NCR Atleos Corporation (NYSE: NATL) is an industry-leading financial technology company that is at the forefront of revolutionizing self-directed banking solutions for a global customer base, including financial institutions, merchants, manufacturers, retailers, and consumers. With a steadfast commitment to innovation and a relentless focus on customer success, NCR Atleos has emerged as a trailblazer in the rapidly evolving self-service banking landscape.
Business Overview and History Established in 1884 as the National Cash Register Company, NCR Atleos has undergone a remarkable transformation over the past century, evolving from a traditional cash register manufacturer to a pioneering provider of advanced self-service banking solutions. On October 16, 2023, the company executed a spin-off from its parent, NCR Corporation, to become an independent, publicly-traded entity, marking a significant milestone in its growth trajectory.
The spin-off was a complex corporate separation that required NCR Atleos to carve out its operations from NCR and establish itself as an independent public entity. During this time, the company had to be laser-focused on completing the spin-off while ensuring a smooth transition for its employees, customers, and operations. Prior to the spin-off, NCR Atleos' historical financial statements were derived from NCR's consolidated financial statements and accounting records, and the company relied on NCR's corporate overhead and other support functions for its business operations.
NCR Atleos operates three core business segments: Self-Service Banking, Network, and Telecommunications Technology (TT). The Self-Service Banking segment offers a comprehensive suite of ATM hardware, software, and related services, enabling customers in the financial services industry to streamline operations, generate new revenue streams, and enhance customer loyalty. The Network segment provides a cost-effective platform for financial institutions, fintechs, neobanks, and retailers to reach and serve their customers through the company's extensive network of ATMs and multi-function financial services kiosks. The TT segment offers managed network and infrastructure services to enterprise clients across various industries.
NCR Atleos has established itself as a leading provider of self-directed banking solutions, with an installed and service fleet of approximately 600,000 ATMs around the world, including approximately 80,000 that it owns and operates in its own networks. The company serves as a critical partner for financial institutions, retailers, and consumers, enabling them to improve financial access and reduce costs through its comprehensive suite of hardware, software, and services.
Financial Performance and Metrics In the fiscal year 2024, NCR Atleos reported total revenue of $4.32 billion, a 3% increase from the previous year. The company's recurring revenue, which includes software maintenance, processing, and network fees, accounted for 73% of total revenue, reflecting the success of its strategic shift towards a more predictable and profitable business model. Adjusted EBITDA for the full year 2024 was $781 million, representing a 7% year-over-year growth and a margin of 18.1%.
The company's focus on driving operational efficiency and productivity initiatives has yielded impressive results. In the fourth quarter of 2024, NCR Atleos reported an adjusted EBITDA margin of 19.8%, a 360-basis point expansion compared to the same period in the prior year. This margin expansion was driven by the continued growth in high-margin service and software revenue streams, as well as the company's ability to optimize its cost structure.
Recurring revenue streams, which include software maintenance, processing, and network fees, grew 5% year-over-year in 2024, reaching $3.14 billion. This shift towards a more recurring revenue base has provided NCR Atleos with greater visibility and stability in its financial performance. Additionally, the company's ATM as a Service (ATMaaS) offering, which provides a comprehensive outsourced solution for financial institutions, continued to gain traction, with revenue growing 27% in 2024 and the active device count reaching over 28,000 by the end of the year.
Financials NCR Atleos' financial performance demonstrates its ability to generate consistent revenue growth and maintain profitability in a competitive market. The company's focus on recurring revenue streams and high-margin services has contributed to its strong financial position. In 2024, NCR Atleos reported a gross profit of $1.13 billion, representing a gross margin of 26.2%. The company's operating income for the year was $435 million, with an operating margin of 10.1%.
For the full year 2024, NCR Atleos reported net income of $91 million and operating cash flow of $344 million. The company generated $242 million in free cash flow, demonstrating its ability to convert earnings into cash and support its growth initiatives.
In the fourth quarter of 2024, NCR Atleos reported revenue of $1.1 billion, up 1% year-over-year. Net income for the quarter was $46 million, with operating cash flow of $80 million and free cash flow of $119 million. The revenue increase was driven by mid-single digit growth in services and software revenue, partially offset by declines in non-core commerce and Bitcoin-related revenues. The improvement in profitability was due to favorable business mix, cost productivity initiatives, and lower separation-related costs compared to the prior year period.
Liquidity As of December 31, 2024, NCR Atleos maintained a solid liquidity position with $419 million in cash and cash equivalents. The company's total debt stood at $2.89 billion, resulting in a net debt position of $2.47 billion. NCR Atleos has a debt-to-equity ratio of 7.35, reflecting its leveraged capital structure. The company has access to a $350 million revolving credit facility, of which $225 million was drawn as of December 31, 2024. NCR Atleos' current ratio is 1.04, and its quick ratio is 0.86, indicating adequate short-term liquidity.
Resilience in the Face of Challenges Throughout its history, NCR Atleos has demonstrated its ability to navigate and overcome various industry challenges. During the COVID-19 pandemic, the company quickly adapted its operations and service offerings to support its customers' evolving needs, ensuring uninterrupted access to self-service banking solutions. The company's global footprint and diverse customer base have also provided a degree of resilience, mitigating the impact of regional economic fluctuations.
