported earnings showing that its digital banking business logged $579 million in annualized revenues, serving 1,300 FIs across the United States.

The company’s supplementals showed that the segment’s average revenues per unit were up 6% year over year and that the active user count was up 3% to 19.8 million.

NCR Voyix’s results detailed that digital banking revenues were up 9% in the second quarter, to $154 million. Overall company revenues, on a consolidated basis, were 7% lower, at $876 million.

The proceeds accruing to NCR Voyix from the sale will be used to pay down debt and improve operating leverage.

During the conference call with analysts, CEO David Wilkinson said that digital banking operates as “the only provider of a truly end-to-end offering across the physical and digital channels.”

As for the choice of Veritas, Tansill observed to Webster on Tuesday that private equity (PE) firms tend to be painted with either of two brushes:

Brush one? The PE firm acquires a company and cuts costs to the bone to maximize cash flow as much as possible, then eyes a quick exit, essentially flipping the acquisition to another buyer to make a quick return on investment.

With brush two, the PE brings in considerable financial resources to accelerate growth of the target company. These PEs have a mindset of investing in people and technology for the longer term.

Veritas, Tansill said, fits squarely in the second camp, with more than two decades of investing in tech firms. They take concentrated bets, with only about half a dozen holdings in each one of its funds and billions of dollars committed to the success of those holdings.

“There was an enormous amount of interest in the business, and we were in the strong position of being able to choose a partner that was strategic,” Tansill said.

Veritas also has the expertise to assist with corporate carve outs, Tansill said, which will prove critical in an environment where digital banking will still use consumer accounting and financial services from Voyix while it seeks to hire 200 individuals before it is fully independent.

“This exercise will take as long as a year,” Tansill told Webster.

In the meantime, as that transition unfolds, Tansill said that what’s important is that the digital banking customers “feel zero impact … they should feel the benefit of the Veritas war chest, but not the pains of us trying to separate from Voyix.”

Taking the Long-Term View

The shift from public markets to private ownership also will allow for a strategic and investment mindset evolution.

“When you’re a public company,” Tansill said, there’s a mindset that might constrain how much capital is spent each quarter, because investors compare each quarter’s results and take a shorter-term view of performance.

“In the private market,” he added, where no one’s looking at the numbers besides the Veritas board members, “we can invest a dollar today to be a better company four or five years from now. The investment horizon is longer.”

Business banking will be a key area of focus for the digital banking operations, predicted Tansill, who added that the firm will build or buy operations in that segment more quickly than would be seen were the enterprise still publicly traded.

Brown said that Veritas shares the mindset that there’s still relevance for branches to be a key component of the retail banking experience. That mindset’s been corroborated by the likes of JPMorgan and others building out their physical footprints.

As Brown noted, “community banking still revolves around the concept of the relationship,” and digital-first initiatives simply serve to bring that continuum of omnichannel banking more firmly into the present day. The digital banking operations are also working on a rebranding, said Tansill and Brown.

Said Tansill of the $2.5 billion deal, and the potential of operating as a standalone entity in the evolving digital banking landscape: “We and Veritas see the world similarly, and that’s going to be enormously helpful.”