NATL Q1 2025: ATM-as-a-Service Revenue Jumps 40%, Margins Expand 700bp
- Strong Hardware Demand and Backlog: Executives highlighted that this could be the best hardware year since 2019 with an anticipated 8% revenue growth on hardware, driven by competitive product innovation and a robust replacement cycle, ensuring a solid and growing backlog.
- Robust ATM-as-a-Service Expansion: The company reported impressive growth in its ATM-as-a-Service segment with a significant increase in unique customer count (up to 40% YoY) and expanding margins, driven by higher ARPU in key markets such as North America, positioning the recurring revenue stream for strong long‐term gains.
- Improved Capital Efficiency and Shareholder Returns: Management is aggressively reducing leverage toward a target of under 3x while expecting substantial free cash flow in the latter half of the year, which reinforces a strategy aimed at future share repurchases to deliver enhanced shareholder value.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | Down 6.7% (from $1,050M to $980M) | Total revenue declined by $70M largely driven by significant reductions in product revenue, partially offset by relatively stable service revenue. Previous periods' higher revenue in product sales, which have been impacted by a shift toward recurring revenue models, contributed to the current decline. |
Product Revenue | Fell 21% (from $240M to $189M) | Product revenue experienced a sharp 21% decline likely due to the wind-down of traditional one-time hardware sales and a transition toward recurring models such as ATM as a Service. The previous period’s reliance on hardware and non-recurring sales amplified the impact of this shift in Q1 2025, resulting in lower product revenue figures. |
Service Revenue | Down 2.4% (from $810M to $791M) | Service revenue remained relatively stable with only a modest 2.4% reduction, reflecting the resilience of recurring service contracts. While the previous quarter benefited from slightly higher service deliveries, the current period saw minor declines possibly due to order timing and delayed revenue recognition, keeping the overall service revenue at similar levels. |
Operating Income | Increased 33% (from $72M to $96M) | Operating income improved by 33% despite lower total revenue, indicating more disciplined cost management and improved margins. The previous period’s lower operating income at $72M has risen to $96M as cost efficiencies and better expense control helped compensate for the revenue declines. |
Net Income Attributable to Atleos | From a loss of $8M to a gain of $17M | Net income flipped from a $8M loss to a $17M gain, a turnaround of $25M, due to the combination of improved operating income, stronger margin control, and likely the reduction of one-off charges or special items that affected the previous period. This significant improvement highlights a shift in the underlying profitability dynamics compared to Q1 2024. |
Operating Cash Flow | Down 17% (from $148M to $123M) | Operating cash flow fell by approximately 17% despite higher operating income. This decline may be due to adjustments in working capital, timing differences in cash collections and payments, or increased investments that impacted the cash conversion cycle compared to the more favorable cash flow conversion in the previous period. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Core Revenues | Q1 2025 | Expected to be essentially flat on a constant currency basis. | no current guidance | no current guidance |
Total Company Reported Revenue | Q1 2025 | Expected to decline mid‐single digits due to the cycling of prior year comparisons for the Voyix‐related segment. | no current guidance | no current guidance |
Adjusted EBITDA | Q1 2025 | Projected to be between $165 million to $175 million, representing approximately 5% growth YoY at the midpoint. | no current guidance | no current guidance |
Adjusted EPS | Q1 2025 | Expected to be between $0.50 to $0.60 per share, representing 34% YoY growth at the midpoint. | no current guidance | no current guidance |
Free Cash Flow | Q1 2025 | Expected to be modestly negative due to working capital investments in inventory for a robust Q2 hardware order book. | no current guidance | no current guidance |
Interest Expense | Q1 2025 | Approximately $65 million. | no current guidance | no current guidance |
Effective Tax Rate | Q1 2025 | In the low 30s. | no current guidance | no current guidance |
Fully Diluted Share Count | Q1 2025 | Approximately 75 million. | no current guidance | no current guidance |
Core Revenues | FY 2025 | Expected to grow 3% to 6% on a constant currency basis, with FX being a 2% headwind. | no current guidance | no current guidance |
Total Company Revenue | FY 2025 | Expected to grow 1% to 3% on a constant currency basis, with FX being a 2% headwind. | no current guidance | no current guidance |