In 2024, the company faced additional headwinds, including higher interest rates and inflationary pressures, which impacted its vault cash rental costs. However, NCR Atleos was able to offset these challenges through productivity initiatives and the continued shift towards higher-margin service and software revenue streams. The company's strong operational execution and disciplined cost management enabled it to maintain profitability and generate robust free cash flow, which reached $242 million in 2024.
Furthermore, NCR Atleos had to navigate global macroeconomic pressures and geopolitical events that occurred during 2023 and 2024, including increased logistics costs and foreign currency fluctuations. The company demonstrated its adaptability by adjusting its operations and strategies to mitigate the impacts of these external factors on its business.
Growth Strategies and Opportunities As the self-service banking industry continues to evolve, NCR Atleos is well-positioned to capitalize on several key growth opportunities. The company's strategic focus on providing comprehensive outsourced solutions, such as its ATMaaS offering, has resonated with financial institutions seeking to reduce costs, enhance customer experiences, and expand their reach.
The global demand for self-service banking solutions is expected to remain strong, driven by the increasing preference for convenient and digitally-enabled financial services. NCR Atleos is leveraging its industry-leading expertise and extensive global footprint to expand its presence in both developed and emerging markets, targeting new customer segments and exploring new revenue streams.
The company's investments in product innovation, software capabilities, and data analytics are also expected to drive growth. By enhancing the functionality and user experience of its self-service banking solutions, NCR Atleos aims to solidify its position as a trusted partner for financial institutions and retailers, enabling them to deliver exceptional customer service and drive operational efficiencies.
Furthermore, the company's Network segment, which operates the Allpoint network of surcharge-free ATMs, continues to be a source of recurring and high-margin revenue. As consumers' demand for convenient cash access and digital banking services grows, NCR Atleos is well-positioned to leverage its extensive network and strategic partnerships to expand its reach and capture a larger share of this thriving market.
Segment Performance and Outlook NCR Atleos' three reportable segments have shown varied performance and contribute differently to the company's overall results:
Self-Service Banking Segment: In 2024, this segment generated revenue of $2.70 billion, representing 62.5% of the company's total revenue. Adjusted EBITDA for this segment was $640 million, or 23.7% of segment revenue. The segment's performance was driven by an increase in ATMaaS revenue, software-related revenue, and hardware maintenance and installation revenue, partially offset by a decrease in ATM hardware revenue as the company shifted more towards recurring revenue streams.
Network Segment: This segment generated revenue of $1.28 billion in 2024, representing 29.8% of the company's total revenue. Adjusted EBITDA for this segment was $404 million, or 31.4% of segment revenue. The increase in revenue and Adjusted EBITDA was primarily driven by growth in transaction processing services revenue and other software-related revenue, partially offset by a decline in Bitcoin-related revenue.
Telecommunications Technology (TT) Segment: In 2024, this segment generated revenue of $194 million, representing 4.4% of the company's total revenue. Adjusted EBITDA for this segment was $35 million, or 18.0% of segment revenue. The decrease in revenue was primarily due to a decline in hardware maintenance and installation revenue, partially offset by an increase in one-time hardware sales.
Geographic Performance NCR Atleos operates globally, with 55% of 2024 revenue generated outside the United States. The company has a presence in over 140 countries, with strong market positions in regions like Europe, Middle East and Africa (31% of 2024 revenue) and Asia Pacific (12% of 2024 revenue). This global footprint provides diversification and opportunities for growth in emerging markets.
Industry Trends and Market Position The self-service banking industry is experiencing steady growth, driven by the increasing importance of ATMs and interactive teller machines (ITMs) in delivering convenient financial access. The global ATM market is expected to grow at a CAGR of around 5-7% over the next 5 years, as banks continue to rationalize branch networks and embrace outsourced ATM models like NCR Atleos' ATM as a Service offering.
NCR Atleos is well-positioned to capitalize on these industry trends through its comprehensive self-service banking solutions and focus on operational excellence. The company's strategic initiatives, such as the expansion of its ATMaaS offering and the growth of its Allpoint network, have contributed to its improved financial performance and position it for continued success in the self-directed banking solutions market.
Future Outlook and Guidance Based on its strong performance in 2024 and favorable industry trends, NCR Atleos has provided guidance for the fiscal year 2025:
- Total company reported revenue is expected to grow 1% to 3% on a constant currency basis, with a 2% FX headwind. - Total company adjusted EBITDA is expected to grow 7% to 10% on a constant currency basis, with a 1% FX headwind. - Fully diluted earnings per share is expected to grow 21% to 27% and be in the range of $3.90 to $4.10. - Free cash flow is expected to be between $260 million to $300 million.
For the first quarter of 2025, the company expects: - Core revenues, excluding Voyix, to be essentially flat on a constant currency basis. - Total company reported revenue to be down mid-single digits due to the cycling of prior year Voyix related revenue. - Adjusted EBITDA to be $165 million to $175 million, representing approximately 5% growth year-over-year at the midpoint. - Adjusted EPS of $0.50 to $0.60 per share, representing 34% year-over-year growth at the midpoint. - Free cash flow is expected to be modestly negative in Q1 due to working capital investments to fulfill Q2 hardware orders.
Conclusion NCR Atleos Corporation has demonstrated its resilience and innovative spirit in the rapidly evolving self-service banking industry. With a strong focus on customer success, a commitment to technological advancement, and a diversified business model, the company is poised to capitalize on the growing demand for self-directed banking solutions globally. As NCR Atleos continues to execute its strategic initiatives and leverage its industry-leading expertise, it stands to deliver sustainable growth and create long-term value for its shareholders.