Q4 2024 Earnings Summary
- Strong Growth in ATM-as-a-Service Business: At the end of the fourth quarter, ATM-as-a-Service units increased to 28,000, up from 22,000 in the third quarter. The company expects to exit the year with 40,000 units and an ARR well north of $300 million, up from $210 million today. This significant growth in high-margin, recurring revenue business indicates healthy future earnings and cash flows.
- Expansion into New Markets Driving Revenue Growth: The company is expanding its ATM-as-a-Service offering into new countries, planning to introduce products in at least 4 or 5 new countries this year. Additionally, they are seeing strong demand in key markets like India, Western Europe, and the U.S., particularly with their improved recycler product being quickly adopted by big U.S. customers. This geographic expansion and product adoption are expected to drive hardware and services revenue growth.
- Potential Share Buybacks Enhancing Shareholder Value: The company is on track to reduce net leverage to 3x by the midpoint of the year, which may prompt a debate about implementing a share buyback program. The CEO acknowledged that the stock is "too cheap" and suggested that returning cash to shareholders could be a consideration once leverage targets are met. This potential capital return could enhance shareholder value.
- Lagging ATM-as-a-Service Revenue Growth: The company's recurring revenue performance is "tracking pretty close to where we thought. We're a little bit behind." Specifically, "we're a little behind on our ATM-as-a-Service revenue, which we've talked a bit about the adoption rate and our ability to onboard folks, which causes the total services growth to be a little bit behind those models." This suggests challenges in accelerating recurring revenue growth, potentially impacting future profitability.
- Increased Vault Cash Costs Due to Expiring Hedges: The company will face higher vault cash interest expenses in 2025 as "we're rolling off as we get to the back half of the year, some of those favorable hedges" that were implemented in a lower interest rate environment. As a result, "there is going to be some pressure year-over-year in that segment," particularly affecting the Network segment's EBITDA margin.
- Uncertainty Due to Decrease in Managed Units: The Network business experienced a "slight decrease in unit count... due to pharmacy partners closing low-performing stores," and the company acknowledged "we don't know how many more drugstores are going to close." This trend introduces uncertainty and could negatively impact transaction volumes and revenue growth if not offset by new unit additions.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +1% increase (from $1,098M to $1,108M) | Total Revenue grew modestly by 1% YoY, indicating stable sales. The slight increase is driven by continued steady performance in the recurring revenue streams and a consistent market demand, reflecting the company's ability to maintain revenue levels despite market pressures. |
Operating Income | +332% increase (from $35M to $151M) | Operating Income surged by 332% YoY, a dramatic improvement likely resulting from significant cost-management initiatives and a beneficial product/service revenue mix, which contrasts with the previous period's lower margins. This turnaround underscores the company's focused efforts on expense reduction and enhanced operational efficiency. |
Net Income | Turnaround from a loss of $164M to a gain of $49M | Net Income experienced a significant reversal from a loss of $164M in Q4 2023 to a profit of $49M in Q4 2024. The improvement reflects the strong rebound in operating income, better expense control, and potentially favorable changes in tax or non-operating items relative to the previous period. |
Earnings Per Share | From -$2.34 to $0.63 (improvement) | Earnings Per Share (EPS) improved substantially from -$2.34 in Q4 2023 to $0.63 in Q4 2024. This improvement is in line with the net income turnaround and reflects enhanced profitability per share as a result of the operating and financial performance improvements, indicating recovery and renewed investor confidence. |
Cash Flow | Net cash change of -$43M in Q4 2024 | Cash Flow ended Q4 2024 with a net cash change of -$43M, which, despite the operating improvements, may indicate increased capital expenditures, working capital adjustments, or investment activities compared to the previous period. This warrants further monitoring to ensure that the negative cash flow doesn’t undermine the positive operating and net income trends. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Core Revenues | FY 2025 | no prior guidance | Expected to grow 3% to 6% on a constant currency basis, with FX being a 2% headwind. | no prior guidance |
Total Company Revenue | FY 2025 | no prior guidance | Expected to grow 1% to 3% on a constant currency basis, with FX being a 2% headwind. | no prior guidance |
Adjusted EBITDA | FY 2025 | Reaffirmed at the midpoint of the previous guidance ranges. | Expected to grow 7% to 10% on a constant currency basis, with FX being a 1% headwind. | raised |
Adjusted EPS | FY 2025 | Raised to approximately $3.12 (midpoint previously $3.05). | Expected to grow 21% to 27%, ranging between $3.90 to $4.10. | raised |
