NCR Atleos (NATL) - 2024 Q2 - Quarterly Results

Q2 2024 Financial Highlights & Business Overview NCR Atleos reported strong Q2 2024 results, meeting or exceeding guidance with 4% revenue growth to $1.08 billion and 9% recurring revenue increase, reaffirming full-year targets Q2 2024 Key Results NCR Atleos reported strong second-quarter 2024 financial results that met or exceeded the high-end of its guidance, driven by a 4% revenue increase to $1.08 billion Q2 2024 Financial Highlights | Metric | Q2 2024 | YoY Change | | :--- | :--- | :--- | | Revenue | $1.08 billion | +4% | | Recurring Revenue | $793 million | +9% | | GAAP Net Income | $29 million | -45% | | Adjusted EBITDA | $193 million | -3% | | GAAP Fully Diluted EPS | $0.39 | -48% | | Non-GAAP Fully Diluted EPS | $0.81 | -51% | | Operating Cash Flow | $9 million | -89% | | Adjusted Free Cash Flow | $16 million | -78% | - CEO Tim Oliver attributed the strong performance to intensified focus on product/service quality and differentiated ATM outsourcing capabilities, driving increased interest from financial institutions and retail partners[1] - Given the strong first-half results and building commercial momentum, the company reaffirmed and narrowed its consolidated guidance ranges for full-year 2024[1] Financial Performance Analysis This section analyzes Atleos's Q2 2024 operating and segment performance, detailing revenue, profit, and EBITDA changes year-over-year Operating Results In Q2 2024, total revenue increased to $1.08 billion from $1.04 billion, while GAAP net income decreased significantly to $29 million from $53 million, and Adjusted EBITDA slightly declined to $193 million Q2 Operating Results Comparison (YoY) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Revenue | $1.08 billion | $1.04 billion | | Recurring Revenue | $793 million | $730 million | | GAAP Gross Profit | $253 million | $247 million | | Adjusted Gross Profit (Non-GAAP) | $276 million | $270 million | | GAAP Income from Operations | $107 million | $79 million | | Adjusted Income from Operations (Non-GAAP) | $152 million | $161 million | | Net Income Attributable to Atleos (GAAP) | $29 million | $53 million | | Adjusted EBITDA | $193 million | $198 million | Segment Performance The Network segment drove Q2 2024 growth with 6% revenue and 11% Adjusted EBITDA increase, while Self-Service Banking revenue grew 3% but Adjusted EBITDA declined 9% Q2 2024 Revenue by Segment (in millions) | Segment | Q2 2024 | Q2 2023 | % Change | | :--- | :--- | :--- | :--- | | Self-Service Banking | $673 | $654 | 3% | | Network | $326 | $309 | 6% | | T&T | $51 | $49 | 4% | | Total Segment Revenue | $1,050 | $1,012 | 4% | Q2 2024 Adjusted EBITDA by Segment (in millions) | Segment | Q2 2024 Adj. EBITDA | Q2 2023 Adj. EBITDA | % Change | Q2 2024 Margin | Q2 2023 Margin | | :--- | :--- | :--- | :--- | :--- | :--- | | Self-Service Banking | $158 | $173 | (9)% | 23.5% | 26.5% | | Network | $101 | $91 | 11% | 31.0% | 29.4% | | T&T | $8 | $6 | 33% | 15.7% | 12.2% | Financial Outlook Atleos provides its Q3 and full-year 2024 guidance, narrowing revenue forecasts and raising adjusted free cash flow targets while maintaining other key metrics Third Quarter and Full Year 2024 Guidance Atleos provided its outlook for the third quarter of 2024 and updated its full-year guidance, narrowing revenue forecast to $4.260 - $4.340 billion and raising adjusted free cash flow target to $190 - $220 million Q3 & Full Year 2024 Guidance | Consolidated | Q3 2024 Targets | Updated FY 2024 Targets | Prior FY 2024 Targets | | :--- | :--- | :--- | :--- | | Revenue | $1.045 - $1.075 billion | $4.260 - $4.340 billion | $4.200 - $4.400 billion | | Adjusted EBITDA | $195 - $205 million | $770 - $800 million | $770 - $800 million | | Non-GAAP Diluted EPS | $0.71 - $0.81 | $2.90 - $3.20 | $2.90 - $3.20 | | Adjusted Free Cash Flow-Unrestricted | $40 - $60 million | $190 - $220 million | $170 - $230 million | Consolidated Financial Statements This section presents Atleos's Q2 2024 consolidated statements of operations, balance sheets, and cash flows, detailing key financial positions and performance Statements of Operations For Q2 2024, total revenue was $1.081 billion, a 4% increase, but higher interest expense led to a net income of $29 million, down from $53 million in Q2 2023 Condensed Consolidated Statements of Operations (in millions) | Line Item | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Total Revenue | $1,081 | $1,040 | | Total Gross Profit | $253 | $247 | | Income from Operations | $107 | $79 | | Interest Expense | $(79) | — | | Income Before Income Taxes | $32 | $75 | | Net Income Attributable to Atleos | $29 | $53 | Earnings Per Share (Diluted) | Period | Diluted EPS | | :--- | :--- | | Q2 2024 | $0.39 | | Q2 2023 | $0.75 | Balance Sheets As of June 30, 2024, total assets were $5.765 billion, with $374 million in cash and $2.921 billion in long-term borrowings, reflecting a slight increase in total liabilities Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $374 | $339 | | Total current assets | $1,979 | $1,875 | | Goodwill | $1,951 | $1,952 | | Total assets | $5,765 | $5,716 | | Total current liabilities | $1,853 | $1,754 | | Long-term borrowings | $2,921 | $2,938 | | Total liabilities | $5,514 | $5,461 | | Total stockholders' equity | $251 | $255 | Statements of Cash Flows Q2 2024 net cash from operating activities significantly decreased to $9 million from $80 million, with net cash used in investing activities at $40 million and financing activities providing $57 million Condensed Consolidated Statements of Cash Flows (in millions) | Cash Flow Activity | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $9 | $80 | | Net cash used in investing activities | $(40) | $10 | | Net cash used in financing activities | $57 | $(39) | | Increase in cash, cash equivalents, and restricted cash | $23 | $50 | Non-GAAP Financial Measures & Reconciliations This section defines and reconciles Atleos's non-GAAP financial measures, including Adjusted Gross Profit, Adjusted EBITDA, and Adjusted Free Cash Flow, to their GAAP equivalents Definition of Non-GAAP Measures Atleos uses non-GAAP measures like Adjusted Gross Profit, Adjusted EBITDA, and Adjusted Free Cash Flow-Unrestricted to provide a clearer view of operational performance by excluding special items - The company uses non-GAAP measures to evaluate year-over-year operating performance and believes they provide a more complete understanding of underlying operational trends[14] - Adjusted EBITDA is a key metric used by management to evaluate segment performance and is calculated by adding back items like interest, taxes, D&A, and other special non-recurring charges to GAAP Net Income[15] - Adjusted free cash flow-unrestricted is defined as net cash from operating activities adjusted for capital expenditures, changes in restricted cash, and other specific financing and pension-related items[17] Reconciliation of GAAP to Non-GAAP Net Income & EPS For Q2 2024, GAAP Net Income of $29 million was reconciled to Non-GAAP Adjusted Net Income of $60 million, resulting in a Non-GAAP Diluted EPS of $0.81, primarily due to amortization and compensation adjustments Q2 2024 GAAP to Non-GAAP Reconciliation (in millions, except per share) | Metric | GAAP Result | Adjustments | Non-GAAP Result | | :--- | :--- | :--- | :--- | | Gross Profit | $253 | $23 | $276 | | Income from Operations | $107 | $45 | $152 | | Net Income Attributable to Atleos | $29 | $31 | $60 | | Diluted EPS | $0.39 | $0.42 | $0.81 | Reconciliation of GAAP Net Income to Adjusted EBITDA Q2 2024 GAAP Net Income of $29 million was reconciled to an Adjusted EBITDA of $193 million, primarily by adding back net interest expense, depreciation, and acquisition-related amortization Q2 GAAP Net Income to Adjusted EBITDA Reconciliation (in millions) | Line Item | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net income attributable to Atleos (GAAP) | $29 | $53 | | Interest expense, net | $79 | $5 | | Income tax expense | $4 | $23 | | Depreciation and amortization expense | $43 | $35 | | Acquisition-related amortization of intangibles | $23 | $25 | | Stock-based compensation expense | $9 | $19 | | Separation costs | $6 | $33 | | Other adjustments | $2 | $5 | | Adjusted EBITDA (Non-GAAP) | $193 | $198 | Reconciliation of GAAP Operating Cash Flow to Adjusted Free Cash Flow Q2 2024 Net Cash Provided by Operating Activities of $9 million was reconciled to an Adjusted Free Cash Flow-Unrestricted of $16 million, after accounting for capital expenditures and a temporary fund transfer Q2 Operating Cash Flow to Adjusted Free Cash Flow Reconciliation (in millions) | Line Item | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities (GAAP) | $9 | $80 | | Total capital expenditures | $(32) | $(14) | | Restricted cash settlement activity | $7 | $5 | | Pension contributions | — | $1 | | Transfer of temporary funds back to Voyix | $32 | — | | Adjusted free cash flow-unrestricted (Non-GAAP) | $16 | $72 | Other Information This section provides important context for investors, including Atleos's spin-off status and cautionary statements regarding forward-looking information and associated risks Notes to Investors Atleos became a standalone public company on October 16, 2023, meaning historical financial statements prior to this date were carve-out, potentially limiting 2024 vs 2023 comparability - Atleos became a standalone public company on October 16, 2023[4] - Prior to the separation, financial statements were prepared on a standalone carve-out basis from Voyix's records, which may affect the meaningful comparability of 2024 and 2023 results[4] Cautionary Statements The report includes cautionary statements about forward-looking information, detailing various risks and uncertainties that could cause actual results to differ materially from projections - The release contains forward-looking statements that are subject to a number of known and unknown risks and uncertainties[10][11] - Key risk factors include competition, economic conditions, data security, level of indebtedness, and potential challenges arising from the spin-off, such as failing to achieve expected synergies and having a limited history as an independent company[11]