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NCR Atleos Corp. Q1 2025 Filing Summary

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended March 31, 2025. NCR Atleos Corporation (Atleos) is a financial technology company providing self-directed banking solutions, including ATM/ITM hardware, software, and the Allpoint network. The company operates three segments: Self-Service Banking, Network, and Telecommunications & Technology (T&T). Atleos spun off from NCR Voyix Corporation in October 2023 and continues to wind down commercial agreements with Voyix.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Decline: Total revenue decreased 7% year-over-year. Product revenue fell 21% due to the conclusion of manufacturing services with Voyix and a strategic shift from one-time hardware sales to recurring "ATM as a Service" (ATMaaS) models. Service revenue declined 2%, primarily due to foreign exchange headwinds and the wind-down of Voyix maintenance agreements.
• Profitability Improvement: Despite lower revenue, Net Income turned positive ($17M) from a loss ($8M) in Q1 2024. Operating income increased 33% to $96 million, driven by cost optimization and a favorable shift in revenue mix toward higher-margin software and services.
• Margin Expansion: GAAP Gross Margin improved to 24.0% from 21.0%. Adjusted Gross Margin (Non-GAAP) rose to 26.2% from 23.2%.
• Interest Expense Reduction: Interest expense decreased 15% to $67 million, attributed to debt restructuring in late 2024 and lower variable interest rates.
• Segment Performance: Self-Service Banking Adjusted EBITDA grew 14% to $153 million. Network Adjusted EBITDA grew 2% to $88 million. T&T Adjusted EBITDA declined 20% to $8 million due to reduced project volumes.

Outlook, Risks, and Contingencies

• Strategic Transition: Management continues to pivot toward a recurring revenue model via ATMaaS and software subscriptions. Recurring revenue now comprises 75.7% of total revenue.
• Environmental Contingency: Atleos shares liability with Voyix for certain environmental remediation matters (e.g., Kalamazoo River). As of March 31, 2025, the company has accrued $18 million for these shared matters. Voyix's total reserve for the Kalamazoo River site is approximately $148 million, with potential costs potentially doubling under different assumptions.
• Macroeconomic Risks: The company faces exposure to geopolitical challenges, including Red Sea conflicts affecting logistics, and new U.S. import tariffs introduced in February 2025. Management states the tariff impact was not material in Q1 2025 but is monitoring the situation.
• Liquidity: The company maintains $336 million in borrowing capacity under its revolving credit facility. Management expects to fund operations and debt service through operating cash flows and existing credit facilities.
• Seasonality: Q1 is historically the lowest revenue quarter due to winter weather impacts on ATM transaction volumes.

Investor Verification Checklist

• Recurring Revenue Mix: Verify the sustainability of the 75.7% recurring revenue ratio and the pace of the transition from hardware sales to ATMaaS.
• Voyix Wind-Down: Monitor the timeline for the complete cessation of commercial agreements with Voyix and the associated revenue impact.
• Environmental Liability: Track updates on the Kalamazoo River remediation costs and the potential for the $18 million accrual to increase.
• Tariff Impact: Assess the long-term effect of new U.S. import tariffs on the cost of goods sold for imported finished goods and service parts.
• Debt Covenants: Confirm compliance with the consolidated leverage ratio covenant (currently capped at 4.50x, stepping down to 4.25x in late 2025).