10-K: NCR Atleos Reports Fiscal Year 2024 Results, Navigates Spin-Off and Strategic Shift

NCR Atleos Corporation details its financial performance for fiscal year 2024, marking its first year as an independent entity following its separation from NCR Corporation, while focusing on strategic growth initiatives and a transition to software-led solutions.

Summary

• NCR Atleos Corporation (NATL) reported its financial results for the fiscal year ended December 31, 2024.
• The company completed its separation from NCR Corporation (now NCR Voyix Corporation) on October 16, 2023, and launched as an independent publicly-traded entity.
• Total revenue for 2024 was $4.317 billion, a 3% increase compared to $4.191 billion in 2023.
• Recurring revenue grew to $3.136 billion, representing 72.6% of total revenue, compared to $2.982 billion in 2023.
• Net income attributable to Atleos was $91 million, a significant improvement from a net loss of $134 million in 2023.
• Adjusted EBITDA increased to $781 million, up from $732 million in the previous year.
• Research and development expenses were $66 million in 2024, compared to $77 million in 2023.
• The company is focused on shifting to a recurring ATM as a Service (ATMaaS) model and growing the Allpoint network.
• As of December 31, 2024, the company had approximately 20,000 employees worldwide.
• The company is subject to various evolving government laws and regulations, including those related to environmental protection, privacy and data protection, and anti-corruption.

Sentiment

Score: 7

Explanation: The document presents a balanced view with positive financial results and strategic progress, but also acknowledges risks and challenges associated with the spin-off and industry competition.

Positives

• Shift to a software-led solutions and ATM as a Service model is driving recurring revenue.
• Growth in ATMaaS units and revenue indicates successful adoption of the new service model.
• Increase in transaction levels at existing ATM locations.
• Expansion of the Allpoint network.
• Strategic acquisitions are complementing organic growth.
• Strong focus on risk management and data protection.
• Commitment to environmental management and supplier responsibility.
• Established a university hiring program and welcomed 200 intern and graduate hires in our inaugural year.
• Enhanced various Total Rewards programs, such as short-term incentive plans with common measures that reinforce commitment to operational excellence and align with external commitments.
• Launched training and development resources via Linkedin Learning and NCRA U (NCR Atleos University).

Negatives

• Sales have been historically seasonal, with lower revenue in the first quarter of each year.
• The degree to which the company is leveraged may materially and adversely impact its business, financial condition and results of operations.
• The terms of the documents governing the company's indebtedness include financial and other covenants that could restrict or limit its financial and business operations.
• The company may be required to write down the value of certain significant assets, adversely impacting its operating results.
• The company faces uncertainties with regard to regulations, lawsuits and other related matters.
• The company may be subject to actions or proposals from stockholders that do not align with its business strategies or the interests of its other stockholders.

