NCR Atleos Corporation

our second quarter 2025 earnings presentation, which is available on the investor relations section of our website at .ncratlios.com. Today's presentation will include board looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in today's earnings materials and our periodic filings with the SEC, including our annual report. In our review of results today, we will also refer to certain non-GAAP financial measures. These non-GAAP measures are reconciled to their GAAP counterparts in the presentation materials. A replay of our earnings call will be available later this afternoon and can be accessed through our website. I will now turn the call over to Tim.

Thank you, Melanie, and welcome to the At.Leo's team. First week on the job, which we write into an earnings release. We appreciate you being here and we look forward to great things. Thank you to everyone for joining our call this morning. I'll start by quickly reviewing the quarterly operational performance and strategic progress from a more forward-looking and qualitative perspective. I'll leave the quantitative review to Andy. I will then provide some context on the current business environment and its consideration in our outlook. I'll end by reiterating the compelling At.Leo's story and describing a capital allocation strategy that anticipates steady growth and free cash flow. I'll be back after Andy's review to take your questions. For those following along in the presentation posted to the investor relations website, I'll start on slide five. In the second quarter, our sixth full quarter as a separate publicly traded company, At.Leo's reported another solid quarter relative to financial metrics and delivered an exceptional quarter from a strategic and competitive perspective. We grew efficiently by delivering robust hardware revenue that extends our leading install base and drove incremental revenue from the global service fleet by accelerating our outsourced services business. Our service-first initiative elevated service levels to new all-time highs and is being recognized by our partners and rewarded by our customers. And we embrace simplicity, reducing inefficiencies across the company, optimizing our production and supply chain operations, redesigning the organization to speed decision-making and investing in systems and people to make us easier to do business with. The exceptional effort across the company translated to strong financial results. Revenue was $1.1 billion. Core top-line growth was on pace with our plan, led atypically but not unexpectedly by traditional hardware revenue and the conversion of services growth backlog. This growth was partially offset by lower cardless payroll transactions in the US and by lower TNT segment revenue. Profitability ramped nicely and was at the high end of our expectations due to an advantageous hardware revenue mix, accretive outsourced ATM service revenue growth, fixed cost leverage and direct cost productivity, particularly in our service organization. These were all partially offset by a higher cash rental costs and higher tariffs. Considering Atlio's solid first half results, we continue to believe our full year 2025 guidance is appropriate. Backlog that supports both multi-year high traditional ATM deliveries and strong ATM outsourced service growth, coupled with cost productivity momentum should together be sufficient to offset lower cardless transactions in the network business and persistently high interest rates that impact our cash rental costs. Shifting to chart six, which describes a self-service banking segment. This is primarily a services business comprised of a global installed base of over 500,000 ATMs sold to financial institutions that then run on our subscription software and rely on the Atlio servicing agreement for the duration of their deployment. Traditionally, ATM services have been centered on maintenance and repairs, but increasingly banks are opting to outsource more or even all of their other services necessary to run an ATM. We now have over 120,000 machines that we support beyond traditional break-fix, including over 33,000 that are now fully outsourced to Atlio's. Segment financial performance was strong. Revenue grew an impressive 9% in the second quarter, benefiting from increased demand for our recycler product, coupled with acceleration in outsourced services. Services and software grew a combined 5%. ATM as a service was a primary source of services growth and continued to gain momentum with meaningful additions to total contract value, to customer count, and to backlog. This segment generated significant profit growth with margins up across each hardware, software, and services. A higher margin hardware mix and services growth augmented by productivity initiatives contributed to the margin expansion. We also continue to make good progress on our three objectives for 2025, which I'll remind you are, grow efficiently, prioritize service, and embrace simplicity. From a growth perspective, product innovation efforts are allowing our products to compete exceptionally well. Demand across the product portfolio, and especially at the recycler product, has exceeded expectations. Accelerating demand and the simultaneous relocation of the preponderance of our manufacturing and assembly to a singular plant have challenged our logistics organization, but their diligent efforts allowed us to make every delivery commitment in the second quarter, and they stand ready for a further ramp in the second half of 2025. While we consider ourselves a services company, growth in our hardware installed base catalyzes future period success. After eight years running, the ship's share leader in our collective ATM markets, in 2024, we moved into the first position for installed base and expect to extend that lead in 2025. We will increase the number of machines that we put into service in 2025 by almost 20% over what was a solid year in 2024. Demand for our ATM outsourcing services was also strong and accelerating. We streamlined the sales process and proved conversion rates resulting in our best quarter ever for ATMs as a service bookings. $177 million of new total contract value, including several orders for enterprise level customers, and in new geographies, including ING Spain, the State Bank of India, and Bank National Canada. Our