NCR Atleos Corporation

Good day and welcome to the NCR Atlios Q3 2025 earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to Melanie Skigis, head of investor relations. Please go ahead.

Good morning and thank you for joining the Atlios third quarter 2025 earnings call. Joining me on the call today are Tim Oliver, chief executive officer, Andy Walmser, chief financial officer, and Stuart McKinnon, chief operating officer. During the call, we will reference our third quarter 2025 earnings presentation available through the webcast and on our new investor relations website at investor.ncratlios.com. Today's presentation will include forward-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. 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. During the call today, we will also refer to certain non-GAAP financial measures which the company uses to measure its performance. These non-GAAP measures are reconciled to their GAAP counterparts in the presentation materials. The webcast this morning is being recorded and will be available for replay by accessing our investor relations website. With that, I will turn the call over to Tim.

Thanks, Melanie, and thank you to everyone for joining us on our call this morning. I will start this morning 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 Atleo story and describing a capital allocation strategy that anticipates steady growth and free cash flow. And then Stuart, Andy, and I will take your questions. Having now passed the second anniversary of our spin from legacy NCR, our separation process is complete. The magnitude of the effort and of the accomplishment cannot be overstated. We bifurcated or duplicated 140 years' worth of IT systems and hardware. We physically separated hundreds of global locations. We established dozens of new legal entities. We migrated over 700 critical customer connections and completed over 200 transition service agreements. I'm very pleased that the resources formerly dedicated to this effort can now be focused on growing Atlios. From the outset, we described two fundamental goals that we knew would be essential to the eventual evaluation of our company. First, establishing a quarterly pattern of transparent and predictable financial performance. And second, deploying free cash flow to reduce leverage, and then begin returning free cash to shareholders. In the third quarter, our seventh full quarter as a separate publicly traded company, Atlios extended a series of steady financial performance that has repeatedly been consistent with our expectations and our external guidance. The resiliency of both Atlios' business model and its employees that drive it, augmented by prudent contingency planning, have allowed us to overcome exogenous shocks like 50% import tariffs, persistently high interest rates, disrupted supply routes, and dramatic shifts in immigrant work payrolls. As we enter the fourth quarter, we have also crossed the originally targeted threshold leverage level of three times and are on path to be at about 2.8 times at year end. While we were unable to repurchase shares in Q3 due to trading window restrictions, we expect to begin repurchasing Atleo shares in the upcoming trading window and to establish a 10b-5-1 plan that dictates the repurchase program thereafter. For those following along in the presentation from the Investor Relations website, I will start on slide 5 that provides a quick visual of our vertically integrated self-service offering. As digital transaction and asset types proliferate, The translation to and from physical assets becomes increasingly complex and is accelerating outsourcing of self-service banking and the cash ecosystem. Banks and retailers are demanding more efficient and lower friction physical transactions at more capable devices and at convenient and safe locations beyond the branch. Our service infrastructure and installed base of machines is purpose-built to solve these needs. We become essential to any transaction that requires physical authentication, and the ability to dispense or accept or even safekeep valuable physical assets. NCR Atleos is uniquely positioned to benefit from either of the two solutions, a shared financial utility ATM estate or outsourced bank-specific fleets. Both growth vectors leverage a common Atleos infrastructure that is world-class, has unmatched global scale, and delivers significant cost leverage. Turning to chart six, which describes our Q3 performance against our qualitative and financial goals. The third quarter was an exceptional quarter from a strategic and competitive perspective. We grew efficiently by delivering robust hardware revenue that augments our leading installed base with record production from our manufacturing facility in Chennai. We drove incremental revenue from the global service fleet by accelerating our outsource services business. Our service first initiative elevated service levels and is being recognized by our partners and rewarded by our customers. And we embrace simplicity, reducing inefficiencies across the company, optimizing our production supply chain operations, redesigning the organization to speed decision making, and investing in systems and people to make it easier to do business with. Core top line growth was 6%, led atypically but not unexpectedly by traditional hardware revenue and the conversion of services backlog. This growth was partially offset by lower payroll card transactions in the U.S. network business. Profitability ramped nicely and was at the high end of our expectations due to an advantageous hardware revenue mix, accretive outsourced ATM as a service revenue growth, fixed cost leverage, and direct cost productivity in our service organization. These were all partially offset by higher cash rental costs and higher tariffs. Shifting to chart seven, which describes the self-service banking segment. This is primarily a service business comprised of a global installed base of over 500,000 ATMs sold