Risks

• Unsuccessful growth strategies could negatively impact operating results.
• Failure to develop and introduce new solutions in a competitive environment.
• Inability to compete effectively within the technology industry.
• Failure to successfully integrate acquisitions or manage alliance activities.
• Adverse impact from domestic and global economic and credit conditions.
• Tariffs and other trade measures could adversely affect results of operations.
• Significant risks and uncertainties from the payments-related business and industry.
• Potential loss of vault cash and cost fluctuations based on interest rate movements.
• Failure to retain key employees or attract quality replacements.
• Defects, errors, installation difficulties, or development delays.
• Failure of third-party suppliers to fulfill needs.
• Major natural disasters or catastrophic events.
• Environmental exposures from historical and ongoing manufacturing activities.
• Climate change could negatively impact the business long-term.
• Data protection, cybersecurity, and data privacy issues.
• The degree to which the company is leveraged may materially and adversely impact its business, financial condition and results of operations.
• The terms of the documents governing the company's indebtedness include financial and other covenants that could restrict or limit its financial and business operations.
• The company may be required to write down the value of certain significant assets, adversely impacting its operating results.
• Failure to protect intellectual property may have an adverse effect on the business.
• Changes to tax rates and additional income tax liabilities could impact profitability.
• The company faces uncertainties with regard to regulations, lawsuits and other related matters.
• Changes to cryptocurrency regulations could impact profitability.
• If Atleos is unable to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, or its internal control over financial reporting is not effective, the reliability of Atleos financial statements may be questioned and Atleos stock price may suffer.
• Voyix may fail to perform under various transaction agreements that were executed as a part of the spin-off or Atleos may fail to have necessary systems and services in place when Voyix is no longer obligated to provide services under the various agreements.
• Under applicable tax law, Atleos may be liable for certain tax liabilities of Voyix following the spin-off if Voyix were to fail to pay such taxes.
• In connection with Atleos spin-off from NCR, Voyix has and will indemnify Atleos for certain liabilities. However, there can be no assurance that the indemnity will be sufficient to insure Atleos against the full amount of such liabilities, or that Voyixs ability to satisfy its indemnification obligation will not be impaired in the future.
• In connection with our separation, Atleos has and will assume, and indemnify Voyix for, certain liabilities. If we are required to make payments pursuant to these indemnities to Voyix, we would need to meet those obligations and our financial results could be adversely impacted.
• If the distribution of shares of Atleos, together with certain related transactions, does not qualify as a reorganization within the meaning of sections 368(a)(1)(D) and 355 of the IRS Code that is generally tax-free for U.S. federal income tax purposes, you and Voyix could be subject to significant U.S. federal income tax liability and, in certain circumstances, Atleos could be required to indemnify Voyix for material taxes pursuant to indemnification obligations under the tax matters agreement.
• To preserve the tax-free treatment to Voyix and its stockholders of the distribution and certain related transactions, under the tax matters agreement, Atleos is restricted from taking certain actions after the distribution that could adversely impact the intended U.S. federal income tax treatment of the distribution and such related transactions.
• The spin-off and related internal restructuring transactions may expose Atleos to potential liabilities arising out of state and federal fraudulent conveyance laws and legal dividend requirements.
• Certain of Atleos executive officers and directors may have actual or potential conflicts of interest because of their previous positions at NCR.
• Some contracts and other assets transferred or assigned from NCR or its affiliates to Atleos in connection with Atleos spin-off from NCR may require the consent of a third party. If such consent is not given, Atleos may not be entitled to the benefit of such contracts and other assets in the future, which could adversely impact Atleos financial condition and future results of operations.
• Atleos stock price may fluctuate significantly.
• Any sales of substantial amounts of shares of Atleos common stock in the public market or the perception that such sales might occur, may cause the market price of Atleos common stock to decline.
• Atleos cannot guarantee the timing, amount or payment of dividends on its common stock.
• Your percentage of ownership in Atleos may be diluted in the future.
• Certain provisions in Atleos charter and bylaws, and of Maryland law, may prevent or delay an acquisition of Atleos, which could decrease the trading price of the common stock.
• Atleos bylaws contains an exclusive forum provision that could limit a stockholders ability to bring a claim in a judicial forum that the stockholder believes is favorable for such disputes and may discourage lawsuits against Atleos and any of our directors, officers or other employees.
• We may be subject to actions or proposals from stockholders that do not align with our business strategies or the interests of our other stockholders.

Future Outlook

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

Management Comments

• The company is continuing its transition to software-led solutions.
• The company intends to continue pursuing opportunities to win new customers, expand its footprint and drive more transactions and foot traffic for its customers.
• The company also plans to continue to improve its execution to drive solid returns and to transform its business to enhance value for all stockholders.

Industry Context

The announcement highlights the increasing importance of self-directed banking solutions and the shift towards recurring revenue models in the financial technology industry. NCR Atleos is positioning itself to capitalize on these trends through its ATMaaS offering and Allpoint network.

Comparison to Industry Standards

• Competitors in the ATM software, services, and hardware space include Fiserv, Euronet, Cord Financial, Brinks, Hyosung, and Diebold Nixdorf.
• The company competes with financial institutions and other independent ATM deployers (IADs) for ATM placements, merchant accounts, branding, and acquisitions.
• The company's performance can be compared to that of companies in the S&P Composite 1500 Transaction & Payment Processing Services Index.

Management Changes

Legal Proceedings

• The company is subject to proceedings, lawsuits, claims and other matters, including those that relate to the environment, health and safety, labor and employment, employee benefits, import/export compliance, intellectual property, data privacy and security, payments services (including payment processing and settlement services), cryptocurrency, product liability, commercial disputes and regulatory compliance, among others.
• Voyix has been identified as a potentially responsible party in connection with certain environmental matters, including the Kalamazoo River matter.

Related Party Transactions

• The company has entered into various agreements with Voyix, including a Separation and Distribution Agreement, a Transition Services Agreement, a Tax Matters Agreement, an Employee Matters Agreement, certain intellectual property agreements, an employee matters agreement, the commercial agreements and other agreements, which provide for the performance by each company for the benefit of the other for a period of time after the spin-off.

Stakeholder Impact

• The company's performance and strategic decisions impact shareholders, employees, customers, suppliers, and creditors.
• The company is committed to managing its environmental footprint and protecting the global communities in which it operates.

Next Steps

• Continue investing to win new ATMaaS customers and convert existing customers operating under a traditional model.
• Continue investing in international expansion.
• Continue to complement and accelerate organic growth strategies through acquisitions.

Key Dates