service first initiative is working. Already industry leading service levels continue to trend upward in the second quarter, setting another new high and further enhancing customer satisfaction. Over the first half of the year, customer health scores have increased by 160 basis points, and half of your customers are buying more. Our efforts to simplify how we operate are generating positive business outcomes. Following the successful test run of our AI driven dispatch and service optimization model in Canada, we launched this product for all of North America in the second quarter. These AI tools are delivering improvement across our service performance metrics and are already allowing over 65% of our total dispatches in those regions to be scheduled without intervention. And turning to chart seven, summarizing the network segment. The network segment is a utility banking business that consists of approximately 80,000 owned and operated ATMs in 13 countries placed in blue chip retail locations where consumers can meet their regular banking needs. The network business continues to grow the number of network card holders, the number of client financial institutions, the types of transactions resident on the devices, and geographies. While second quarter trends for most transaction types and regions increased both year over year and sequentially, lower dynamic currency conversion due to less international traveling and lower US prepaid card transactions in cities with large migrant populations result in an overall modest decline in segment revenue. We do anticipate both of these to be transitory and temporal rather than trends. Adjusted EBITDA margin rate was on budget but decreased year over year due to the known expiration of interest rate hedges on our vault cash rental costs that were put in place at the time of the Cartronics acquisition. Growth opportunities and investments in this segment typically expand the footprint of the network or the transaction capability of the machines in the network. In Q2 we welcomed the return of 7-Eleven locations to our all point network and activated the first 1,000 locations for FCTI for processing. We will also deploy 5,000 at-lios devices backed by our service and support into the 7-Eleven US fleet with the rollout beginning in the fourth quarter. More recently we announced that we will add convenience retailer KC and their 2,900 locations for surcharge free transactions for our 75 million card holders at all point. And we added 6,500 ATMs and the Access Cash brand in Canada. Our new transaction types performed well. ReadyCode further expanded its presence in digital payments through an agreement with Incom Payments providing additional cardless use cases for the ATM. And cash deposit transactions grew 170% for the first half of the year in our US retail portfolio. We continue to build a pipeline of partnerships and integrations to increase transaction opportunities and volumes with a focus on FinTech issuers and wallet providers. Flipping to chart eight, I will use this as a backdrop to restate our strategy and illustrate our unique position. In separating from legacy NCR through a spin transaction in late 2023, Atleos is now a pure play independent company with a leadership position in self-service banking and a clear growth strategy. In a global environment that continues to demonstrate steady cash-based consumer transactions and a stable install base of ATM hardware, our growth will come from generating more revenue for every Atleos device that we support. Whether that's from providing high quality, more efficient and more comprehensive services to our financial institution clients, or by driving more transaction volume across our own network machine. Both of these strategies are fueled by our customers' desire to improve financial access for their customers, while also outsourcing more of their cash ecosystem. And NCR Atleos is uniquely positioned to benefit from either solution, a shared financial utility estate or an outsourced bank-specific fleet. Both vectors leverage a common Atleos infrastructure that has unmatched scale and is world class. And finally on chart nine, I summarize our investment thesis. Our separation is done, our TSAs are completed and we have no new commercial agreements with our former sister company. Nearly two years since our launch roadshow, the key tenants of our value creation strategy remain unchanged. Our strategy and the investment to support that strategy is supremely focused on the ATM and on physical to digital transaction types. Over the past six quarters, we have launched our innovation efforts and reclaimed our leadership position. We've expanded our installed base, we've grown our capabilities, we've returned to best in class service levels and engaged our global employee base in the service first culture. We've also improved our balance sheet and are about to cross a critical milestone of being under three times net leverage. With free cashflow projected to ramp considerably over the next several years and net leverage expected to drop below three times in the third quarter of this year, we believe a more balanced approach to capital allocation that favors the highest incremental ROI is now appropriate. To that end, the NCR Atlioz Board of Directors has authorized a $200 million share repurchase program with a two year duration. On nearly every measure and every multiple, I believe our company remains undervalued relative to our industry and relative to our peers. And at the return of the shares you purchased at these levels is very compelling. We plan to execute on their purchase program using a 10B51 plan while also driving further reductions in net leverage and pursuing small bull tone acquisitions that are creative and reduce net leverage. Before I hand off to Andy, I wanna thank our 20,000 employees all over the world for their dedication to our company, dedication to each other and to our customer. Their service first bias is driving our success and their unrelenting effort allowed us to deliver yet another strong quarter for the company. We will continue to be innovative, to drive impactful outcomes and to lead our industry from the front. The separate duration transaction is now behind us, our balance sheet continues to improve and our outlook is very bright. With that, Andy over to you.