to financial institutions that run our subscription software and rely on Atleo servicing agreements for the duration of their deployment. Traditionally, ATM services have been centered on maintenance and repair, but increasingly banks are opting to outsource more or even all of the services necessary to run and manage their ATMs. We now have over 120,000 machines that we support beyond traditional break-fix, including those that are fully outsourced at Leos. Segment financial performance was strong. Revenue grew an impressive 11% in the third quarter, benefiting from increased demand for our recycler product, coupled with acceleration in outsourced services. Services and software combined grew 5%. And 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. Scalable services growth and advantageous hardware mix were augmented by indirect productivity efforts, all contributed to margin expansion. Demand across the product portfolio, and especially our recycler product, has exceeded expectations. In early 2024, we launched an effort to strengthen our manufacturing capabilities, to prioritize our engineering effort, and to increase throughput for next-generation recyclers. This effort has now reduced our delivery lead times from months to weeks. Demand for our ATM outsourced services is also strong and accelerating, posting 37% growth in Q3. We have streamlined the sales process and improved conversion rates, resulting in our best quarter ever for ATM-as-a-service bookings. Approximately $195 million of total contract value, including our first as a service customers in Latin America and in the Middle East. Backlog remains strong in this business and we expect the fourth quarter implementations to be the highest of the year. Our service first initiative is working. Already industry leading service levels continue to trend upward in the third quarter. We completed our annual customer satisfaction survey in the third quarter and the results showed an impressive 30% improvement in our net promoter score from already solid scores in the prior year. We will use the detailed data from this survey to focus on areas that need improvement and we'll follow up with every customer comment and request. 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 for all of North America in the second quarter. These AI tools have delivered meaningful improvement in both first-time repair and time-to-repair metrics through automated dispatching. We will roll these tools out in the UK and Europe in Q1, and we'll test a third AI tool in North America in 2026 that is focused on preventative maintenance. Turning to chart 8, summarizing the network segment. The network segment is our utility banking business that consists of approximately 80,000 owned and operated ATMs in 13 countries that are placed in blue chip retail locations where consumers can meet their regular banking needs. The network business continues to grow the number of network cardholders, the number of client financial institutions, the types of transactions resonant on the machine, and the geographies. Similar to Q2, positive trends in surcharge-free transactions, cash deposits, and TAP were more than offset by significantly lower payroll card transactions in U.S. cities with large migrant workforces and lower dynamic currency conversion transactions due to fewer international visitors. The net result was an overall modest decline in segment revenue. These two effects seem to have stabilized at new levels in August and September. And that said, our rolling 12-month ARPU was up slightly, and our machine count grew to about 81,000 machines, offsetting the recurring reduction we've seen from pharmacy closures. Growth in this segment typically results from expanding the number of cardholders, extending the footprint of the network, or growing the transaction capability of the machines in the network. In Q3, Allpoint executed an important branding agreement with a top 10 U.S. bank and added deposit capability with the world's largest credit union. Our emerging transaction types were equally successful. ReadyCode further expanded its presence in digital payments through an agreement with CoinMe. And volumes from GID workers are recovering quickly from a contractual pause. Cash deposits were up 90% with particular lift from TAP-based deposits. Our newer fleets in Greece and Italy are outperforming expectations in these cash-preferred economies. And 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. And finally, on chart nine, I summarize our investment thesis. First, our comprehensive portfolio is unique and allows Atleos to be indifferent to the self-service solution our customers prefer, whether that is a full outsourcing of traditional infrastructure or membership and access to a shared financial utility network. Second, our scale is unmatched and enables world-class service and efficient incremental costs. Third, the outsourcing of the cash ecosystem and physical transactions by banks and retailers is accelerating, and we are the obvious choice to take on that work. Fourth, we understand the importance of a new small cap company like Atleos to establish a track record of consistency and transparency. Seven quarters in our financial performance in every quarter has been very similar to our guided ranges. And finally, We expect to generate predictable free cash flow at steadily improving free cash flow yields sufficient to simultaneously improve our balance sheet and repurchase shares. Before Andy walks you through the detailed results, I'd like to express my appreciation to the 20,000-strong Atlios employee base. If you subscribe to any of our social media channels, you know that our recently celebrated Atlios Brand Week highlighted a positive, dedicated, and engaged global team. Our continued success is entirely due to our collaborative spirit and our collective effort. Together, let's close out a successful 2025 and carry momentum into 2026. And with that, Andy, over to you.