NCR Atleos (NATL) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue reached $1.08 billion, exceeding guidance, with service revenue at a record $843 million and net income of $24 million, reversing a $58 million loss in Q3 2023.

• Adjusted EBITDA was $207 million, with non-GAAP EPS of $0.89, both above expectations, and recurring revenue mix increased to 73% of total revenue.

• Year-to-date free cash flow totaled $123 million, with positive free cash flow generated in each quarter.

• Strategic focus on expanding ATM as a Service, recurring revenue streams, and new transaction types is driving growth and higher ARPU.

• The spin-off from NCR was completed in October 2023, with most separation activities finalized and ongoing costs expected through 2024.

Financial highlights

• Q3 2024 revenue grew 4% year-over-year on a constant currency basis to $1,078 million, with recurring revenue at $790 million (73% of total), and adjusted EBITDA margin at 19.2%.

• Adjusted free cash flow for Q3 was $38 million, with $123 million year-to-date; operating cash flow for Q3 was $107 million.

• Net debt reduced by $76 million year-to-date; net leverage ratio improved to 3.5x as of September 30, 2024.

• Gross margin for Q3 2024 was 24.3%, down from 25.1% in Q3 2023, mainly due to lower margins on Voyix-related products.

• GAAP EPS was $0.32, and non-GAAP EPS was $0.89, up from a loss of $0.82 per share last year.

Outlook and guidance

• Full-year 2024 revenue guidance reaffirmed at approximately $4.3 billion, with adjusted EBITDA guidance at $785 million and non-GAAP EPS raised to the high end of the range ($3.20).

• Adjusted free cash flow guidance for 2024 is $205 million, with management expecting higher hardware demand in 2025 due to ATM upgrades and outsourcing.

• Company expects to carry momentum into 2025, with minimal impact from winding down TSA and commercial agreements.

• Ongoing separation-related costs are anticipated through at least fiscal year 2024.

• Plans to invest in business growth, repay debt, and maintain adequate liquidity.