NCR Atleos Corp
For the period ended Sep 30, 2024. Filed Nov 12, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 12, 2024
NATL$47.18+0.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0001974138-24-000049
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-12.
0001974138-24-000062
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 136 previous paragraphs and 142 current paragraphs.
90 unchanged; 45 reworded; 7 added; 1 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 27 previous and 27 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (7)
Current report
(1) Refer to our definitions of Annualized recurring revenue, ATM as a Service units, LTM ARPU and Network Managed Units in the section entitled “Non-GAAP Financial Measures and Use of Certain Terms.”
Current report
Annualized Recurring Revenue (“ARR”). Recurring revenue, excluding software licenses sold as a subscription, for the last three months times four, plus the rolling four quarters for term-based software license arrangements that include customer termination rights. Atleos believes this metric may be useful to investors in evaluating the Company’s achievement of strategic goals related to the conversion of the self-service banking business to recurring revenue streams over time. ARR is an operating metric and does not necessarily reflect the pattern of revenue recognition in accordance with GAAP and should not be considered a substitute for GAAP revenue. ARR does not have a uniform definition and, therefore, Atleos’ definitions may differ from other companies’ definitions of this measure.
Current report
ATM as a Service Units. The number of ATMs as of period end that are deployed under our ATM as a Service offering. ATM as a Service refers to our turnkey, end-to-end ATM platform solution, whereby we provide comprehensive managed services solutions to financial institutions. Atleos believes this metric may be useful to investors in measuring the Company’s achievement of strategic goals related to growth of the ATM as a Service business over time.
Current report
Last twelve months average revenue per unit (“LTM ARPU”). For the Network segment, total segment revenue for the previous twelve months divided by the average Network Managed Units for the previous twelve months. Atleos believes this metric may be useful to investors in evaluating the Company’s achievement of strategic goals related to the improved monetization of our ATM fleet over a specified period, excluding the impact of seasonality. LTM ARPU is an operating metric and does not represent revenue generated solely by our Network Managed Units, as total Network segment revenue includes revenue generated from other sources besides the Network Managed Units. LTM ARPU does not have a uniform definition and, therefore, Atleos’ definitions may differ from other companies’ definitions of this measure.
Current report
Network Managed Units. All transacting ATMs as of period end, whether Company-owned or Merchant-owned, other than those for which we only provide third party processing services and those under legacy managed services arrangements. This metric is used in the calculation of Network segment LTM ARPU.
Current report
T&T revenue decreased 6% for the three months ended September 30, 2024 compared to the prior year period due to a decrease in hardware maintenance and installation revenue. T&T revenue was flat for the nine months ended September 30, 2024, compared to the prior year period, due to the decrease in hardware maintenance and installation revenue offset by one-time hardware sales.
Current report
On October 17, 2024, Atleos entered into the First Amendment to the Credit Agreement. For additional information, including the impact on the Company’s long-term borrowings, refer to the subsequent event section of Note 1, “Basis of Presentation and Summary of Significant Accounting Policies”, of the Notes to Condensed Consolidated Financial Statements.
Removed paragraphs (1)
Previous report
T&T Adjusted EBITDA increased 33% and 13% for the three and six months ended June 30, 2024, respectively, compared to the prior year period driven by increases in revenue.
Reworded paragraphs (45)
Previous wording
•Results of operations. This section contains an analysis of our results of operations presented in the accompanying Condensed Consolidated Statements of Operations by comparing the results for the three and six months ended June 30, 2024 to the results for the three and six months ended June 30, 2023.
Current wording
•Results of operations. This section contains an analysis of our results of operations presented in the accompanying Condensed Consolidated Statements of Operations by comparing the results for the three and nine months ended September 30, 2024 to the results for the three and nine months ended September 30, 2023.
Previous wording
On October 16, 2023, NCR Corporation (now known as NCR Voyix Corporation or “Voyix,” and referred to as “NCR” prior to the Separation), completed a Spin-off to NCR shareholders of its self-service banking, network, and telecommunications and technology businesses (the “Spin-off” or “Separation”). Concurrent with the Spin-off, the Company became a stand-alone publicly-traded company and its financial statements are now presented on a consolidated basis. Prior to the Separation, the Company’s historical combined financial statements were prepared on a stand-alone basis and were derived from NCR’s consolidated financial statements and accounting records. The financial statements for all periods presented, including the historical results of the Company prior to October 16, 2023, are now referred to as “Condensed Consolidated Financial Statements”, and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Current wording
On October 16, 2023, NCR Corporation (now known as NCR Voyix Corporation or “Voyix,” and referred to as “NCR” when discussing periods prior to the Separation), completed a Spin-off to NCR shareholders of its self-service banking, network, and telecommunications and technology businesses (the “Spin-off” or “Separation”). Concurrent with the Spin-off, the Company became a stand-alone publicly-traded company and its financial statements are now presented on a consolidated basis. Prior to the Separation, the Company’s historical combined financial statements were prepared on a stand-alone basis and were derived from NCR’s consolidated financial statements and accounting records. The financial statements for all periods presented, including the historical results of the Company prior to October 16, 2023, are now referred to as “Condensed Consolidated Financial Statements”, and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Previous wording
The bank failures in 2023, in addition to other global macroeconomic conditions, have caused a degree of uncertainty in the investor community and among bank customers, and could significantly impact the national, regional and local banking industry and the global business environment in which Atleos operates. The Company does not believe that the circumstances of these bank failures are indicators of broader issues within the banking system. However, if there is a severe or prolonged economic downturn, it could result in a variety of risks to our business, including driving banking customers to tighten budgets and curtail spending, which would negatively impact our sales and business.
Current wording
The bank failures in 2023 and 2024, in addition to other global macroeconomic conditions, have caused a degree of uncertainty in the investor community and among bank customers, and could significantly impact the national, regional and local banking industry and the global business environment in which Atleos operates. The Company does not believe that the circumstances of these bank failures are indicators of broader issues within the banking system. However, if there is a severe or prolonged economic downturn, it could result in a variety of risks to our business, including driving banking customers to tighten budgets and curtail spending, which would negatively impact our sales and business.