Adjusted EBITDA | FY 2025 | Expected to grow 7% to 10% on a constant currency basis, with FX being a 1% headwind. | no current guidance | no current guidance |
Adjusted EPS | FY 2025 | Expected to grow 21% to 27%, ranging between $3.90 to $4.10. | no current guidance | no current guidance |
Free Cash Flow | FY 2025 | Expected to be between $260 million to $300 million. | no current guidance | no current guidance |
Interest Expense | FY 2025 | Approximately $275 million. | no current guidance | no current guidance |
Effective Tax Rate | FY 2025 | Approximately 24%. | no current guidance | no current guidance |
Fully Diluted Share Count | FY 2025 | Approximately 76 million. | no current guidance | no current guidance |
Self-Service Banking – Revenue | FY 2025 | Expected to grow mid‐single digits on a constant currency basis, with FX being a 2% headwind. | no current guidance | no current guidance |
Self-Service Banking – Adjusted EBITDA | FY 2025 | Expected to grow 12% to 13% on a constant currency basis, with FX being a 1% headwind. | no current guidance | no current guidance |
Self-Service Banking – Margins | FY 2025 | Expected to expand YoY and be in the mid‑20s. | no current guidance | no current guidance |
Network Business – Revenue | FY 2025 | Expected to grow in the low to mid‑single digits on a constant currency basis, with FX being a 1% headwind. | no current guidance | no current guidance |
Network Business – Adjusted EBITDA Margin | FY 2025 | Approximately 29%, with a decrease due to higher vault cash costs from the expiration of hedges. | no current guidance | no current guidance |
T&T Segment – Revenue | FY 2025 | Expected to decline. | no current guidance | no current guidance |
T&T Segment – EBITDA | FY 2025 | Expected to be flat to slightly up. | no current guidance | no current guidance |
Voyix-Related Revenue | FY 2025 | Expected to be between $40 million to $45 million, with EBITDA of approximately $5 million. | no current guidance | no current guidance |
Corporate Costs | FY 2025 | Expected to be approximately flat YoY. | no current guidance | no current guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Total Company Revenue | Q1 2025 | Expected to decline mid-single digits year-over-year | 980 million | Met |
Interest Expense | Q1 2025 | Approximately $65 million | $67 million | Met |
Free Cash Flow | Q1 2025 | Expected to be modestly negative | $82 million (calculated from net cash from ops 123, capex (29), software (12)) | Beat |
Fully Diluted Share Count | Q1 2025 | Approximately 75 million | 75.2 million | Met |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
ATM-as-a-Service Business Growth and Recurring Revenue | Consistently discussed in Q4 2024 , Q3 2024 and Q2 2024 with positive growth in revenue, customer base, ARR and a rising recurring revenue mix. | Q1 2025 reports robust growth with 24% YoY revenue increase to $57 million, a 44% increase in unique customers, improved profitability metrics, and an increased recurring revenue mix (75%) as well as higher ARR. | Steady and positive momentum, reaffirming the strategic emphasis on scaling and recurring revenue generation. |
Hardware Demand and the Refresh Cycle | In Q4 2024, there was emphasis on strong global hardware demand, an improved recycler product, and a modest refresh wave. Q3 2024 noted early stages of the refresh cycle with anticipation for higher revenue in coming periods. Q2 2024 reinforced optimism with a strong order book and recycler product strength. | Q1 2025 highlights what is described as the best hardware year since 2019 with an 8% revenue growth, strong backlog and replacement cycle lifting demand. | Continued robust demand with an enhanced replacement cycle narrative—sentiment remains very positive and reinforces future revenue potential. |
Capital Efficiency, Leverage Reduction, and Shareholder Returns | Across Q2 2024 , Q3 2024 and Q4 2024 , the company emphasized reducing leverage (targeting below 3x), prioritizing debt reduction, and planning for shareholder returns primarily via share repurchases when targets are met. | In Q1 2025, there is reaffirmation of the plan to reduce leverage below 3x and a commitment to efficient growth, with the indication that excess free cash flow will be returned to shareholders through share repurchases once the target is achieved. | Consistent focus with similar strategic messaging; the sentiment remains steady with near-term leverage reduction and shareholder return plans likely to positively impact valuation. |
EBITDA Growth, Margin Expansion, and Pricing Pressures | Q2 2024 , Q3 2024 and Q4 2024 all reported strong adjusted EBITDA growth and significant margin expansions, while also noting some pricing pressures (e.g., FX headwinds and cost increases) that were being managed. | Q1 2025 maintained this narrative with 9% YoY EBITDA growth (11% on constant currency), substantial margin expansion (e.g., 270bps increase overall, 320bps in Self-Service Banking) and pricing adjustments to mitigate tariff impacts – minimal net negative effect reported. | Sustained positive performance with expanding margins and effective management of pricing pressures, suggesting continued operational resilience. |