Thank you, Tim. Building on Tim's comments, the company continued to perform well in the second quarter, making good progress on our plans for the year, advancing our long-term growth strategy and delivering solid financial results. The strong momentum we've built through the first half of the year, coupled with our robust hardware order book and sales pipeline, set this up well to meet our operating and financial objectives for the year. Importantly, over the past six quarters, the company has demonstrated the ability to generate profitable growth and significant free cashflow, which has enabled us to reduce financial net leverage from 3.7 times at the time of the split from legacy NCR to approximately 3.1 times at the end of the second quarter. Our confidence in the company's ability to continue growing profit and free cashflow in conjunction with good visibility into reaching net leverage of approximately 2.8 times as we close out the year, supports shifting to a more balanced approach for capital allocation. Given the company's current valuation and significant incremental earnings power, repurchasing our shares offers one of the most compelling value enhancing uses of our capital. So we are pleased to announce that the board has authorized a $200 million share repurchase program that represents approximately 10% of our current market capitalization. The repurchase authorization has a two-year term. Moving forward, our goal is to continue to invest in the business and balance share repurchases with further debt reduction at a pace that optimizes sustainable shareholder value creation. Starting on slide 11, I will focus my comments on core results for the second quarter. Because the wind down of VOIX related business impacts comparability with the prior year period, note that VOIX related comps will continue to be less meaningful during the second half of the year. The key message you should take away from this slide is that we delivered solid second quarter financial results with mid single digit core top line and EBITDA growth, margin expansion and high single digit EPS growth all within or above the upper end of our outlook. Poor revenue of just under 1.1 billion grew 4% year over year with 3% growth in our services and software businesses, including acceleration and ATM as a service growth. Hardware was up 18% year over year in line with our expectations, which drove 3% growth for the first half of the year. We demonstrated continued progress in our services focused growth strategy with recurring revenue streams accounting for over 70% of total revenue in the quarter. We achieved strong results with high recurring revenue alongside one of our best quarters for hardware sales in recent years. Strong growth in our higher margin recurring businesses coupled with good early progress on productivity initiatives drove 4% growth in adjusted EBITDA to 205 million. The primary source of EBITDA growth was the self-service banking segment, partially offset by decrease in network EBITDA, which was expected and a slight increase to corporate cost. Adjusted EBITDA margin of almost 19% expanded approximately 40 basis points in the prior year with strong margin expansion for self-service banking more than offsetting margin compression from the network segment. Below the line, net interest expense decreased 9 million compared to the prior year, benefiting from a lower debt balance, lower variable rate and lower credit spreads achieved in our credit facility refinancing late last year. The other income and expense line improved by 3 million year over year. The non-GAAP effective tax rate was approximately 26% for the second quarter compared to 17% in the prior year. Non-GAAP fully diluted earnings per share increased an impressive 9% year over year to 93 cents. We generated modest free cashflow in the second quarter due to ongoing investment in working capital to support another step up in hardware deliveries for the third quarter. Turning to slide 12, the self-service banking segment delivered exceptional financial results in the second quarter. Starting in the upper left, revenue grew 9% year over year and reached a new quarterly high of 733 million. The primary factor that drove the top line strength was 21% growth in hardware delivery, which reflects higher demand related to the industry refresh cycle, uptake of our recently upgraded recycler products and the anticipated shift towards the second quarter for our first half order book. Hardware demand remains robust and should drive another step up in revenue for the second half of the year. Our services and software businesses continue to generate healthy growth of 5% on a combined basis, with banks increasingly outsourcing more services to us. We estimate that the impact of deferred hardware revenue related to new ATM as a service agreements was approximately 130 basis point headwind on second