Previous wording
The following tables show our key strategic financial metrics for the three and six months ended June 30, the relative percentage that those amounts represent to total revenue, and the change in those amounts year-over-year.
Current wording
The following tables show our key strategic financial metrics for the three and nine months ended September 30, the relative percentage that those amounts represent to total revenue, and the change in those amounts year-over-year.
Previous wording
Net income (loss) attributable to Atleos and Adjusted EBITDA(2) as a percentage of total revenue
Current wording
Net income (loss) attributable to Atleos and Adjusted EBITDA(2)as a percentage of total revenue
Previous wording
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”)Atleos’ management uses the non-GAAP measure Adjusted EBITDA because it provides useful information to investors as an indicator of performance of the Company’s ongoing business operations. Atleos determines Adjusted EBITDA based on GAAP Net income (loss) attributable to Atleos plus interest expense, net; plus income tax expense (benefit); plus depreciation and amortization; plus acquisition-related costs; plus pension mark-to-market adjustments, pension settlements, pension curtailments and pension special termination benefits; plus separation-related costs; plus transformation and restructuring charges (which includes integration, severance and other exit and disposal costs); plus stock-based compensation expense; plus other special (expense) income items. These adjustments are considered non-operational or non-recurring in nature and are excluded from the Adjusted EBITDA metric utilized by our chief operating decision maker (“CODM”) in evaluating segment performance and are separately delineated to reconcile back to total reported income attributable to Atleos. This format is useful to investors because it allows analysis and comparability of operating trends. It also includes the same information that is used by Atleos management to make decisions regarding our segments and to assess our financial performance. Refer to the table below for the reconciliations of Net income (loss) attributable to Atleos (GAAP) to Adjusted EBITDA (non-GAAP).
Current wording
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”)Atleos’ management uses the non-GAAP measure Adjusted EBITDA because it provides useful information to investors as an indicator of performance of the Company’s ongoing business operations. Atleos determines Adjusted EBITDA based on GAAP Net income (loss) attributable to Atleos plus interest expense, net; plus income tax expense (benefit); plus depreciation and amortization; plus acquisition-related costs; plus pension mark-to-market adjustments, pension settlements, pension curtailments and pension special termination benefits; plus separation-related costs; plus transformation and restructuring charges (which includes integration, severance and other exit and disposal costs); plus stock-based compensation expense; plus Voyix legal and environmental indemnification expense; plus other special (expense) income items. These adjustments are considered non-operational or non-recurring in nature and are excluded from the Adjusted EBITDA metric utilized by our chief operating decision maker (“CODM”) in evaluating segment performance and are separately delineated to reconcile back to total reported income attributable to Atleos. This format is useful to investors because it allows analysis and comparability of operating trends. It also includes the same information that is used by Atleos management to make decisions regarding our segments and to assess our financial performance. Refer to the table below for the reconciliations of Net income (loss) attributable to Atleos (GAAP) to Adjusted EBITDA (non-GAAP).
Previous wording
Adjusted gross margin as a percentage of revenue (non-GAAP), Adjusted selling, general and administrative expenses as a percentage of revenue (non-GAAP) and Adjusted research and development expenses as a percentage of revenue (non-GAAP). Atleos’ Adjusted gross margin rate (non-GAAP), Adjusted selling, general and administrative expenses as a percent of revenue (non-GAAP) and Adjusted research and development expenses as a percent of revenue (non-GAAP) are determined by excluding, as applicable: acquisition-related costs; pension settlements, pension curtailments and pension special termination benefits; separation-related costs; amortization of acquisition-related intangibles; stock-based compensation expense; transformation and restructuring charges (which includes integration, severance and other exit and disposal costs); and other special (expense) income items from Atleos’ GAAP gross margin, selling, general and administrative expenses, and research and development expenses, respectively. Due to the nature of these special items, Atleos’ management uses these non-GAAP measures to evaluate year-over-year operating performance. Atleos believes these measures are useful for investors because they may provide a more complete understanding of Atleos’ underlying operational performance, as well as consistency and comparability with Atleos’ past reports of financial results.
Current wording
Adjusted gross margin as a percentage of revenue (non-GAAP), Adjusted selling, general and administrative expenses as a percentage of revenue (non-GAAP) and Adjusted research and development expenses as a percentage of revenue (non-GAAP). Atleos’ Adjusted gross margin rate (non-GAAP), Adjusted selling, general and administrative expenses as a percentage of revenue (non-GAAP) and Adjusted research and development expenses as a percentage of revenue (non-GAAP) are determined by excluding, as applicable: acquisition-related costs; pension settlements, pension curtailments and pension special termination benefits; separation-related costs; amortization of acquisition-related intangibles; stock-based compensation expense; transformation and restructuring charges (which includes integration, severance and other exit and disposal costs); and other special (expense) income items from Atleos’ GAAP gross margin, selling, general and administrative expenses, and research and development expenses, respectively. Due to the nature of these special items, Atleos’ management uses these non-GAAP measures to evaluate year-over-year operating performance. Atleos believes these measures are useful for investors because they may provide a more complete understanding of Atleos’ underlying operational performance, as well as consistency and comparability with Atleos’ past reports of financial results.
Previous wording
(1)Includes Related party interest expense, net, as presented in the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023.
Current wording
(1)Includes Related party interest expense, net, as presented in the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023.
Previous wording
The following tables show our results for the three and six months ended June 30, the relative percentage that those amounts represent to revenue, and the change in those amounts year-over-year.
Current wording
The following tables show our results for the three and nine months ended September 30, the relative percentage that those amounts represent to revenue, and the change in those amounts year-over-year.
Previous wording
Revenue results in the first half of 2024 were negatively impacted by the delayed transfer of seven legal entities to Atleos following our separation from Voyix, due to local processes of setting up Atleos legal entities. Prior to the Separation, the operating results of each of these entities were included within Atleos’ results under carve-out methodology as all entities were dedicated to the Atleos business. Of these seven entities, three transferred during the first quarter of 2024 and two entities transferred in the second quarter of 2024. The remaining two entities are expected to transfer in the second half of 2024. We estimate the delayed transfer of these entities resulted in an approximately $6 million and $19 million decline in revenue for the three and six months ended 2024 compared to the prior year period.
