NCR Atleos Corporation

Good day and welcome to the NCR Atlios Fourth Quarter and Full Year Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Brendan Mitrano, Vice President of Investor Relations. Please go ahead.

Good morning and thank you for joining the Atlios 2024 Full Year and Fourth Quarter Earnings Call. Joining me on the call today are Tim Oliver, CEO, Andy Wamser, CFO, Stuart McKinnon, COO, and Paul Campbell. Tim will start this morning with an overview of the company's performance this year and an update on strategic progress and priorities for 2025. Andy will follow with a review of financial results and our 2025 financial 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, which are often expressed by words such as may, will, include, expect, and words of similar meaning. 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. Also, in our review of results today, we will refer to certain non-GAAP financial measures, which the company uses to measure its performance, These non-GAAP measures are described and reconciled to their GAAP counterparts in our presentation materials and on the Investor Relations website. A replay of this call will be available later today on our website, investor.ncratlios.com. With that, I will turn the call over to Tim.

Thank you, Brendan, and thank you to everyone for joining us on this call this morning. For those following along in the presentation from the Investor Relations website, We'll start today on slide five. I will start this morning by reminding you of the compelling Atlios story, reviewing our operational performance and strategic progress in 2024, and then previewing our 2025 outlook. I'll then hand it off to Andy Walmser to review the financial results in the 2025 financial outlook. Andy joined Atlios as CFO in late January and brings the experience that includes CFO roles at public companies and investment banking. I'm very pleased to have Andy on the team. I'd also like to thank Paul Campbell, who recently stepped down from the CFO role for his 37 years with NCR and Atlios. He has continued to work with the company to facilitate the closing and the Sarbanes-Oxley process for 2024, and importantly, to ensure a smooth transition for the finance organization. I am grateful to Paul for both his significant contributions to our company over almost four decades, and more personally, for his support of me, both in my old role and in my new role as Atlios CEO. Reflecting on our first full year as an independent company and our best quarter yet, it is impossible to overstate what Atlios' team has accomplished. One year in, our employees are engaged and energized, our customers recognize a return to best-in-class service levels and appreciate our reinvigorated innovation efforts. Our strategic progress is pushing our revenue per ATM higher, and our financial performance has been solid and steady. In nearly every regard, 2024 was an outstanding year for Atlios, I am proud to report the company's impressive fourth quarter and full year results today. Despite being a standalone publicly traded ATM-centric company for about five quarters, equity investors' share of mind and daily trading volumes in the atlios are still too low. Presuming that many investors are new to this story, I think it is valuable on these calls to provide a quick description of the company and the compelling opportunity we see for all of our constituencies, but with particular focus on investors. While our employees, customers, partners, and communities have all recognized the compelling outlook for Atleos, the company remains significantly undervalued relative to our peer companies, and our strong performance has not translated into compensatory gains in enterprise value. Since separating from legacy NCR through a spin transaction, Atleos is now a pure play independent company with a leadership position in self-service banking, a clear strategy, and we've begun building a track record of strong financial performance and predictable free cash flow generation. Atlios has an installed and service fleet of approximately 600,000 ATMs around the world, including approximately 80,000 that we own and operate in our own networks. In a global environment that continues to demonstrate steady cash-based consumer transactions and a stable installed base of ATM hardware, our growth will come from generating more revenue for Atlios for every machine that we service and support. Whether that's from providing higher quality, more efficient, and more comprehensive services to our financial institution clients, or by driving more transaction volume across our own network machines located in blue-chip retail locations. Both of these strategies are fueled by our customers' desire to improve financial access for their customers while outsourcing more of their cash ecosystem. We service both growth vectors from a common infrastructure that is unmatched in scale, is leverageable, and is world-class. As global banks continue to seek to improve their customers' experience in the most cost-effective way, the importance of self-service devices is increasing. As a result, our customers are reinvesting back into their retail banking footprint and embracing shared financial utilities. For them, this strategy will result in lower costs, higher quality, better consumer experience, broader reach, and higher foot traffic. For Atleos, it will drive higher revenue growth, increased profitability from both scale and a richer revenue mix, and predictable and growing free cash flow. Turning to slide six for a review of 2024. 2024 was a year of unmitigated success for Atleos. After completing a complex corporate separation in October of 2023 that required us to be myopically focused on the completion of that transaction, we quickly redirected our focus to establishing a new independent company with a clear growth strategy, an engaged global employee base of nearly 20,000 people, and satisfied customers that allow us to be trusted strategic partners. For the full year 2024, we generated over $4.3 billion in revenue, $3.22 of adjusted EPS, over 242 million dollars of adjusted free cash flow all in line or above the financial targets we set out for the year margin expanded year over year and increased sequentially in each quarter benefiting from an accretive revenue shift mix toward services coupled with cost productivity initiatives that accelerated across the year as we begin 2025 our strategy is being validated demand for more capable atms with enhancements like cash recycling or tap capability or biometric authentication is accelerating. Banks and retailers are increasingly acknowledging the commercial logic of outsourcing non-core ATM services to capable operators like Atleos. And the demand for shared financial utilities that provide immediate and low-cost coverage away from traditional bank branches is growing globally. Moving to slide seven in the self-service banking business. This is primarily a service business comprised of globally installed base of over 500,000 ATMs that we sell to our financial institutions with a software subscription and then service and support over time. Traditionally, those services were centered on repairs and light maintenance, but increasingly banks are opting to outsource all of the other services necessary to run the ATM to others. Full year 2024 financial results were in