Free Cash Flow | FY 2025 | no prior guidance | Expected to be between $260 million to $300 million. | no prior guidance |
Interest Expense | FY 2025 | no prior guidance | Approximately $275 million. | no prior guidance |
Effective Tax Rate | FY 2025 | no prior guidance | Approximately 24%. | no prior guidance |
Fully Diluted Share Count | FY 2025 | no prior guidance | Approximately 76 million. | no prior guidance |
Self-Service Banking – Revenue | FY 2025 | no prior guidance | Expected to grow mid‐single digits on a constant currency basis, with FX being a 2% headwind. | no prior guidance |
Self-Service Banking – Adjusted EBITDA | FY 2025 | no prior guidance | Expected to grow 12% to 13% on a constant currency basis, with FX being a 1% headwind. | no prior guidance |
Self-Service Banking – Margins | FY 2025 | no prior guidance | Expected to expand year-over-year and be in the mid-20s. | no prior guidance |
Network Business – Revenue | FY 2025 | no prior guidance | Expected to grow in the low to mid-single digits on a constant currency basis, with FX being a 1% headwind. | no prior guidance |
Network Business – Adjusted EBITDA Margin | FY 2025 | no prior guidance | Approximately 29%, with a decrease due to higher vault cash costs from expired hedges. | no prior guidance |
T&T Segment – Revenue | FY 2025 | no prior guidance | Expected to decline. | no prior guidance |
T&T Segment – EBITDA | FY 2025 | no prior guidance | Expected to be flat to slightly up. | no prior guidance |
Voyix-Related Revenue | FY 2025 | no prior guidance | Expected to be between $40 million to $45 million, with EBITDA of approximately $5 million. | no prior guidance |
Corporate Costs | FY 2025 | no prior guidance | Expected to be approximately flat year-over-year. | no prior guidance |
Core Revenues | Q1 2025 | no prior guidance | Expected to be essentially flat on a constant currency basis. | no prior guidance |
Total Company Reported Revenue | Q1 2025 | no prior guidance | Expected to decline mid-single digits due to cycling of prior year comparisons (Voyix-related). | no prior guidance |
Adjusted EBITDA | Q1 2025 | no prior guidance | Projected to be between $165 million to $175 million, representing 5% growth year-over-year at the midpoint. | no prior guidance |
Adjusted EPS | Q1 2025 | no prior guidance | Expected to be between $0.50 to $0.60 per share, representing 34% year-over-year growth at the midpoint. | no prior guidance |
Free Cash Flow | Q1 2025 | no prior guidance | Expected to be modestly negative due to working capital investments in inventory. | no prior guidance |
Interest Expense | Q1 2025 | no prior guidance | Approximately $65 million. | no prior guidance |
Effective Tax Rate | Q1 2025 | no prior guidance | In the low 30s. | no prior guidance |
Fully Diluted Share Count | Q1 2025 | no prior guidance | Approximately 75 million. | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
ATM-as-a-Service Growth | Consistently highlighted across Q1–Q3 with strong revenue growth, increasing active devices, and rising annual recurring revenue ( ). | Q4 emphasized robust ARR, 24% YoY revenue growth, strong customer adoption, and projections to reach over $300M ARR by 2025 ( ). | Positive and accelerating. Continued robust growth and enhanced market adoption reinforce a bullish outlook. |
Hardware Demand & Product Refresh Cycle | Discussed in Q2 and Q3 with early indications of a hardware replacement cycle, strong orders, and demand for advanced features—Q1 had no commentary ( ). | Q4 highlighted a modest refresh wave with improvements (e.g. enhanced recycler product) and ongoing opportunities in key regions such as Europe and the U.S. ( ). | Steady with a longer-term horizon. Continued positive sentiment with a slower, more measured refresh cycle compared to past cycles. |
Geographic Expansion & Market Dynamics | Q1 detailed global expansions and competitive wins across multiple regions; Q2 and Q3 mentioned targeted client wins and groundwork in new markets such as Greece, Italy, and India ( ). | Q4 emphasized strong traction in India, expansion into 4–5 new countries, and leveraging favorable market dynamics in core regions ( ). | Consistently positive. Strategic international growth continues with deeper market penetration and diversified geographic opportunities. |
Capital Structure, Debt & Shareholder Returns | All previous quarters outlined strong focus on debt reduction, refinancing to lower costs, and plans to eventually initiate shareholder returns through buybacks or dividends ( ). | Q4 reiterated the commitment to lowering leverage to 3x and mentioned that share repurchases could be considered upon reaching these targets ( ). | Cautiously optimistic. Ongoing conservative capital allocation with a potential pivot to shareholder returns once leverage goals are met. |
Margin Expansion & Cost Efficiency | Q1 emphasized seasonality and cost‐out initiatives including early use of AI tools; Q2 and Q3 reported sequential margin improvements and productivity gains ( ). | Q4 reported a further expanded adjusted EBITDA margin (over 25% in Q4 and 18.1% for full year) and noted over $100M in gross cost savings ( ). | Strong and continuous. Operational efficiencies and cost savings continue to enhance profitability. |