Current wording
Revenue results for the three and nine months ended September 30, 2024 were negatively impacted by the delayed transfer of seven legal entities to Atleos following our separation from Voyix, due to local processes of setting up Atleos legal entities. Prior to the Separation, the operating results of each of these entities were included within Atleos’ results under carve-out methodology as all entities were dedicated to the Atleos business. Of these seven entities, three transferred during the first quarter of 2024 and two entities transferred in the second quarter of 2024. The remaining two entities are expected to transfer in the fourth quarter of 2024. We estimate the delayed transfer of these entities resulted in an approximately $3 million and $22 million decline in revenue for the three and nine months ended 2024, respectively, compared to the prior year period.
Previous wording
Total revenue increased 4% for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, primarily driven by the growth of recurring service revenue streams in our core business as well as revenues recognized pursuant to our commercial agreements with Voyix.
Current wording
Total revenue increased 1% for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily driven by the growth of recurring service revenue streams in our core business as well as revenues recognized pursuant to our commercial agreements with Voyix.
Previous wording
Product revenue for the three months ended June 30, 2024 decreased 6% compared to the three months ended June 30, 2023, due to declines in non-core commerce-related revenue of approximately $11 million related to the wind down of that business, ATM and other hardware revenue of approximately $14 million and Bitcoin-related revenues of approximately $7 million, partially offset by approximately $13 million of product revenues earned under the commercial agreements with Voyix. The decline in ATM hardware revenue is partially due to the shift in the business from one-time hardware sales to recurring ATM as a Service subscriptions as well as a $2 million reduction due to the delayed legal entities described above. The decline in Bitcoin-related revenue is due to a decrease in transaction volumes.
Current wording
Product revenue for the three months ended September 30, 2024 decreased 7% compared to the three months ended September 30, 2023, due to declines in non-core commerce-related revenue of approximately $6 million related to the wind down of that business, ATM and other hardware revenue of approximately $11 million and Bitcoin-related revenues of approximately $9 million, partially offset by approximately $6 million of product revenues earned under the commercial agreements with Voyix and a $2 million increase in software license revenue. The decline in ATM hardware revenue is partially due to the shift in the business from one-time hardware sales to recurring ATM as a Service subscriptions as well as a $1 million reduction due to the delayed legal entities described above. The decline in Bitcoin-related revenue is due to a decrease in transaction volumes.
Previous wording
Services revenue for the three months ended June 30, 2024 increased 7% compared to the prior year period, driven primarily by 8% total growth in our core self-service banking and network offerings. Services revenue benefited from increases of approximately $23 million of transaction processing services revenue, $11 million in hardware maintenance and installation revenue, $10 million in ATM as a Service revenue as well as $13 million in other software-related revenues. The increase in transaction processing services was driven by an increase in withdrawal transaction volumes and the favorable mix of payments transactions year-over-year, while the growth in ATM as a Service revenue was due to the continued growth in our ATM as a Service offering, whereby we own the ATMs and charge per ATM for the service. The increase in hardware maintenance and installation was primarily due to an increase in the core business of approximately $7 million and approximately $5 million earned under the commercial agreements with Voyix. Included in the activity described above, the delayed transfer of legal entities resulted in a reduction of hardware maintenance and installation revenue and other software-related services revenue of approximately $3 million and $1 million, respectively.
Current wording
Services revenue for the three months ended September 30, 2024 increased 3% compared to the prior year period, driven primarily by 5% total growth in our core self-service banking and network offerings. Services revenue benefited from increases of approximately $6 million of transaction processing services revenue, $9 million in ATM as a Service revenue, $5 million in hardware maintenance and installation revenue earned under the commercial agreements, and $15 million in other software-related revenues, partially offset by a decrease of $4 million in hardware maintenance and installation revenue in our core business. The increase in transaction processing services was driven by an increase in withdrawal transaction volumes and the favorable mix of payments transactions year-over-year, while the growth in ATM as a Service revenue was due to the continued growth in our ATM as a Service offering, whereby we own the ATMs and charge per ATM for the service. Included in the activity described above, the delayed transfer of legal entities resulted in a reduction of hardware maintenance and installation revenue and other software-related services revenue of approximately $1 million and $1 million, respectively.
Previous wording
Total revenue increased 5% for the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily driven by the growth of recurring service revenue streams in our core business as well as revenues recognized pursuant to our commercial agreements with Voyix.
Current wording
Total revenue increased 4% for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily driven by the growth of recurring service revenue streams in our core business as well as revenues recognized pursuant to our commercial agreements with Voyix.
Previous wording
Product revenue for the six months ended June 30, 2024 decreased 2% compared to the six months ended June 30, 2023, due to declines in non-core commerce related revenues of approximately $21 million related to the wind down of that business, ATM and other hardware revenue of approximately $18 million and Bitcoin-related revenues of approximately $10 million, partially offset by approximately $38 million of product revenues earned under the commercial agreements with Voyix. The decline in ATM hardware revenue is partially due to the shift in the business from one-time hardware sales to recurring ATM as a Service subscriptions as well as a $4 million reduction due to the delayed legal entities described above. The decline in Bitcoin-related revenue is due to a decrease in transaction volumes.
Current wording
Product revenue for the nine months ended September 30, 2024 decreased 3% compared to the nine months ended September 30, 2023, due to declines in non-core commerce related revenues of approximately $27 million related to the wind down of that business, ATM and other hardware revenue of approximately $28 million and Bitcoin-related revenues of approximately $19 million, partially offset by approximately $44 million of product revenues earned under the commercial agreements with Voyix. The decline in ATM hardware revenue is partially due to the shift in the business from one-time hardware sales to recurring ATM as a Service subscriptions as well as a $5 million reduction due to the delayed legal entities described above. The decline in Bitcoin-related revenue is due to a decrease in transaction volumes.
