NCR Atleos, a leading provider of self-service financial solutions, has solidified its position as a trailblazer in the industry. With a rich history spanning decades, the company has consistently demonstrated its ability to adapt and innovate, positioning itself at the forefront of the ever-evolving financial technology landscape.
Company History and Evolution
Established in 1884 as the National Cash Register Company, NCR Atleos has a long and storied history in the financial technology sector. Initially focused on manufacturing and selling mechanical cash registers, the company has undergone a remarkable transformation over the decades. It expanded its product portfolio to include various business machines and technology solutions, evolving from a hardware-centric business to a comprehensive provider of cutting-edge self-service solutions. In 2022, NCR Corporation announced its plan to separate its self-service banking, network, and telecommunications and technology businesses into a new publicly-traded company, NCR Atleos. This separation was completed on October 16, 2023, marking a significant milestone as NCR Atleos emerged as an independent, standalone public company.
Transition and Challenges
The transition to an independent entity presented both challenges and opportunities for NCR Atleos. The company had to navigate the complexities of separating shared services and functions from its former parent company while maintaining uninterrupted service to its customers. Despite these challenges, NCR Atleos successfully leveraged its industry-leading expertise in self-service banking, ATM technology, and financial services to deliver strong financial results in its first year as an independent public company.
Product Portfolio
Today, NCR Atleos boasts an impressive portfolio of self-service banking solutions, including a comprehensive line of ATM hardware and software, as well as related installation, maintenance, and managed services. The company's expertise extends beyond just ATMs, as it also offers solutions to manage and run the ATM channel end-to-end for financial institutions, including back-office, cash management, software management, and ATM deployment.
Network Business
Recognizing the growing demand for seamless, digital-first financial experiences, NCR Atleos has also established a robust network business. Through its Allpoint network, the company provides a cost-effective way for financial institutions, fintechs, neobanks, and retailers to reach and serve their customers. This network offers convenient and fee-free cash withdrawal and deposit access, as well as the ability to convert digital values to cash or vice versa, enabling digital-first financial self-service experiences for consumers.
Business Segments
NCR Atleos operates through three main business segments:
1. Self-Service Banking Segment: This segment offers solutions to enable customers in the financial services industry to reduce costs, generate new revenue streams, and enhance customer loyalty. These solutions include a comprehensive line of ATM hardware and software, as well as related installation, maintenance, and managed and professional services.
2. Network Segment: This segment provides a cost-effective way for financial institutions, fintechs, neobanks, and retailers to reach and serve their customers through Atleos' network of ATMs and multi-functioning financial services kiosks. The company's proprietary Allpoint network offers fee-free cash withdrawal and deposit access, as well as the ability to convert digital value to cash or vice versa via ReadyCode (formerly Pay360). Additionally, Atleos provides ATM branding solutions and its LibertyX business gives consumers the ability to buy and sell Bitcoin.
3. Telecommunications & Technology (TT) Segment: This segment offers managed network and infrastructure services to enterprise clients across all industries. Atleos delivers expert professional, field, and remote services for modern network technologies including Software-Defined Wide Area Networking, Network Functions Virtualization, Wireless Local Area Networks, Optical Networking, and Edge Networks.
Financials
The company's financial performance has been consistently strong, with revenue reaching $4.19 billion in fiscal year 2023. Net income for the same period was -$134 million, while operating cash flow and free cash flow stood at $355 million and $223 million, respectively. Atleos' balance sheet remains solid, with a net debt position of $2.67 billion as of the end of 2023.
In the most recent quarter, NCR Atleos reported revenue of $1.07 billion, with a net income of -$57 million. Operating cash flow for the quarter was $107 million, while free cash flow stood at $38 million. The company achieved a year-over-year revenue growth of 1%, driven by 3% growth in service revenue, partially offset by a 7% decline in product revenue due to lower hardware and Bitcoin-related sales.
