NCR Atleos Corporation

Good day and welcome to the NCR Atlios Q4 Fiscal Year 23 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Brendan Matrano. Please go ahead.

Good morning and thank you for joining the NCR Atlios Earnings Call for the fourth quarter of 2023. Joining me on the call today are Tim Oliver, President and CEO, Paul Campbell, CFO, and and Stuart McKinnon, Chief Operating Officer. Tim will start this morning with an overview of fourth quarter financial and operational results, followed with an update on objectives for 2024. Next, Paul will provide an in-depth review of our results in the 2024 outlook, then we'll move to Q&A. Before we get started, let me remind you that our presentation and discussions will include forward-looking statements These statements reflect our current expectations and beliefs and are subject to risks and uncertainties that could cause actual results to differ materially from those expectations. These risks and uncertainties are described in today's materials and our periodic filings with the SEC, including our annual report. On today's call, we'll also be discussing certain non-GAAP financial measures. These non-GAAP measures are described and reconciled to their GAAP counterparts in the presentation materials and on the investor relations page of our website. A replay of this call will be available later today on our website, investor.ncratlios.com. With that, I'll turn the call over to Tim.

Thank you, Brendan, and thanks to all of you joining us this morning. We appreciate your interest in Atlios. The summary slide on page six describes a very busy 2023, capped by a strong fourth quarter that sets a solid jumping off point for NCR Atlios in our first full year as a separate company. Importantly, our performance in the second half of 2023 and our current outlook for 2024 are both consistent with the modeling that we used during the separation process for discussions with both debt and equity investors. In the fourth quarter, we posted solid year-over-year revenue growth with particular strength in our transaction-driven and in our services businesses that both benefit from our increasingly successful strategy to generate more revenue per machine from our base of 600,000 ATMs. The fourth quarter finished out a year of exceptional execution on three different fronts. First, we completed the separation of a 140-year-old company into two industry leaders with clear strategies and strong competitive positions. Second, we overcame the potential for distraction and the sheer magnitude of the work associated with the spin and delivered financial results that were well ahead of our 2023 annual budget. And finally, we made significant strategic progress by growing both our ATM as a service business by 30% to over 20,000 machines and by adding new FI partners and new countries to the network. I'm extremely grateful for the diligence, the fortitude, and the dedication of our global NCR Atlios team. and I'm very appreciative of the patience and support our customers showed us as we navigated a very challenging but rewarding year. Based on the company's strong performance throughout this year and the momentum we carried into 2024, today we announced 2024 guided ranges that are consistent with the preliminary targets highlighted in our December 5th investor update call. Paul will offer additional comments in a few minutes. Slide seven summarizes highlights from the fourth quarter. In self-service banking, we activated over 2,000 ATM as a service units during the quarter and achieved our goal of finishing the year with over 20,000 active as a service units. Activations in Q4 included 1,650 units for Santander in the UK. We also closed over 20 ATM as a service deals, including eight new ATM as a service customers and 12 extensions with existing satisfied customers. Selling success allowed us to finish the year with good backlog to support our 2024 revenue. The customer pipeline remains robust and our fully outsourced ATM solution continues to gain traction globally. And our ability to efficiently onboard and effectively serve our clients improves with each signing and subsequent activation. The network business had an impressive fourth quarter as well. Top line growth was strong across most regions. as our shared banking utility strategy continued to attract higher and more lucrative transaction volumes. The strong value proposition of the Allpoint network continues to resonate with financial institutions, including the leading non-bank FIs. For example, we recently announced that American Express selected the Allpoint ATM network to expand surcharge-free access in its business and consumer checking customers across the United States. Other notable financial institutions that joined the network in the fourth quarter included Morgan Stanley Wealth and Texas Bank. We also continued to expand our unique blue-chip retail partner network with the addition of retail segment leaders like Quick Trip, Total Petro Stations, and ASDA. Cash withdrawal transactions across the network grew 8% year-over-year, including 12% growth in the important surcharge-free withdrawals. And we again dispensed record amounts of cash. We continue to optimize network efficiency and tactically rationalize some underperforming locations. The combined effect of strong transaction growth, favorable transaction mix, and improved efficiency generated more than 20% adjusted EBITDA growth in the fourth quarter. Turning to slide eight, while Paul will walk you through the specific financial targets for 2024, I want to spend a couple of minutes on key goals and objectives that we have cascaded through the entire organization that should enable competitive, strategic, and financial success in 2024. Our operating plan for 2024 is structured around three objectives. One, differentiate and grow. Two, optimize scarce resource deployment. And three, successfully complete the separation. First, in an environment where the number of ATMs is relatively stable, growth will come from capturing more transactions on our fleet of 80,000 ATMs or from generating incremental service revenues from the 520,000 machines in our FI customers' fleets. We will differentiate the experience on our devices with more functionality, better customer interfaces, and leading reliability. We will evolve our hardware, innovate our product offering, augment functionality, and drive 24-7 availability with very limited downtime. Now, a pure-play ATM company with a singular focus, we can invest in our products and in our service capability to secure and extend our leadership position. Second, we will optimize the allocation of scarce people, capital expense, and operating expense resources. The call on capital will always exceed capacity. We have implemented screening processes that prioritize speed to market and nearer term revenue generation, followed by more robust project management and return models that are monitored and course corrected more frequently. Frequent measurement and clear accountability will result in higher realized returns and more rapid conversion to top line growth. Emphasizing continuous improvement as part of our culture will buttress what has been a project-based cost productivity effort across manufacturing and services to become a repeatable annual process. And now that we are a smaller company, we are simplifying our business model and reducing our indirect cost structure. And finally, we will successfully complete the separation of Atleos from NCR Voyex. Although the spin transaction was finalized on October 16th of last year, efforts to fully separate operations, systems, and even geographies is still ongoing. A few of our businesses have yet to transfer to us due to the lengthy administrative processes in certain countries, which we expect to resolve in the second quarter of this year. There is also a multitude of transitional service and commercial agreements between Atleos and Voyex. I'm working closely with David and his voice team to optimize economic outcomes, fairly adjudicate issues and wind down transition service agreements as quickly as possible to minimize duplicate costs or dis-energies. We have a great company that just completed a remarkable year, and we have good reason to anticipate a bright future for NCR Atlios. With that, Paul, over to you.