Previous wording
Services revenue for the six months ended June 30, 2024 increased 7% compared to the prior year period, driven primarily by 7% total growth in our core self-service banking and network offerings. Services revenue benefited from increases of approximately $32 million of transaction processing services revenue, $37 million in hardware maintenance and installation revenue, $22 million in ATM as a Service revenue as well as $22 million in other software-related revenues. The significant increase in transaction processing services was driven by an increase in withdrawal transaction volumes and the favorable mix of payments transactions year-over-year, while the growth in ATM as a Service revenue was due to the continued growth in our ATM as a Service offering, whereby we own the ATMs and charge per ATM for the service. The increase in hardware maintenance and installation was primarily due to an increase in the core business of approximately $13 million and approximately $24 million earned under the commercial agreements with Voyix. Included in the activity described above, the delayed transfer of legal entities resulted in a reduction of hardware maintenance and installation revenue and other software-related services revenue of approximately $9 million and $5 million, respectively.
Current wording
Services revenue for the nine months ended September 30, 2024 increased 6% compared to the prior year period, driven primarily by 6% total growth in our core self-service banking and network offerings. Services revenue benefited from increases of approximately $38 million of transaction processing services revenue, $37 million in hardware maintenance and installation revenue, $30 million in ATM as a Service revenue as well as $37 million in other software-related revenues. The significant increase in transaction processing services was driven by an increase in withdrawal transaction volumes and the favorable mix of payments transactions year-over-year, while the growth in ATM as a Service revenue was due to the continued growth in our ATM as a Service offering, whereby we own the ATMs and charge per ATM for the service. The increase in hardware maintenance and installation revenue was primarily due to an increase in the core business of approximately $9 million and approximately $28 million earned under the commercial agreements with Voyix. Included in the activity described above, the delayed transfer of legal entities resulted in a reduction of hardware maintenance and installation revenue and other software-related services revenue of approximately $11 million and $6 million, respectively.
Previous wording
Gross margin as a percentage of revenue forthe three months ended June 30, 2024 was 23.4% compared to 23.8% forthe three months ended June 30, 2023. Gross margin for the three months ended June 30, 2024 included $19 million of amortization of acquisition-related intangible assets, $3 million of transformation and restructuring costs and $1 million of stock-based compensation expense. Gross margin for the three months ended June 30, 2023 included $15 million of amortization of acquisition-related intangible assets and $8 million of stock-based compensation expense. Excluding these items, adjusted gross margin as a percentage of revenue (non-GAAP) decreased from 26.0% to 25.5% due to the impact of lower margins recognized on services provided under the commercial agreements with Voyix. Our services gross margin was also impacted by increased interest rates driving $2 million of higher rental cost on our vault cash agreements as well as incremental labor costs.
Current wording
Gross margin as a percentage of revenue forthe three months ended September 30, 2024 decreased to 24.3% compared to 25.1% forthe three months ended September 30, 2023 primarily due to the impact of lower margins recognized on products and services provided under the commercial agreements with Voyix. Our services gross margin was also impacted by increased interest rates driving $4 million of higher rental cost on our vault cash agreements as well as incremental labor costs. Gross margin for the three months ended September 30, 2024 included $20 million of amortization of acquisition-related intangible assets, $2 million of transformation and restructuring costs, $1 million of stock-based compensation expense and $1 million of separation-related costs. Gross margin for the three months ended September 30, 2023 included $15 million of amortization of acquisition-related intangible assets and $5 million of stock-based compensation expense. Adjusted gross margin as a percentage of revenue (non-GAAP) decreased from 27.0% to 26.5%, due to the same factors that impacted GAAP gross margin as a percentage of revenue discussed above.
Previous wording
Gross margin as a percentage of revenue inthe six months ended June 30, 2024 was 22.2% compared to 23.1% inthe six months ended June 30, 2023. Gross margininthe six months ended June 30, 2024 included $41 million of amortization of acquisition-related intangible assets, $3 million of transformation and restructuring costs and $2 million of stock-based compensation expense. Gross margin for the six months ended June 30, 2023 included $30 million of amortization of acquisition-related intangible assets and $13 million of stock-based compensation expense. Excluding these items, adjusted gross margin as a percentage of revenue (non-GAAP) decreased from 25.2% to 24.4% due to the impact of lower margins recognized on services provided under the commercial agreements with Voyix. Our services gross margin for the core business was also impacted by increased interest rates driving $4 million of higher rental costs on our vault cash agreements.
Current wording
Gross margin as a percentage of revenue forthe nine months ended September 30, 2024 decreased to 22.9% compared to 23.8% forthe nine months ended September 30, 2023, primarily due to the impact of lower margins recognized on products and services provided under the commercial agreements with Voyix. Our services gross margin was also impacted by increased interest rates driving $8 million of higher rental costs on our vault cash agreements as well as incremental labor costs. Gross margin for the nine months ended September 30, 2024 included $61 million of amortization of acquisition-related intangible assets, $5 million of transformation and restructuring costs, $3 million of stock-based compensation expense and $1 million of separation-related costs. Gross margin for the nine months ended September 30, 2023 included $45 million of amortization of acquisition-related intangible assets and $18 million of stock-based compensation expense. Adjusted gross margin as a percentage of revenue (non-GAAP) decreased from 25.8% to 25.1% due to the same factors that impacted GAAP gross margin as a percentage of revenue discussed above.
Previous wording
Selling, general, and administrative expenses were $132 million in the three months ended June 30, 2024, compared to $149 million in the three months ended June 30, 2023. As a percentage of revenue, selling, general and administrative expenses were 12.2% in the three months ended June 30, 2024 compared to 14.3% in the three months ended June 30, 2023. In the three months ended June 30, 2024, selling, general and administrative expenses included $4 million of amortization of acquisition-related intangible assets, $2 million of transformation and restructuring costs, $7 million of stock-based compensation expense, $6 million of separation-related costs and $1 million of acquisition-related costs. In the three months ended June 30, 2023, selling, general and administrative expenses included $10 million of amortization of acquisition-related intangible assets, $5 million of transformation and restructuring costs, $9 million of stock-based compensation expense and $33 million of separation-related costs. Excluding these items, adjusted selling, general and administrative expenses as a percentage of revenue (non-GAAP) increased from 8.8% to 10.4% due to lower costs allocated to Atleos under carve-out accounting methodologies in the prior year period, compared to operations as a stand-alone company in the second quarter of 2024 which include separation cost dis-synergies and higher employee-benefit related costs.