Recurring Revenue and Growth Drivers
Atleos' focus on recurring revenue streams has been a key driver of its success. In the latest quarter, the company reported that recurring revenue comprised 73.3% of total revenue, up from 71.7% in the same quarter of the previous year. This highlights the stability and predictability of its business model. The company's strategic shift towards software-led solutions and ATM as a Service offerings has further strengthened its position, with both segments experiencing strong growth.
The Self-Service Banking segment reported annualized recurring revenue of $1.66 billion in Q3 2024, up from $1.55 billion in the prior year period. ATM as a Service units grew from 18.2k to 22.8k over the same time period, with revenue growing 23% to an annual run rate of about $200 million.
The Network segment has also been a standout performer, with Last Twelve Months Average Revenue Per Unit (LTM ARPU) increasing from $14.8k to $15.9k year-over-year. The segment set another new high in revenue per machine, driven by continued migration of financial transactions to NATL's utility banking network.
Liquidity and Capital Structure
As of the most recent reporting period, NCR Atleos had $395 million in cash and cash equivalents, with an available credit line of $294 million. The company's debt-to-equity ratio stands at 11.73, while its current ratio and quick ratio are 1.07 and 0.88, respectively. NATL has made progress in reducing its debt, with net debt down by $76 million year-to-date, and the net leverage ratio dropping from approximately 3.7 to 3.5 times. The company recently executed a debt refinancing transaction that is expected to result in approximately $17 million in annual interest expense savings.
Future Outlook
Looking ahead, Atleos remains well-positioned to capitalize on the growing demand for self-service financial solutions. The company has reaffirmed its full-year 2024 guidance, with revenue expected to be in the range of $4.26 billion to $4.34 billion, and adjusted EBITDA projected to be between $770 million and $800 million. NATL now expects fully diluted non-GAAP earnings per share to be approximately $3.12 for the full year 2024, up from the previous guided range midpoint of $3.05.
The company expects the number of ATM as a Service units to increase in 2025 through the addition of new clients and geographies, further driving growth in this segment.
Challenges and Resilience
While the company has faced some headwinds, such as the impact of the COVID-19 pandemic and ongoing macroeconomic challenges, Atleos has demonstrated its resilience and ability to adapt. The company has successfully navigated these obstacles, implementing strategic initiatives to drive growth and operational efficiency.
Risks
One of the key risks facing Atleos is the potential for increased competition in the self-service banking and financial technology sectors. The company operates in a highly competitive environment, with both established players and emerging disruptors vying for market share. Atleos' ability to maintain its technological edge and continue to innovate will be crucial in its ongoing success.
Additionally, the company is subject to various regulatory and compliance requirements, which could impact its operations and financial performance. Atleos has a dedicated team focused on monitoring and addressing these regulatory changes, but any significant shifts in the regulatory landscape could pose a challenge.
Competitive Advantages
Despite these risks, Atleos' strong market position, diversified product portfolio, and focus on recurring revenue streams position the company for continued success. The company's strategic initiatives, such as its transition to software-led solutions and ATM as a Service offerings, are expected to drive further growth and profitability.
Industry Trends
The self-service banking and ATM industry is expected to grow at a compound annual growth rate (CAGR) of 5-7% over the next 5 years. This growth is primarily driven by the increasing adoption of digital banking and the need for banks to optimize their physical footprint. As a leader in this space, NCR Atleos is well-positioned to capitalize on these industry trends.
Conclusion
In conclusion, NCR Atleos has established itself as a leader in the self-service financial access space, with a rich history of innovation and a steadfast commitment to enabling digital-first financial experiences for its customers. As the company navigates the evolving landscape, its focus on recurring revenue, operational excellence, and strategic positioning will be key to its continued success. With strong financial performance, a solid balance sheet, and a clear growth strategy, NCR Atleos is well-equipped to build the future of self-service financial access and deliver value to its stakeholders in the years to come.