Kartik Mehta: And then just, Brian, on the cash flow conversion, maybe I’m assuming 2024 obviously had — you’re separating from NCR, and there’s probably lots of takes ins and outs associated with it. I’m wondering, over the next few years, what you would expect conversion to be.
Brian Webb-Walsh: Yes. So conversion is impacted this year by still some probably $25 million to $50 million of cash separation costs that are impacting us. We also have some restructuring associated with our cost takeout — so those things are pressuring cash conversion a bit. But as we go forward, those things will come down, and we’ll continue to improve margin and generate more cash flow. We have a working capital improvement baked in for this year as well. We think there’s opportunity to continue that in the future years. So we see cash conversion improving in line with what we said at Investor Day as we go forward.
Operator: Our next question comes from the line of Dan Perlin with RBC.
Matthew Roswell: It’s Matthew Roswell on for Dan. Two questions. I guess, first, when you’re looking at the SMB focus and what sort of either product or sales force investments are we thinking about for this year?
David Wilkinson: Yes. You say SMB, I’ll just redirect a little bit to mid-market. We are focused on that 5%, that kind of multisite operator, both restaurant and retail. The product, we feel is in good shape. So — we’re going to work on process in terms of making it easier to — for our sellers to quote and onboard those customers with the payments led offering. And on the sales side, if I look at it overall, we’re investing about $15 million across the whole company and selling. And so when I think about where the growth will come across all 3 businesses, it will be in that mid-market segment across all 3 businesses. So we’re going to make more investments in sales to get more feet on the street. And that’s where we think the impact will show up. .
Matthew Roswell: Okay. And then on the digital banking piece, you had a number of net new wins in the quarter in the year. And I was wondering, who are you taking share from? Is it mainly legacy players or homegrown solutions?
David Wilkinson: It’s mainly the legacy players that we’re seeing the — I’ll call it as the donor pool.
Operator: Our next question comes from the line of Ian Zaffino with Oppenheimer & Company.
Isaac Sellhausen : This is Isaac Sellhausen on for Ian. My first on the cost side, can you talk about labor and component hardware costs and your expectations for the year? The EBITDA margin guide is certainly strong. So just trying to understand the cost saving measures you talked about and you’ve already taken and maybe how that flows through for the year. .
Brian Webb-Walsh: Yes. Thank you. $100 million is the annualized costs we’re taking out this year, and it’s split between the 3 areas I talked about. The first being hardware, which is simplifying how we design our products, and those changes have been made — and as we go through our inventory, that will start to impact the P&L and is starting to impact the P&L. So we’ll get most of the savings in this year, and that’s worth $25 million. The next area is services, and that’s around using our remote self-capability more, hiring skill set that matches the entry skill set need versus the overall NCR need and also structural changes to get rid of overlaps between organizations that. We’re about halfway through $50 million is what we’re targeting there, and we’ve taken about $25 million of actions.
We anticipate taking more before we end this quarter. So a lot of that will be behind us. And then the last area is our real estate footprint and our corporate footprint. And there, we’re focused on reducing resources, shifting to lower-cost strategic value centers and closing down some facilities, and that’s underway. We have probably 60% of that behind us. So this year, we expect at least $70 million of in-year savings related to this program, and we’re trying to drive more.
David Wilkinson: And I would just say that on those cost savings, those are the net numbers. We’re going to reinvest some of that if you look at the Q4 exit run rate, that’s what we’re reinvesting back in go-to-market in sales, just to make sure we can continue to grow the business. While we’re making the strategic savings in certain areas. They’re — I’ll say a little more surgical as we look at the foundational elements that Brian described, where we’re not making cuts is things like customer support, product innovation and investment and sales and go-to-market, we’re continuing investment there.
Isaac Sellhausen: And then just as a quick follow-up regarding free cash flow for the year. Maybe if you could talk about your capital allocation priorities at 3.7x. What’s the pace you’d like to move down to the 2 to 3x long-term net leverage target?
Brian Webb-Walsh: Yes. So for this year, it’s going to be investing in our CapEx, which is $250 million. And then from there, laying the free cash flow, add to our cash balance to bring down net debt. And we think we can get net leverage to 3.3 to 3.4 turns by the end of the year, and that’s our focus for this year.
Operator: And our next question comes from the line of Alex [indiscernible] with Stephen.
Unidentified Analyst : Just within the retail business, can you just give us a sense of how much the platform sites are contributing to that segment? And then when we could see that moving the needle just from a growth standpoint?
Brian Webb-Walsh: Yes. We’re seeing good growth in the platform sites. I mean, you saw the numbers, and they are contributing to overall growth. So if I take Mayank’s original question around ARR. And I look at that ARR growth that we’re expecting to see in the mid- to high single digits. — in ’24. That’s all coming from platform connected sites. If I break that down even further and think about software-specific related ARR in that business, we’ll see software-specific ARR get into the low double-digit growth in ’24, and that’s all about connecting these sites to the platform. So if you remember, when we connect these sites to the platform, we’re getting an uplift in ARPU when we make that connection and it allows us to cross-sell and upsell.
So as these cohorts are aging, we’re starting to see that benefit our recurring revenue streams, and that’s what you’ll see in these growth numbers. Again, the overall numbers are a little muted because of hardware and retail, but the rest of the software business and recurring revenue streams are growing nicely.