Current wording
Selling, general, and administrative expenses were $127 million in the three months ended September 30, 2024, compared to $160 million in the three months ended September 30, 2023. As a percentage of revenue, selling, general and administrative expenses decreased to 11.8% in the three months ended September 30, 2024 compared to 15.0% in the three months ended September 30, 2023, primarily driven by higher separation-related costs and amortization of acquisition-related intangible assets in the prior year period. In the three months ended September 30, 2024, selling, general and administrative expenses included $4 million of amortization of acquisition-related intangible assets, $5 million of transformation and restructuring costs, $7 million of stock-based compensation expense and $4 million of separation-related costs. In the three months ended September 30, 2023, selling, general and administrative expenses included $9 million of amortization of acquisition-related intangible assets, $1 million of transformation and restructuring costs, $7 million of stock-based compensation expense and $46 million of separation-related costs. The beneficial impact of these cost changes compared to prior year was partially offset by lower costs allocated to Atleos under carve-out accounting methodologies in the prior year period, compared to operations as a stand-alone company in the three months ended September 30, 2024, which include separation cost dis-synergies and higher employee-benefit related costs. Adjusted selling, general and administrative expenses as a percentage of revenue (non-GAAP) increased from 9.1% to 9.9% due to the differences in cost allocations, employee-benefit related costs, and separation cost dis-synergies described above.
Previous wording
Selling, general, and administrative expenses were $264 million in the six months ended June 30, 2024, compared to $285 million in the six months ended June 30, 2023. As a percentage of revenue, selling, general and administrative expenses were 12.4% in the six months ended June 30, 2024 compared to 14.1% in the six months ended June 30, 2023. In the six months ended June 30, 2024, selling, general and administrative expenses included $7 million of amortization of acquisition-related intangible assets, $3 million of transformation and restructuring costs, $16 million of stock-based compensation expense, $14 million of separation-related costs and $1 million of acquisition-related costs. In the six months ended June 30, 2023, selling, general and administrative expenses included $5 million of transformation and restructuring costs, $20 million of amortization of acquisition-related intangible assets, $17 million of stock-based compensation expense, and $40 million of separation costs. Excluding these items, adjusted selling, general and administrative expenses as a percentage of revenue (non-GAAP) slightly increased from 10.0% to 10.5% due to lower costs allocated to Atleos under carve-out accounting methodologies in the prior year period, compared to operations as a stand-alone company in the first half of 2024 which include separation cost dis-synergies.
Current wording
Selling, general, and administrative expenses were $391 million in the nine months ended September 30, 2024, compared to $445 million in the nine months ended September 30, 2023. As a percentage of revenue, selling, general and administrative expenses decreased to 12.2% in the nine months ended September 30, 2024 compared to 14.4% in the nine months ended September 30, 2023, primarily driven by higher separation-related costs and amortization of acquisition-related intangible assets in the prior year period. In the nine months ended September 30, 2024, selling, general and administrative expenses included $11 million of amortization of acquisition-related intangible assets, $8 million of transformation and restructuring costs, $23 million of stock-based compensation expense, $18 million of separation-related costs and $1 million of acquisition-related costs. In the nine months ended September 30, 2023, selling, general and administrative expenses included $6 million of transformation and restructuring costs, $29 million of amortization of acquisition-related intangible assets, $24 million of stock-based compensation expense, and $86 million of separation-related costs. The beneficial impact of these cost changes compared to prior year was partially offset by lower costs allocated to Atleos under carve-out accounting methodologies in the prior year period, compared to operations as a stand-alone company in the nine months ended September 30, 2024, which include cost dis-synergies and higher employee-benefit related costs. Adjusted selling, general and administrative expenses as a percentage of revenue (non-GAAP) increased from 9.7% to 10.3% due to the differences in cost allocations, separation cost dis-synergies and employee-benefit related costs described above.
Previous wording
Research and development expenses were $14 million in the three months ended June 30, 2024, compared to $19 million in the three months ended June 30, 2023. As a percentage of revenue, research and development costs were 1.3% and 1.8% in the three months ended June 30, 2024 and 2023, respectively. In the three months ended June 30, 2024, research and development costs included $1 million of transformation and restructuring costs and $1 million of stock-based compensation expense. In the three months ended June 30, 2023, research and development costs included $2 million of stock-based compensation expense. Excluding these items, adjusted research and development expenses as a percentage of revenue (non-GAAP) decreased from 1.6% to 1.1% due to higher costs allocated to Atleos under carve-out accounting methodologies in the prior year period, compared to operations as a stand-alone company in the second quarter of 2024.
Current wording
Research and development expenses were $16 million in the three months ended September 30, 2024, compared to $17 million in the three months ended September 30, 2023. As a percentage of revenue, research and development costs decreased to 1.5% from 1.6% in the three months ended September 30, 2024 and 2023, respectively, due to higher costs allocated to Atleos under carve-out accounting methodologies in the prior year period, compared to operations as a stand-alone company in the three months ended September 30, 2024. In the three months ended September 30, 2024, research and development costs included $1 million of stock-based compensation expense. Adjusted research and development expenses as a percentage of revenue (non-GAAP) decreased from 1.6% to 1.4% due to the same factors that impacted GAAP research and development expenses as a percentage of revenue discussed above.
Previous wording
Research and development expenses were $31 million in the six months ended June 30, 2024, compared to $37 million in the six months ended June 30, 2023. As a percentage of revenue, research and development costs were 1.5% and 1.8% in the six months ended June 30, 2024 and 2023, respectively. In the six months ended June 30, 2024, research and development costs included $1 million of transformation and restructuring costs and $1 million stock-based compensation expense. In the six months ended June 30, 2023, research and development expenses included $3 million of stock-based compensation expense. Excluding these items, adjusted research and development expenses as a percentage of revenue (non-GAAP) decreased from 1.7% to 1.4% due to higher costs allocated to Atleos under carve-out accounting methodologies in the prior year period, compared to operations as a stand-alone company in 2024.
