NCR Atleos Corp. Q2 FY2024 earnings call

• Atleos is an independent pure-play ATM company with ~600,000 ATMs, focusing on generating more revenue per machine through services and transaction volume. - Second quarter saw services revenue up 6% and ATM as a Service revenue up over 30%. Key wins and renewals in self-service banking across geographies. - Network segment had robust performance with higher ARPU, transaction volumes, and progress on deposit and cardless cash payout initiatives. - Separation from NCR Voyix is on schedule, with focus on debt reduction and refinancing plans in the fall. The company continues to prioritize productivity initiatives and has completed early closure of transition service agreements.

Self-service Banking: Revenue grew 3% year-over-year to $673 million, with recurring revenue up 12% to 63% of segment revenues. ATM as a Service grew 31% year-over-year to $47 million, with active units over 22,000. Hardware orders were higher than expected, particularly for recycling products, boosting backlog. Network: Revenue increased 6% year-over-year to $326 million, with withdrawal volumes up 10%. Deposit transactions grew ~170% year-over-year. Adjusted EBITDA for Network was $101 million, up 11% year-over-year.

• Full year revenue midpoint unchanged at $4.3 billion, with range tightened to $4.26B-$4.34B. Adjusted EBITDA outlook reaffirmed at $770M-$800M. - Q3 total company revenue expected in range $1.045B-$1.075B, adjusted EBITDA $195M-$205M, adjusted EPS $0.71-$0.81, free cash flow $40M-$60M. - Self-service banking revenue range adjusted, network revenue range adjusted, T&T and other segments' outlooks modified based on learnings and current profiles.

• Macro headwinds and geopolitical risks affecting global economic trends. - Softness in the Liberty business impacting the Network segment's revenue outlook.

Q: Remind on balance sheet, cash interest expense, potential debt refinancing and leverage level for dividends/share repurchase A: Annual interest cost between $295M-$305M in 2024. Looking to refinance ~$750M term loan B. Target leverage of 3x for considering dividends/share repurchase.

Q: Hardware growth outlook for 2025 and network growth algorithm A: Feel good about 2024 hardware demand, expecting 2025 to be strong. In network, shorter term growth from withdrawal transactions, with new transaction types growing but currently smaller.

Q: Large contracts for ATM as a Service units, timing and confidence A: Line of sight to close large contracts late third or early fourth quarter with existing customers moving along the continuum. Not chasing unit numbers at the expense of profitability; prioritizing asset-light implementations.

Q: ATM as a Service light strategy, number of implementations in quarter, impact on medium-term targets A: Prioritizing asset-light transactions, with customers preferring to own devices in some cases. This has allowed higher free cash flow as not spending as much on capital. The strategy doesn't alter medium-term targets but ensures profitability.