NCR Atleos Corp (NATL)·Q2 2025 Earnings Summary

Executive Summary

• Revenue $1.10B, Non-GAAP EPS $0.93; both at/above the high-end of guidance; revenue and EPS beat Wall Street consensus ($1.082B and $0.84, respectively) as ATM outsourcing momentum and advantaged hardware mix offset network headwinds. Bold beat: revenue and EPS vs S&P consensus. | Revenue/EPS consensus from S&P Global*
• Adjusted EBITDA $205M with margin 18.6% (+40 bps y/y); Self-Service Banking led with 20% y/y EBITDA growth and ~240 bps margin expansion; Network EBITDA declined on higher vault cash costs as rate hedges rolled off.
• FY2025 guidance reaffirmed (core revenue +3–6% CC, total revenue +1–3% CC, adj. EBITDA +7–10% CC, non-GAAP EPS +21–27%, FCF $260–$300M). New $200M share repurchase authorization (~10% of market cap) introduces a capital return catalyst.
• Near-term watch: network transactional softness (prepaid/DCC) and tariff uncertainty; management sees transitory nature and expects sequential improvement; Q3 guide: adj. EBITDA $210–$225M, non-GAAP EPS $0.95–$1.10.

What Went Well and What Went Wrong

• What Went Well

  • Self-Service Banking strength: revenue +9% y/y to $733M; adjusted EBITDA +20% y/y to $189M; margin to 25.8% (+~240 bps) on services productivity and recycler demand. “Our Service First initiative elevated service levels to new all time highs.”
  • ATMaaS acceleration: revenue +32% y/y to $62M; ARR $249M (+32% y/y); backlog +105% y/y; ARPU in backlog ~$9.1k. “Best quarter ever for ATM as a Service bookings.”
  • Capital allocation and confidence: leverage ~3.1x; board authorized $200M buyback with 10b5-1 plan expected. “We plan to… repurchase at these levels.”

• What Went Wrong

  • Network headwinds: revenue -2% y/y to $320M; adjusted EBITDA $86M (-15% y/y) on higher vault cash costs and lower DCC/prepaid volumes; LTM ARPU +3% y/y to $16.2K but units down to ~77K.
  • Cash flow softer in Q2: GAAP operating cash flow -$23M; adjusted free cash flow-unrestricted $15M (investment for H2 hardware ramp).
  • Tariff uncertainty and FX: management flagged gross tariff impact (~$5M in Q2) and elevated interest costs on vault cash; expects mitigation but remains a risk.

Financial Results

• Versus Wall Street consensus (S&P Global): Revenue $1.082B*, actual $1.104B; Primary/Normalized EPS $0.84*, actual $0.93. Bold beat on revenue and EPS. | S&P Global values*

Segment breakdown (Q2 2025 vs Q2 2024)

KPIs

Guidance Changes

Notes: Company changed non-GAAP EPS definition to exclude hyperinflationary FX remeasurement starting Q2’25; historical recast.

Earnings Call Themes & Trends

Management Commentary

• “Robust demand for our self-service banking technology coupled with accelerating interest in ATM outsourcing resulted in a strong order book and backlog.” — Tim Oliver (CEO)
• “We will increase the number of machines that we put into service in 2025 by almost 20% over…2024… best quarter ever for ATM as a Service bookings.” — Tim Oliver
• “Adjusted EBITDA margin expanded approximately 40 basis points… with strong margin expansion for self-service banking more than offsetting margin compression from the network segment.” — Andy Wamser (CFO)
• “We plan to execute on the repurchase program using a 10b5-1 plan… while also driving further reductions in net leverage.” — Tim Oliver
• “Tariffs had a gross impact of approximately $5 million in the quarter.” — Andy Wamser

Q&A Highlights

• ATMaaS backlog and ARPU: Backlog >8k units; backlog ARPU ~$9.1k; margin profile expected to “grind higher” as NAMR mix rises.
• Network drivers: ReadyCode disruption ~$2M headwind; DCC/prepaid -$2–$3M; sequential improvement expected as partners ramp (e.g., INCOMM).
• Tariffs footprint: India tariff move discussed; mitigation via swing capacity (Europe/Mexico) if sustained; not a 2025 issue; modest Q4 impact if undressed.
• Interest rate sensitivity: 1% SOFR change ≈ $38M vault cash cost impact; outlook positive as cuts come through over time.
• Hardware demand: refresh cycle normalizing; capability upgrades (recycling, tap) driving mix and margins; not OS-forced.

Estimates Context

Notes: S&P Global consensus used for comparisons. Company reports adjusted EBITDA ($205M) vs various “EBITDA” definitions tracked by third parties; EPS definition recast to exclude hyperinflationary FX remeasurement starting Q2’25. Values retrieved from S&P Global.*

Where estimates may adjust:

• Upward bias to FY EPS/EBITDA paths given SSB margin expansion and ATMaaS acceleration; Network likely modeled with softer H1, improving H2 as partners recover and vault cash costs normalize.
• Q3 EPS/EBITDA ranges provided should anchor near-term consensus convergence.

Key Takeaways for Investors

• Mix upgrade in Self-Service Banking plus ATMaaS scaling are structurally expanding margins; expect continued EBITDA leverage in H2.
• Network headwinds are identifiable and viewed as transitory; partner activations and deposit growth should support sequential improvement. Monitor vault cash cost trajectory vs rates.
• Capital return thesis emerges: $200M buyback over two years, with leverage trending <3x by Q3; potential upside if free cash flow tracks top half of guide.
• Hardware cycle provides forward revenue visibility and seeds future recurring services; recycler and capability-led upgrades support profitability.
• Risk watch: tariff policy shifts and FX; management outlined mitigation levers (manufacturing footprint, productivity) and quantified impacts.
• Near-term trading: positive setup into Q3 on reaffirmed FY guide and Q3 EPS/EBITDA ranges; focus on ATMaaS bookings, network transaction normalization, and buyback execution cadence.
• Medium-term thesis: services-led, software-enabled ATM platform delivering predictable FCF, deleveraging, and shareholder returns — with dual growth vectors (bank outsourcing + network transactions).

Footnotes: Values retrieved from S&P Global.*