Current wording
Research and development expenses were $47 million in the nine months ended September 30, 2024, compared to $54 million in the nine months ended September 30, 2023. As a percentage of revenue, research and development costs decreased to 1.5% from 1.7% in the nine months ended September 30, 2024 and 2023, respectively, due to higher costs allocated to Atleos under carve-out accounting methodologies in the prior year period, compared to operations as a stand-alone company in the nine months ended September 30, 2024. In the nine months ended September 30, 2024, research and development costs included $1 million of transformation and restructuring costs and $2 million of stock-based compensation expense. In the nine months ended September 30, 2023, research and development expenses included $3 million of stock-based compensation expense. Adjusted research and development expenses as a percentage of revenue (non-GAAP) decreased from 1.6% to 1.4%, due to the same factors that impacted GAAP research and development expenses as a percentage of revenue discussed above.
Previous wording
Interest expense was $79 million in the three months ended June 30, 2024. Interest expense is primarily related to our senior secured notes and borrowings under the Senior Secured Credit Facility entered into on September 27, 2023. The Company had no external interest expense in the three months ended June 30, 2023. Refer to Note 4, “Debt Obligations”, for further details regarding the issuance of debt.
Current wording
Interest expense was $79 million and $2 million in the three months ended September 30, 2024 and 2023, respectively. Interest expense is primarily related to our senior secured notes and borrowings under the Senior Secured Credit Facility entered into on September 27, 2023. Refer to Note 4, “Debt Obligations”, for further details regarding the issuance of debt.
Previous wording
Related party interest expense, net was $5 million in the three months ended June 30, 2023. Related party interest expense, net is primarily related to certain related party borrowings during the prior year period.
Current wording
Related party interest expense, net was $4 million in the three months ended September 30, 2023. Related party interest expense, net is primarily related to certain related party borrowings during the prior year period.
Previous wording
Interest expense was $158 million in the six months ended June 30, 2024. Interest expense is primarily related to our senior secured notes and borrowings under the Senior Secured Credit Facility entered into on September 27, 2023. The Company had no external interest expense in the six months ended June 30, 2023. Refer to Note 4, “Debt Obligations”, for further details regarding the issuance of debt.
Current wording
Interest expense was $237 million and $2 million in the nine months ended September 30, 2024 and 2023, respectively. Interest expense is primarily related to our senior secured notes and borrowings under the Senior Secured Credit Facility entered into on September 27, 2023. Refer to Note 4, “Debt Obligations”, for further details regarding the issuance of debt.
Previous wording
Related party interest expense, net was $9 million in the six months ended June 30, 2023. Related party interest expense, net is primarily related to certain related party borrowings during the prior year period.
Current wording
Related party interest expense, net was $13 million in the nine months ended September 30, 2023. Related party interest expense, net is primarily related to certain related party borrowings during the prior year period.
Previous wording
Other (expense) income, net was income of $4 million and $1 million in the three months ended June 30, 2024 and 2023, respectively, and income of $7 million and $1 million in the six months ended June 30, 2024 and 2023, respectively, with the components reflected in the following table:
Current wording
Other (expense) income, net was expense of $3 million and income of $5 million in the three months ended September 30, 2024 and 2023, respectively, and income of $4 million and $6 million in the nine months ended September 30, 2024 and 2023, respectively, with the components reflected in the following table:
Previous wording
Income tax expense was $4 million for the three months ended June 30, 2024 compared to $23 million for the three months ended June 30, 2023. The change was primarily driven by lower income before taxes and discrete tax benefits realized in the three months ended June 30, 2024, compared to the prior year. For the three months ended June 30, 2024, the Company recognized a $9 million benefit related to provision to return adjustments. For the three months ended June 30, 2023, the Company recognized a $2 million expense from recording a valuation allowance against deferred tax assets in Turkey.
Current wording
Income tax expense was $14 million for the three months ended September 30, 2024 compared to income tax expense of $147 million for the three months ended September 30, 2023. The change was primarily driven by lower income before taxes in the three months ended September 30, 2024 compared to the prior year period and discrete tax expenses recognized in the three months ended September 30, 2023. In the three months ended September 30, 2024, the Company did not recognize any material discrete tax expenses or benefits. In the three months ended September 30, 2023, the Company completed certain internal restructuring transactions in connection with the Spin-off, resulting in a net of $121 million discrete tax expenses. Approximately $109 million of the discrete tax expense was for non-cash deferred tax items, primarily related to the tax effects upon the transfer of certain intangible assets among the wholly-owned subsidiaries prior to the Spin-off.
Previous wording
Income tax expense was $8 million for the six months ended June 30, 2024 compared to income tax expense of $48 million for the six months ended June 30, 2023. The change was primarily driven by lower income before taxes and discrete tax benefits realized in the six months ended June 30, 2024, compared to the prior year. For the six months ended June 30, 2024, the Company recognized an $11 million benefit related to provision to return adjustments. For the six months ended June 30, 2023, the Company recognized a $2 million expense from recording a valuation allowance against deferred tax assets in Turkey.
Current wording
Income tax expense was $22 million for the nine months ended September 30, 2024 compared to income tax expense of $195 million for the nine months ended September 30, 2023. The change was primarily driven by lower income before taxes and discrete tax benefits and expenses realized in the nine months ended September 30, 2024 and 2023, respectively. In the nine months ended September 30, 2024, the Company recognized a $14 million benefit related to provision to return adjustments. In the nine months ended September 30, 2023, the Company completed certain internal restructuring transactions in connection with the Spin-off, resulting in a net of $121 million discrete tax expenses. Approximately $109 million of the discrete tax expense was for non-cash deferred tax items, primarily related to the tax effects upon the transfer of certain intangible assets among the wholly-owned subsidiaries prior to the Spin-off.
Previous wording
The following tables show our segment revenue and Adjusted EBITDA for the three and six months ended June 30, the relative percentage that those amounts represent to segment revenue, and the change in those amounts year-over-year.