quarter revenue growth. Moving to the chart on the top right, SSB grew adjusted EBITDA an impressive 20% in the second quarter to 189 million, also a new quarterly high. The key takeaway here is our ability to drive significant incremental profit through efficient, profitable growth and continuous productivity improvement. Segment adjusted EBITDA margin expanded 240 basis points year over year to almost 26%, with margins up across each line of business. Tariff had a gross impact of approximately $5 million in the quarter. Moving to the bottom of the slide, KPIs reflect the healthy fundamentals of the business. On the bottom left of the slide, we estimate the mix of recurring revenue was 57%, with recurring revenue comprising the majority of the business, even one of the strongest hardware quarters in recent years. Normalizing for hardware volumes, we estimate the mix of recurring revenue would have been 60% in Q2. ARR was up year over year, reflecting the continued build in recurring services and software revenue from our existing install base. Next is slide 13, and our A-Team as a Service Outsourcing Business. As a reminder, our Bank Outsourcing Solutions business resides within our Self-Service Banking segment. Advancing our customers through the continuum of ATM outsource services towards full outsourcing is a key strategic priority for the company. We break out primary operational metrics separately to help investors better understand and track our progress. As previously mentioned, we will continue to evolve how we discuss the outsourcing business in the coming quarters for better comparability with industry reporting practices. Starting at the top left of the slide, revenue grew 32% year over year to 62 million for the second quarter, led by 25% growth in unique customers and a favorable mix shift to Naimer, which is our highest margin geography. We also expanded to a new geography in Q2, closing our first deal in Spain. The chart on the right highlights the strong profitability of our ATM outsource services business, with gross profit up 72% year over year and gross margin up 900 basis points to 40%, benefiting from faster growth and margin expansion in Naimer, our most profitable region. Moving to the bottom of the slide, KPIs also demonstrate the positive trajectory of the business. On the left, ARR continues to build and was up 32% year over year to 249 million. We finished the quarter with a strong backlog and sales pipeline that puts us on track with our growth targets for the year. On the right, you can see the healthy revenue uplift we generate from our ATM as a service business, with second quarter ARPU of 8,300. The modest sequential downtick in ARPU for the second quarter was influenced by a higher mix of asset-like customers onboarded in recent quarters. Such fluctuations are expected because the base is still relatively small, so variables like region, scope, and timing of onboarding can impact ARPU for the quarter. Over the longer term, it should continue to trend upward from growth in higher ARPU regions like North America and Europe. Moving to the network segment on slide 14, second quarter results were at the lower end of our expectations. Segment revenue of 320 million was down 2% year over year on a reported basis. Digging into business results, cash withdrawal transactions were approximately 4% lower than the prior year, with mid single digit decreases in the UK and North America. As Tim noted, North America was impacted by several factors beyond our control. Disruption in one of ReadyCode's key digital payment partners coupled with shifts in government policy have affected certain consumer segments. As Tim mentioned, we've seen a decrease in dynamic currency conversion transactions as fewer people are traveling to the United States and also lower utilization of prepaid payment cards given certain government policies. Excluding those items, we estimate North America withdrawals would have grown low to mid single digits. On a positive note, our ReadyCode solution continues to garner interest from a variety of wallet, fintech and money services providers. Several new participants are in the process of coming live. We expect ReadyCode to return to growth in the coming month as these new partners, such as Incom, aggregate programs and funnel existing transactions to self-service. Additionally, we've completed certifications for our ATMs in South Africa, and we're seeing strong growth of 13% -over-year in the region, driven by a mixture of product and operational enhancements. We generated strong trapline trends for sources other than withdrawals, helping to diversify the business and support future growth. We continue to see strong momentum across our utility deposit network as deposit volumes were up 170% -over-year, with volumes exceeding $1 billion of annualized deposits for the first time. Moving to the upper