10-Q: NCR Atleos Reports Q1 2025 Results, Revenue Declines Amid Transition to ATM as a Service

NCR Atleos' Q1 2025 revenue decreased by 7% year-over-year, primarily due to the wind-down of Voyix commercial agreements and a shift towards ATM as a Service solutions.

Summary

• NCR Atleos Corporation reported its Q1 2025 financial results, with total revenue decreasing by 7% to $980 million compared to $1.05 billion in Q1 2024.
• Product revenue declined by 21% to $189 million, while service revenue decreased by 2% to $791 million.
• The revenue decline was attributed to the wind-down of commercial agreements with Voyix and a planned transition to ATM as a Service (ATMaaS) solutions.
• Net income attributable to Atleos was $17 million, a significant improvement from the net loss of $8 million in the same period last year.
• Adjusted EBITDA increased by 9% to $175 million, representing 17.9% of total revenue.
• The company's Self-Service Banking segment saw a 1% revenue decrease, while Network revenue decreased by 4% and T&T revenue decreased by 16%.
• The company is focused on transitioning to service and software-led solutions, with a growing emphasis on recurring revenue streams.
• The company is managing macroeconomic pressures, including higher interest rates, increased logistics costs, and foreign currency fluctuations.
• The company is exposed to cybersecurity risks and maintains cybersecurity risk management policies and procedures.
• The company expects to make contributions of $2 million to its international pension plans, $23 million to its U.S. pension plan, $23 million to its postemployment plan, and $1 million to its postretirement plans in 2025.

Sentiment

Score: 7

Explanation: The document presents a mixed picture. While revenue declined, profitability improved, and the company is making progress on its strategic transition to ATMaaS and recurring revenue. The sentiment is cautiously optimistic.

Positives

• Net income attributable to Atleos improved significantly, reaching $17 million compared to a loss of $8 million in the same period last year.
• Adjusted EBITDA increased by 9%, indicating improved operational efficiency and profitability.
• Recurring revenue as a percentage of total revenue increased to 75.7%, demonstrating a shift towards a more stable and predictable revenue model.
• Cost optimization efforts have contributed to lower total selling, general and administrative spend compared to the prior year period.
• The company terminated interest rate swaps associated with Term Loan Facilities on February 18, 2025, for cash proceeds of $13 million.

Negatives

• Total revenue decreased by 7%, primarily due to the wind-down of Voyix commercial agreements and a shift towards ATM as a Service solutions.
• Product revenue declined by 21%, driven by the conclusion of manufacturing services with Voyix and a shift away from one-time hardware sales.
• Service revenue decreased by 2%, impacted by unfavorable foreign currency fluctuations and a decline in hardware maintenance and installation revenue.
• T&T revenue decreased by 16% due to a decline in customer projects and hardware maintenance and installation revenue.
• Adjusted selling, general and administrative expenses as a percentage of revenue (non-GAAP) increased from 10.6% to 11.1% primarily due to the Voyix-related revenue impact.

Risks

• The company is exposed to macroeconomic pressures such as higher interest rates, increased logistics costs, and foreign currency fluctuations.
• The company is subject to cybersecurity risks and must maintain robust cybersecurity risk management policies and procedures.
• The company's ability to generate positive cash flows from operations is dependent on general economic conditions and the competitive environment.
• The company is subject to diverse and complex laws and regulations, including those relating to corporate governance, public disclosure and reporting, environmental safety and the discharge of materials into the environment, product safety, import and export compliance, data privacy and security, antitrust and competition, government contracting, anti-corruption, and labor and human resources, which are rapidly changing and subject to many possible changes in the future.
• The company shares liability with Voyix for certain investigatory and remedial activities, and related litigation, at facilities formerly owned or operated by Voyix, to comply, or to determine compliance, with environmental laws (the Shared Environmental Matters).

Future Outlook

Atleos expects to be a cash-generative business positioned to focus on delivering ATMaaS to a large, installed customer base across banks and retailers and continue shifting to a highly recurring revenue model to drive stable cash flow and capital returns to stockholders.

Management Comments

• Atleos is expected to be a cash-generative business positioned to focus on delivering ATMaaS to a large, installed customer base across banks and retailers.
• We believe it will build on our leadership in self-service banking and ATM networks to meet global demand for ATM access and leverage new ATM transaction types, including digital currency solutions, to drive market growth.
• Atleos is expected to also continue shifting to a highly recurring revenue model to drive stable cash flow and capital returns to stockholders.

Industry Context

The shift towards ATM as a Service reflects a broader trend in the financial services industry towards outsourcing non-core functions to specialized providers. The company's focus on recurring revenue aligns with the industry's emphasis on stable and predictable income streams.

Comparison to Industry Standards

• While specific benchmarks for ATMaaS are still developing, companies like Diebold Nixdorf and Hyosung TNS also offer similar managed services for ATMs.
• Atleos' recurring revenue percentage of 75.7% is comparable to software and service-oriented companies in the broader technology sector.
• The company's Adjusted EBITDA margin of 17.9% is within the range of profitability for established players in the financial technology industry.

Management Changes

Legal Proceedings

• The company is subject to various proceedings, lawsuits, claims and other matters, including, for example, those that relate to the environment and health and safety, labor and employment, employee benefits, import/export compliance, patents or other intellectual property, data privacy and security, product liability, warranty claims, commercial disputes and regulatory compliance, among others.
• In November 2015, in Hoak, et al. v. Plan Administrator of the Plans of NCR Corporation , participants and beneficiaries of certain deferred compensation retirement plans sponsored by NCR Corporation (collectively, the Plan) filed a putative class action lawsuit against NCR and other defendants, alleging the defendants breached the plan agreements by, among other things, paying lump sum payments based on mortality tables and actuarial calculations upon termination of the Plan.

Related Party Transactions

• Following the Separation, certain functions continue to be provided by or for Voyix under the Transition Services Agreements or are being performed using Atleos own resources or third-party service providers.
• Additionally, certain maintenance services, product resale and other support services and supply chain operations will continue to be provided by or to Voyix under the Commercial Agreements.

Stakeholder Impact

• The company's performance and strategic decisions can impact shareholders through stock value and dividends.
• Employees are affected by changes in the company's operations, restructuring, and compensation plans.
• Customers benefit from the company's solutions and services, particularly the transition to ATMaaS.
• Suppliers are impacted by the company's procurement decisions and supply chain management.
• Creditors are affected by the company's debt levels and ability to meet its financial obligations.

Next Steps

• Continue transition to service and software-led solutions.
• Focus on delivering ATMaaS to a large, installed customer base across banks and retailers.
• Improve execution to drive solid returns and to transform our business to enhance value for all stockholders.
• Continue to evaluate the long-term impact that geopolitical and macroeconomic pressures may have on our business model.

Key Dates

Keywords

ATM as a Service, recurring revenue, Adjusted EBITDA, financial results, self-service banking, NCR Atleos, revenue, Q1 2025, ATMs, Network