line or slightly above expectations. Revenue grew at a healthy mid-single digit pace. Services and software were the primary growth drivers and resulted in 9% growth in recurring revenue. ATM as a service contributed one full point of top-line growth for the year. From a profitability perspective, direct and indirect cost savings initiatives generated over $100 million in gross savings, which eliminated split-related disenergies and more than offset inflation and unanticipated expenses like the Red Sea shipping disruption. This productivity, coupled with a more advantageous revenue mix, resulted in approximately 400 basis points of margin expansion from the first quarter through to the fourth. Over the past year, we committed considerable resources to product and service quality and go-to-market execution to support our strategy. Service levels began to improve quickly, and by the end of 2024, we're at multi-year highs. We were pleased to see our commitment to service acknowledged externally. In February of 2025, Atlios was awarded the ATMIA Outstanding Service Award, recognizing our company for excellence in technology service, and leadership and best practices. We also relaunched a product innovation effort and previewed concept machines that will be modified to reflect our customers' reactions to them and then ultimately commercialize. The top strategic priority for this business remains capturing more comprehensive service revenue for every machine that we service and support around the world. In 2024, we generated 27% revenue growth in the ATM as a service full outsourcing product and grew software and services overall at 8%. ATM as a service exited the year with an ARR of more than $20 million. We grew the number of unique customers by 50% in 2024 and finished the year with over 28,000 active devices. We have a robust backlog and a sales pipeline that positions us well for 2025. We continue to see appetite across the broad range of financial institutions to outsource all or a portion of their ATM-centric services to a singular provider. As discussed in last quarter's call, customers see the ATM-as-a-service opportunity as a continuum of outsourced services that can migrate piecemeal and over time. And while we have passed on some large unit count ATM full outsourcing deals in lower cost regions, our backlog continues to grow. The quality of that backlog is very high. And the significant streamlining of our onboarding organization has sped up implementation. For 2025, we expect the ATM as a service business revenue will grow over 40%. And then we will exit 2025 with an ARR of over $300 million. Moving to the network segment on slide eight. The network segment is our utility banking business that consists of approximately 80,000 owned and operated ATMs located in blue-chip retail locations. This business performed well in the fourth quarter and for the full year, with financial results generally above our expectations. The traditional ATM network revenues were up in the mid-single digits for the full year, excluding the decline in our crypto-conjection unit. LibertyX. Adjusted EBITDA margin expanded by more than 150 basis points, and ARPU grew in each quarter, with fourth quarter setting another new high. We generated strong top-line performance with high single-digit transaction growth in both the U.S. and in international markets, fueled by the addition of new high-quality banking and retail partnerships, new transaction types, and new geographies. Our Allpoint branded network grew transactions double digits for both the fourth quarter and the full year, as the value proposition continued to resonate with retail banking customers looking for convenient, safe, and low-fee channels to conduct their regular banking activities. Recently, a top 20 retail bank headquartered in the Midwest executed a new surcharge-free partnership agreement that will see them direct their customers to our retail locations. We expanded key commercial relationships and invested in technologies that enable us to conduct the broadest possible range of transactions at our machines. We expanded our partnership with Chime during the fourth quarter and we completed the branding of more than 4,000 Allpoint ATMs in our pharmacy locations now that display the brand of Chime. Many issuers and program managers, including key partners such as Capital One, PNC, and Navy Federal Credit Union, have upgraded to our more comprehensive Allpoint Plus offering that enables their customers to make cash deposits at our locations. This resulted in almost 200% growth in deposit transactions in 2024. Deposit transactions are profitable for us, and typically generate follow-on transactions by the consumer. We finished the year with an annualized run rate of nearly $1 billion in deposits. And we continue to see growth in our ReadyCode product, with transaction-driving programs at additional partners such as Lyft. ReadyCode is appropriate to many accountless, cardless cash distribution needs, and we are in discussion with several other significant partners. Turning to slide nine to discuss our plans for 2025. A year ago, we laid out three primary goals that were appropriately broad to allow every employee in our company to align their objectives with our company's success. Part of our success in 2024 is attributable to that continuity of thought and alignment. In 2025, we have again communicated new top-level objectives that should allow similar alignment and similar success. The first is to grow efficiently. Accelerating growth while we're still somewhat constrained by our balance sheet will require judicious allocation of growth capital and operating expense. We will emphasize those growth vectors that drive more immediate returns and are accretive to margin rate and to cash generation. We will also de-emphasize some products or regions or even customer sets that are less profitable to allow us to re-emphasize others. The second is to develop a service-first culture. We believe service, not product, is a key to differentiating factor in the ATM industry and in the cash ecosystem. Service already makes up about half of our revenue base and carries higher margins. As our strategic plan plays out, service revenue opportunities will outpace the overall market growth dynamic. Gaining share of wallet through outsourced services requires a deep customer trust that can only be achieved through sustained customer excellence and leading service performance. A 24-7, always-on customer service mindset is essential for our long-term success. And finally, we will embrace simplicity. The complexity that we inherited from our former life as part of the legacy NCR is unnecessary and inefficient. Investment in our people, our systems, and our processes will make us more nimble, make our employees' jobs more rewarding, and make us much easier to do business with. Our strategy is simple, and our operations need to be as well. Before I hand over to Andy, I want to thank the 20,000 Atlios team members for delivering a great first full year through their diligent work, their dedication to continuous improvement, focus on customer success, and a positive collaborative disposition. Thank you for all you did in 2024. And thank you for accepting the challenge of an even better 2025. The bar does get higher, but the future is bright. With that, Andy, over to you.