Network Segment Performance & Unit Management | Across Q1–Q3, there was steady growth in transaction volumes, strong revenue performance, and careful unit optimization with minor reductions due to rationalization ( ). | Q4 showed slightly lower unit counts due to rationalization of low performers but maintained high transaction volumes with expectations to add units in 2025 ( ). | Solid with strategic consolidation. Despite unit rationalization, performance remains strong and is poised for future expansion. |
Expiring Hedges on Vault Cash Costs | Not mentioned in Q1/Q2 and only indirectly referenced in Q3 with derivative swap management ( ). | Q4 introduced explicit discussion about expiring hedges leading to higher vault cash costs, though overall margins are projected to remain robust ( ). | Emerging caution. New topic raising concerns over cost pressures despite efforts to manage impacts on margins. |
Forecasting & Guidance Uncertainty | Q1 had limited detail; Q2 and Q3 acknowledged macroeconomic risks and external uncertainties, with some adjustments in segment forecasts ( ). | Q4 provided detailed notes on currency headwinds, an EBITDA methodology change, and tariff exposure, reflecting increased focus on forecasting challenges ( ). | Heightened caution. Greater emphasis on external volatility and methodological shifts produces a more cautious sentiment. |
Transition to an Asset-Light Model | Q1 mentioned a higher mix of asset-light deals in the sales funnel; Q2 and Q3 expanded on customer preferences towards asset-light transactions for reduced CapEx ( ). | Q4 reaffirmed that most new ATM-as-a-Service deals are asset-light, contributing to lower capital intensity and improved returns ( ). | Consistently positive. The strategic shift to asset-light operations is delivering improved financial efficiency and future flexibility. |
Potential Share Buyback Consideration | Q1–Q3 discussed the eventual possibility of share repurchases once leverage targets were met, given the stock’s undervaluation ( ). | Q4 continued to consider buybacks as a potential use of free cash flow after achieving the targeted debt reduction, reflecting the same contingent strategy ( ). | Steady and shareholder-friendly. The idea remains a constant priority, relying on reaching key financial benchmarks before execution. |
-
Capital Allocation Plans
Q: Are you considering share buybacks given the stock's level?
A: While our focus remains on reducing debt to 3× net leverage, we recognize our stock is undervalued and may consider share repurchases mid-year as we achieve our leverage targets. -
Free Cash Flow Outlook
Q: How do you see free cash flow progressing towards 2027 targets?
A: We expect free cash flow growth to outpace EBITDA growth, aiming for $300 million in 2025. Our overperformance in 2024 boosts confidence in sustaining and increasing free cash flow. -
ARPU Trends and Mix Shift
Q: Can you explain the shift in ARPU in the as-a-service backlog?
A: The ARPU decreased from $12,000–$13,000 to $10,000 due to a mix shift toward India and other regions with slightly lower profitability. Despite this, we expect the average ARPU to be accretive to the current $8,600 per device across the year. -
ATM-as-a-Service Units and ARR Outlook
Q: What are the current ATM-as-a-Service units and future expectations?
A: We have 28,000 units at year-end, up from 22,000, slightly below our 30,000 target. We anticipate exiting the year at 40,000 units with ARR well north of $300 million, up from about $210 million today. -
Vault Cash Interest Expense Impact
Q: How will changes in vault cash interest expense affect gross margin?
A: As favorable hedges roll off in 2025, we'll face higher market rates impacting costs. Despite this, the Network segment's EBITDA margin remains close to 29%, indicating it's still a strong business. -
Changes in EBITDA Calculation
Q: What's being adjusted in the new EBITDA calculation?
A: We will exclude other income and expenses, such as pension and FX impacts, to reduce volatility, affecting EBITDA by $5–$10 million per quarter. -
Moving Customers Up the Continuum
Q: How successful have you been in upselling outsourcing services?
A: We've seen many of our 90,000 managed services machines move up into full ATM-as-a-Service. Transitioning customers along this continuum remains a key growth strategy. -
Strategy in High vs. Low ARPU Markets
Q: Are you focusing on higher ARPU markets over India?
A: We're not emphasizing one over the other; both are important. Markets like India offer scale with over 120,000 machines, while higher ARPU markets impact reported results more significantly. -
Network Business Rationalization
Q: How long will the rationalization of low-performing stores continue?
A: It's uncertain, but as underperforming stores close, we redeploy machines elsewhere without significant revenue loss. We expect to add 3,000–4,000 units in 2025 to offset reductions. -
Gross Margin Variability Expectations
Q: Should we expect gross margin fluctuations in 2025?
A: Regular seasonality will cause some variability, but the overall margin profile will resemble this year's, exiting with an EBITDA margin rate around 20%.
Research analysts covering NCR Atleos.