right, adjusted EBITDA of 86 million was at the low end of our expectations. The -over-year decrease in EBITDA was expected, and was primarily due to a 12 million increase in vault cash costs, resulting from the wind down of previous hedges and macro-related transactional headwinds. Adjusted EBITDA margin was 27% in the quarter. The metrics at the bottom of the slide highlight key elements of our strategy. The chart on the left shows our last 12 months average revenue per unit continues to move higher sequentially. It was up 3% -over-year in the second quarter. On the right, you can see our ATM portfolio finished the quarter at approximately 77,000 units, which is flat sequentially. Looking forward, we expect the number of ATM network units to increase in 2025, to the addition of both new retail partners and geographies. Slide 15 presents a trending product-centric view of our results. This helps visualize how the complementary nature of our businesses creates a company that operates an attractive, growing, and highly profitable market. Most notably, it reinforces that Atleos is primarily a services business that generates recurring streams of revenue and profit. Second, the trend demonstrates that our strategy is working. Our services and software businesses have accelerated, coupled with the solid momentum in hardware revenues, fueling top line and profit growth. The consistent performance in our transactional business reaffirms the resilience of our business strategy. As a reminder, the other Vox operations represent legacy NCR Voyage's exited geographies and commercial agreements between Atleos and NCR Voyage. We expect business results to continue to decline in these non-core operations. In slide 16, we present a reconciliation of our second quarter free cashflow and a snapshot of our financial position at quarter end. We generated 15 million of free cashflow for the second quarter, which includes investments in our inventory to support our robust hardware delivery that is scheduled for the third and fourth quarters and is consistent with our outlook for the year. We expect to generate significant free cashflow in each of the remaining quarters as adjusted EBITDA progressively builds in the second half of the year. Net leverage was 3.1 times from the second quarter and was down approximately a half a turn compared to the prior year. We made $20 million of debt principal payments in the second quarter and finished with 2.9 billion of gross debt. Our unrestricted cash balance was just under 360 million at quarter end and resulted in a net debt balance of 2.5 billion. Based on our financial outlook and capital allocation priorities, we expect net leverage to be below three times in the third quarter. Moving to slide 17 for financial outlook. Given our solid second quarter results and positive momentum heading into the third quarter, we've reaffirmed the full year 2025 guidance ranges presented earlier this year. For the third quarter, we expect consolidated core revenue to grow in the mid single digit range. The VOIX related impact on top line should diminish further in the third quarter and result in low to mid single digit growth for the total company. We expect self-service banking revenues should grow mid to high single digits, benefiting from approximately 20% year over year growth in hardware and positive top line growth for services and software. We expect network revenue will be flat year over year with growth in the core ATM network business offset by lower Liberty crypto revenues. Adjusted EBITDA is projected to be between 210 and 225 million with margins in the mid 20s for self-service banking, high 20s for network and high teens for TNT. Below the line interest expense should be similar to Q2. Effective tax rate is expected to be approximately 25% and share count approximately 75 million. Putting the pieces together, we expect adjusted EPS to be in the range of 95 cents to $1.10. We expect free cashflow to meaningfully step up in the third quarter. As a reminder, the midpoint of our free cashflow guidance was 280 million and we expect a 40, 60% split between quarters three and four. Concluding my comments, Atlio's had a successful second quarter and first half of the year and sets us up well to achieve our plan for the year. We delivered solid financial results, had great operational execution and made progress on our key strategic priorities to grow efficiently, prioritize service and embrace simplicity. We have reaffirmed our guidance for 2025, despite continued tariff uncertainty and macro related transactional headwinds and have developed plans to mitigate risk. We move into the second half of 2025 with confidence in our approach and ability to drive profitable growth with our unmatched platform of ATM solutions for our customers, which will ultimately translate to shareholder value. With that, I will turn it back to the operator.