NCR Atleos Corp. Q1 FY2024 earnings call

• Atleos is an independent pure-play ATM company with a service fleet of ~600,000 ATMs, 15% owned/operated for Network business.
• Q1 financial results strong, led by transaction and services growth; profit margins climbing.
• Self-Service Banking: ATM-as-a-Service revenue up 40% YOY, 12 new deals in Q1, backlog over 4,000 units; geographically broad-based revenue growth.
• Network Segment: Robust transaction growth, record March volumes, deposit transactions fastest-growing; U.K. deposit locations launched in partnership with Cash Access UK.
• Strategic objectives: Differentiate/grow (ATM innovations, tap transactions, deposit locations); optimize resource allocation (reorganized functions, AI tool, productivity initiatives); complete separation from Voyix (transferred 4 countries, 3 remaining to transfer by Q3).

Self-Service Banking: Revenue grew 4% year-over-year to $628 million, with recurring revenue up 7% to 62% of segment revenues. Adjusted EBITDA was $134 million, down 160 basis points year-over-year due to separation dis-synergies, etc. ATM-as-a-Service revenue was up 37% year-over-year to approximately $46 million, with active units at ~21,000 and backlog over 4,000 units. Network Segment: Revenue increased 3% year-over-year, led by 11% growth in withdrawal volumes. Adjusted EBITDA increased 15% year-over-year to $86 million, with margin expanding 270 basis points to 28% due to higher growth and more profitable transactions.

• Full year 2024: Total company revenues expected $4.2B-$4.4B, adjusted EBITDA $770M-$800M, diluted adjusted EPS $2.90-$3.20, free cash flow $170M-$230M.
• Q2 2024: Total company revenues $1.06B-$1.09B, adjusted EBITDA $180M-$190M, diluted adjusted EPS $0.63-$0.73. Self-Service Banking revenue $645M-$660M, Network revenue $325M-$335M.

• Forward-looking statements subject to risks/uncertainties causing actual results to differ.
• Non-GAAP measures subject to reconciliation; separation dis-synergies and interest rate impacts on free cash flow.

Q: Talk about the ATM-as-a-Service deployment cadence to hit annual targets.

A: Paul Campbell said the business doesn't flow linearly, has over 4,000 in backlog, funnel activity robust, back half of year expected to have more volume than first half.

Q: Sustainability of transaction trends and ARPU?

A: Stuart MacKinnon said confident in continued transactions as cash remains stable, neobanks driving growth; ARPU growth from higher-margin deposit transactions.

Q: Visibility on ATM-as-a-Service units in given quarter?

A: Paul Campbell said working through scaling rollouts, funnel expected to come in more linearly; Tim Oliver added typical wins are 250-300 machines, with larger deals also present.

Q: Margin expansion drivers?

A: Paul Campbell said Network transaction volumes seasonal, higher margin; cost out initiatives compounding through the year.

Q: Dividend vs deleveraging commentary?

A: Timothy Oliver said intent on reducing indebtedness, stock repurchase program may make more sense currently, with more to say on dividend in second quarter.