Current wording
The following tables show our segment revenue and Adjusted EBITDA for the three and nine months ended September 30, the relative percentage that those amounts represent to segment revenue, and the change in those amounts year-over-year.
Previous wording
Self-Service Banking revenue increased 3% and 3% for the three and six months ended June 30, 2024, respectively, compared to the prior year period. For the three and six months ended June 30, 2024, ATM as a Service revenue increased approximately $10 million and $22 million, software-related revenue increased approximately $18 million and $27 million, hardware maintenance and installation revenue increased $7 million and $13 million and ATM hardware revenue decreased $17 million and $21 million, respectively, compared to the prior year period. Revenue results for the period were primarily due to the shift from non-recurring revenues to recurring ATM as a Service arrangements whereby we own the ATMs and charge per ATM for the service, as well as the shift to recurring software subscriptions. Included in the results described above, the delayed transfer of legal entities drove a reduction of approximately $6 million and $19 million for the three and six months ended June 30, 2024, respectively, compared to the prior year period. Software and services revenue as a percent of total Self-Service Banking segment revenue were 72% and 73% in the three and six months ended June 30, 2024, respectively, compared to 69% and 70% in the prior period.
Current wording
Self-Service Banking revenue increased 3% for the three and nine months ended September 30, 2024, respectively, compared to the prior year period. For the three and nine months ended September 30, 2024, ATM as a Service revenue increased approximately $8 million and $30 million, software-related revenue increased approximately $24 million and $51 million, hardware maintenance and installation revenue decreased $1 million and increased $12 million and ATM hardware revenue decreased $10 million and $31 million, respectively, compared to the prior year period. Revenue results for the period were primarily due to the shift from non-recurring revenues to recurring ATM as a Service arrangements whereby we own the ATMs and charge per ATM for the service, as well as the shift to recurring software subscriptions. Included in the results described above, the delayed transfer of legal entities drove a reduction of approximately $3 million and $22 million for the three and nine months ended September 30, 2024, respectively, compared to the prior year period. Software and services revenue as a percent of total Self-Service Banking segment revenue were 72% and 73% in the three and nine months ended September 30, 2024, respectively, compared to 70% and 70% in the prior period.
Previous wording
Network revenue increased 6% and 4% for the three and six months ended June 30, 2024, respectively, compared to the prior year period. For the three and six months ended June 30, 2024, the increase in revenue was due to approximately $23 million and $32 million increases, respectively, in transaction processing services revenue driven by an increase in higher value ATM transactions, and $1 million and $4 million increases, respectively, in other software-related revenue, partially offset by decreases in Bitcoin-related revenue of approximately $7 million and $10 million, respectively, due to decreases in transaction volumes.
Current wording
Network revenue decreased 1% and increased 3% for the three and nine months ended September 30, 2024, respectively, compared to the prior year period. For the three months ended September 30, 2024, the decrease in revenue was due to the decrease in Bitcoin-related revenue of approximately $9 million due to decrease in transaction volumes, partially offset by a $6 million increase in transaction processing services revenue driven by an increase in higher value ATM transactions. For the nine months ended September 30, 2024, the increase in revenue was due to an approximately $38 million increase in transaction processing services revenue driven by an increase in higher value ATM transactions and a $4 million increase in other software-related revenue, partially offset by a decrease in Bitcoin-related revenue of approximately $19 million due to the decrease in transactions volumes.
Previous wording
Self-Service Banking Adjusted EBITDA decreased 9% and 6% for the three and six months ended June 30, 2024, respectively, compared to the prior year period due to separation dis-synergies, higher labor and employee benefit-related costs, and the impact of one-time hardware sales shifting to ATM as a Service arrangements that are amortized over the contract period, partially offset by the higher margin recurring revenue stream growth.
Current wording
Self-Service Banking Adjusted EBITDA decreased 3% and 5% for the three and nine months ended September 30, 2024, respectively, compared to the prior year period due to separation dis-synergies, higher labor and employee benefit-related costs, and the impact of one-time hardware sales shifting to ATM as a Service arrangements that are amortized over the contract period, partially offset by the higher margin recurring revenue stream growth.
Previous wording
Network Adjusted EBITDA increased 11% and 13% for the three and six months ended June 30, 2024, respectively, compared to the prior year period due to increases in withdrawal transaction volumes, the mix of higher margin transaction revenue, and cost optimization initiatives. These improvements were partially offset by higher interest rates on our vault cash agreements driving additional cost of $2 million and $4 million, respectively, as well as higher cash-in-transit costs driven by the higher volume of cash dispensed in the period, and an increase in employee benefit-related costs.
Current wording
Network Adjusted EBITDA decreased 9% and increased 4% for the three and nine months ended September 30, 2024, respectively, compared to the prior year period. The decrease in the three months ended September 30, 2024 was due to higher interest rates on our vault cash agreements driving additional cost of $4 million, as well as higher cash-in transit costs driven by the higher volume of cash dispensed in the period, and an increase in employee benefit-related costs. The increase in the nine months ended September 30, 2024 was due to increases in withdrawal transaction volumes, the mix of higher margin transaction revenue, and cost optimization initiatives. These improvements were partially offset by higher interest rates on our vault cash agreements driving additional cost of $8 million, as well as higher cash-in-transit costs driven by the higher volume of cash dispensed in the period, and an increase in employee benefit-related costs.
Previous wording
T&T revenue increased 4% and 3% for the three and six months ended June 30, 2024, respectively, compared to the prior year period. The increase for the three and six months ended June 30, 2024 was primarily due to one-time hardware sales.
Current wording
T&T Adjusted EBITDA decreased 10% and increased 4% for the three and nine months ended September 30, 2024, respectively, compared to the prior year period. The decrease in the three months ended September 30, 2024 was due to the decrease in revenue. The increase in the nine months ended September 30, 2024 was primarily due to one-time hardware sales and cost optimization initiatives.