Geographical Expansion and New Market Penetration | Not specifically mentioned in Q4 2024, Q3 2024, or Q2 2024. | Q1 2025 highlights significant progress in entering new markets, with a notable increase in new customers (primarily in higher ARPU regions such as North America, APAC, India, and Europe) driving ATM-as-a-Service growth. | Emerging focus in the current period – a new qualitative emphasis that signals expansion beyond traditional markets, likely to have a large strategic impact going forward. |
Asset-Light Strategy Transition | Discussed positively in Q3 2024 and Q2 2024 as a key initiative driving improved returns and free cash flow by shifting to deals where customers own devices. | Not mentioned in Q1 2025. | Decreased emphasis in the current period; while it was previously highlighted as beneficial, its absence may indicate integration into longer‐term strategy or lower priority in current discussions. |
Impact of Expiring Hedges on Vault Cash Costs | Only discussed in Q4 2024, where expiring hedges were noted to increase vault cash costs as hedges roll off, though margins in the Network segment remained robust. | Not mentioned in Q1 2025. | Topic no longer highlighted in Q1 2025, suggesting either resolution of hedge-related concerns or a shift in focus to other operational metrics. |
Network Segment Performance and Managed Unit Trends | Consistently detailed across Q2 2024 , Q3 2024 and Q4 2024 with reports of steady revenue growth, expanding transaction volumes, new strategic partnerships and managed optimization of ATM locations. | In Q1 2025, the Network segment continues strong performance with strategic initiatives such as signing key partnerships (e.g., with 7-Eleven) and monitoring portfolio optimization, reinforcing strong transaction growth and elevated ARPU. | Ongoing robust performance with continuous portfolio optimization – the sentiment is very positive with incremental improvements noted, indicating a long-term stable revenue impact. |
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Buyback Timing
Q: How will balance sheet affect buybacks?
A: Management is focused on reducing net leverage to under 3x and plans to deploy free cash flow—about $700 million over six quarters—toward share repurchases, with a more definitive decision expected in 90 days. -
Hardware & Ramp
Q: How is hardware and as-a-service ramping?
A: They expect the best hardware year since 2019, with a robust backlog and an end-of-year ramp in as-a-service revenue similar to last year’s pattern, underscoring steady demand. -
Tariff Impact
Q: What is the impact of tariffs?
A: Tariffs impacted Q1 minimally at roughly $2 million and are expected to add up to about $25 million annually, a cost that management is addressing through pricing and supply chain adjustments. -
M&A Pipeline
Q: What are your M&A plans?
A: They have a portfolio of ideas—from smaller deals to more strategic acquisitions—that could accelerate growth once further debt reduction is achieved, showing a disciplined expansion approach. -
Cash Flow Cadence
Q: When will free cash flow improve?
A: Free cash flow is projected to be slightly positive in Q2, with conversion nearing 60% in Q3 and Q4, reflecting the typical back-end loading of hardware investments. -
CapEx Allocation
Q: Where is ATM-as-a-Service CapEx focused?
A: The planned CapEx for ATM-as-a-Service is expected to be balanced evenly between international markets and the U.S., supporting its global operations. -
Withdrawal Trends
Q: How are withdrawal transactions trending?
A: In the Network business, U.S. withdrawals increased by 2%, while U.K. volumes declined by 6–7%, with management anticipating improvement moving forward. -
Unit Price Metrics
Q: What is the unit sale price in backlog?
A: The ATM-as-a-Service backlog includes roughly 7,500 units with an average revenue per unit significantly above $8,400, indicating strong pricing dynamics. -
Hardware Order Shifts
Q: Were hardware orders shifted across quarters?
A: No shifts occurred; all hardware orders were delivered as planned with no cancellations, aligning with customers’ predetermined ordering schedule. -
Network Optimization
Q: How is the network portfolio being optimized?
A: Despite closures in underperforming segments like pharmacy, transactions remain robust, and strategic partnerships such as with 7-Eleven help maintain strong network performance. -
Customer Count & Margins
Q: How are customer counts and margins trending?
A: ATM-as-a-Service customer numbers grew notably—especially in North America—contributing to a 700 basis point expansion in margins due to higher profitability in these contracts.
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