Previous wording
Atleos’ management uses a non-GAAP measure called “Adjusted free cash flow-unrestricted” to assess the financial performance and liquidity of Atleos. We define Adjusted free cash flow-unrestricted as net cash provided by operating activities less capital expenditures for property, plant and equipment, less additions to capitalized software, plus/minus the change in restricted cash settlement activity, plus/minus net reductions or reinvestment in the trade receivables facility established in the fourth quarter of 2023 due to fluctuations in the outstanding balance of receivables sold, plus/minus financing payments/receipts of owned ATM capital expenditures, and plus pension contributions and settlements. Restricted cash settlement activity represents the net change in amounts collected on behalf of, but not yet remitted to, certain of the Company’s merchant customers or third-party service providers that are pledged for a particular use or restricted to support these obligations. These amounts can fluctuate significantly period to period based on the number of days for which settlement to the merchant has not yet occurred or day of the week on which a reporting period ends. We believe Adjusted free cash flow-unrestricted information is useful for investors because it indicates the amount of cash available after these adjustments for, among other things, investments in Atleos’ existing businesses, strategic acquisitions, and repayment of debt obligations. Adjusted free cash flow-unrestricted does not represent the residual cash flow available, since there may be other non-discretionary expenditures that are not deducted from the measure. Adjusted free cash flow-unrestricted does not have a uniform definition under GAAP, and therefore Atleos’ definition may differ from other companies’ definitions of this measure. This non-GAAP measure should not be considered a substitute for, or superior to, cash flows from operating activities under GAAP.
Current wording
Atleos’ management uses a non-GAAP measure called “Adjusted free cash flow-unrestricted” to assess the financial performance and liquidity of Atleos. We define Adjusted free cash flow-unrestricted as net cash provided by operating activities less capital expenditures for property, plant and equipment, less additions to capitalized software, plus/minus the change in restricted cash settlement activity, plus/minus net reductions or reinvestment in the trade receivables facility established in the fourth quarter of 2023 due to fluctuations in the outstanding balance of receivables sold, plus/minus financing payments/receipts of owned ATM capital expenditures, plus pension contributions and settlements, and plus legal and environmental indemnification payments made to Voyix. Restricted cash settlement activity represents the net change in amounts collected on behalf of, but not yet remitted to, certain of the Company’s merchant customers or third-party service providers that are pledged for a particular use or restricted to support these obligations. These amounts can fluctuate significantly period to period based on the number of days for which settlement to the merchant has not yet occurred or day of the week on which a reporting period ends. We believe Adjusted free cash flow-unrestricted information is useful for investors because it indicates the amount of cash available after these adjustments for, among other things, investments in Atleos’ existing businesses, strategic acquisitions, and repayment of debt obligations. Adjusted free cash flow-unrestricted does not represent the residual cash flow available, since there may be other non-discretionary expenditures that are not deducted from the measure. Adjusted free cash flow-unrestricted does not have a uniform definition under GAAP, and therefore Atleos’ definition may differ from other companies’ definitions of this measure. This non-GAAP measure should not be considered a substitute for, or superior to, cash flows from operating activities under GAAP.
Previous wording
Summarized cash flow information for the six months ended June 30, is as follows:
Current wording
Summarized cash flow information for the nine months ended September 30, is as follows:
Previous wording
Cash provided by operating activities was $157 million in the six months ended June 30, 2024 compared to cash provided by operating activities of $200 million in the six months ended June 30, 2023. The decrease in cash provided by operating activities of $43 million in the six months ended June 30, 2024 was primarily driven by a decline in net income of $69 million partially offset by the favorable movement in net working capital accounts of $16 million and an increase in non-cash charges of $10 million.
Current wording
Cash provided by operating activities was $264 million in the nine months ended September 30, 2024 compared to cash provided by operating activities of $347 million in the nine months ended September 30, 2023. The decrease in cash provided by operating activities of $83 million in the nine months ended September 30, 2024 was primarily driven by the unfavorable movement in net working capital accounts of $12 million and a decrease in non-cash charges of $82 million partially offset by an increase in net income of $11 million.
Previous wording
Investing activities in the six months ended June 30, 2024 primarily include capital expenditures for property, plant and equipment of $47 million and additions to capitalized software of $15 million. Investing activities in the six months ended June 30, 2023 primarily include capital expenditures for property, plant and equipment of $22 million and additions to capitalized software of $15 million. Other investing activities primarily include business acquisitions, divestitures and investments, which were not significant in the six months ended June 30, 2024 and 2023.
Current wording
Investing activities in the nine months ended September 30, 2024 primarily include capital expenditures for property, plant and equipment of $69 million and additions to capitalized software of $26 million. Investing activities in the nine months ended September 30, 2023 primarily include capital expenditures for property, plant and equipment of $70 million, additions to capitalized software of $15 million, amounts advanced for related party notes receivable of $217 million and repayments received from related party notes receivable of $44 million. Other investing activities primarily include purchases of intellectual property and investments, which were not significant in the nine months ended September 30, 2024 and 2023.
Previous wording
Our financing activities include borrowings and repayments of credit facilities and notes. Financing activities for the six months ended June 30, 2024 also included tax withholding payments on behalf of employees for stock based awards that vested of $13 million. Prior to the Spin-off, financing activities also include short-term borrowings with, and transfers to and from, NCR, consisting of, among other things, cash transfers and changes in receivables and payables and other transactions between Atleos and NCR. See Note 10, “Related Parties”, in the Notes to Condensed Consolidated Financial Statements for further discussion on transactions with NCR.
Current wording
Our financing activities include borrowings and repayments of credit facilities and notes. Financing activities for the nine months ended September 30, 2024 also included tax withholding payments on behalf of employees for stock based awards that vested of $14 million, acquisition holdback payments of $5 million, and proceeds from employee stock plans of $3 million. Financing activities for the nine months ended September 30, 2023 primarily include financing arrangements entered into in connection with the Spin-off. Prior to the Spin-off, financing activities also include short-term borrowings with, and transfers to and from, NCR, consisting of, among other things, cash transfers and changes in receivables and payables and other transactions between Atleos and NCR. See Note 10, “Related Parties”, in the Notes to Condensed Consolidated Financial Statements for further discussion on transactions with NCR.
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