NCR Atleos Corp

Key Strategic Financial Metrics

The following tables show our key strategic financial metrics for the years ended December 31, the relative percentage that those amounts represent to total revenue, and the change in those amounts year-over-year.

Recurring revenue as a percentage of total revenue

(1)Refer to our definition of Recurring revenue in the section entitled “Non-GAAP Financial Measures and Use of Certain Terms” below.

Net income (loss) attributable to Atleos and Adjusted EBITDA(2)as a percentage of total revenue

(2)Refer to our definition of Adjusted EBITDA in the section entitled “Non-GAAP Financial Measures and Use of Certain Terms” below.

Other performance metrics

(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.”

Non-GAAP Financial Measures and Use of Certain Terms:

Non-GAAP Financial Measures

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).

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.

Special Item Related to Russia The war in Eastern Europe and related sanctions imposed on Russia and related actors by the United States and other jurisdictions required us to commence the orderly wind down of our operations in Russia beginning in the first quarter of 2022. We have ceased operations in Russia and have completed the liquidation of our only subsidiary in Russia. As a result, our presentation of segment revenue and Adjusted EBITDA for the year ended December 31, 2022, excludes the immaterial impact of our operating results in Russia, as well as the impact of impairments taken to write down the carrying value of assets and liabilities, severance charges, and the assessment of collectability on revenue recognition. We consider this to be a non-recurring special item and management has reviewed the results of its business segments excluding these impacts.

Atleos’ definitions and calculations of these non-GAAP measures may differ from similarly-titled measures reported by other companies and cannot, therefore, be compared with similarly-titled measures of other companies. These non-GAAP measures should not be considered as substitutes for, or superior to, results determined in accordance with GAAP.

Use of Certain Terms

Recurring revenue: All revenue streams from contracts where there is a predictable revenue pattern that will occur at regular intervals with a relatively high degree of certainty. This includes hardware and software maintenance revenue, processing revenue, interchange and network revenue, Bitcoin related revenue, and certain professional services arrangements, as well as term-based software license arrangements that include customer termination rights.

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.

ATM as a Service Units: The number of ATMs as of period end that are deployed under our ATMaaS offering. ATMaaS 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 ATMaaS business over time.

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.

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.

Reconciliation of Net income (loss) attributable to Atleos (GAAP) to Adjusted EBITDA (Non-GAAP)

(1)Includes Related party interest expense, net, as presented in the Consolidated Statements of Operations for the years ended December 31, 2023 and 2022.

Reconciliation of Gross Margin Rate (Gross Margin as a Percentage of Revenue) (GAAP) to Adjusted Gross Margin Rate (Adjusted Gross Margin as a Percentage of Revenue) (Non-GAAP)

Reconciliation of Selling, General and Administrative Expenses (“SG&A”) as a Percentage of Revenue (GAAP) to Adjusted SG&A as a Percentage of Revenue (Non-GAAP)

Reconciliation of Research and Development Expenses (“R&D”) as a Percentage of Revenue (GAAP) to Adjusted R&D as a Percentage of Revenue (Non-GAAP)

Consolidated Results

The following table shows our results for the years December 31, the relative percentage that those amounts represent to revenue, and the change in those amounts year-over-year.

(1) The percentage of revenue is calculated for each line item divided by total revenue, except for product gross margin and service gross margin, which are divided by the related component of revenue.

Revenue

Product revenue includes our hardware and software license revenue streams as well as Bitcoin-related revenues. Service revenue includes hardware and software maintenance revenue, implementation services revenue, cloud revenue, payments processing revenue, interchange and network revenue, as well as professional services revenue.

Revenue results for the twelve months ended December 31, 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 legal entities, five transferred during 2024. The remaining two entities are expected to transfer in the first quarter of 2025. We estimate the delayed transfer of these entities resulted in an approximately $22 million decline in revenue in 2024 compared to the prior year period.

Total revenue increased 3% for the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily driven by the growth of recurring service revenue streams in our core business as well as revenue recognized pursuant to our commercial agreements with Voyix.

Product revenue decreased 3% for the year ended December 31, 2024 compared to the year ended December 31, 2023 due to declines in non-core commerce related revenues of approximately $30 million related to the wind down of that business, ATM and other hardware revenue of approximately $21 million and Bitcoin-related revenues of approximately $26 million, partially offset by an increase of approximately $33 million of product revenues earned under the commercial agreements with Voyix and a $6 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 ATMaaS 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.

Service revenue increased 5% for the year ended December 31, 2024 compared to the year ended December 31, 2023, driven primarily by 6% total growth in our core self-service banking and network offerings. Services revenue benefited from increases of approximately $39 million of transaction processing services revenue, $25 million in hardware maintenance and installation revenue, $41 million in ATMaaS revenue as well as $57 million in other software-related revenues. The increase in transaction processing services revenue was driven by an increase in withdrawal transaction volumes and the favorable mix of payments transactions year-over-year, while the growth in ATMaaS revenue and other software-related revenues was due to the continued growth in our ATMaaS offering, whereby we own the ATMs and charge per ATM for the service, as well as the shift to recurring software subscriptions. The increase in hardware maintenance and installation revenue was primarily due to an increase in the core business of approximately $14 million and a $12 million increase in revenue 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.

Gross Margin

(1) The percentage of revenue is calculated for each line item divided by the related component of revenue.

Gross margin as a percentage of revenue was 23.9% in 2024 compared to 22.3% in 2023, primarily due to the impact of higher margin recurring revenue streams as well as higher separation-related costs and stock-based compensation expense in the prior year period. These improvements are partially offset by the impact of lower margins recognized on products and services provided under the commercial agreements with Voyix as well as an increase in amortization of acquisition-related intangible assets and transformation and restructuring costs in the current year. Our services gross margin was also impacted by increased interest rates driving $11 million of higher rental costs on our vault cash agreements. Gross margin for the year ended December 31, 2024 included $80 million of amortization of acquisition-related intangible assets, $7 million of transformation and restructuring costs, and $5 million of stock-based compensation expense. Gross margin for the year ended December 31, 2023 included $51 million of reserves on net assets transferred and incremental retention costs paid out as part of the Spin-off from Voyix, $65 million related to amortization of acquisition-related intangible assets, $20 million of stock-based compensation expense, and $1 million related to transformation and restructuring costs. Adjusted gross margin as a percentage of revenue (non-GAAP) increased from 25.5% to 26.1% due to the improved mix of higher margin recurring revenue streams, partially offset by the impact of lower margins recognized under the commercial agreements with Voyix and vault cash rental costs described above.

Selling, General and Administrative Expenses

Selling, general, and administrative expenses were $518 million in 2024, compared to $585 million in 2023. As a percentage of revenue, selling, general and administrative expenses decreased to 12.0% in 2024 compared to 14.0% in 2023, primarily driven by higher separation-related costs, amortization of acquisition-related intangible assets and stock-based compensation expense in the prior year period. In 2024, selling, general and administrative expenses included $8 million of transformation and restructuring costs, $31 million of stock-based compensation expense, $15 million of acquisition-related amortization of intangibles and $18 million of separation-related costs. In 2023, selling, general and administrative expenses included $8 million of transformation and restructuring costs, $43 million of stock-based compensation expense, $33 million of acquisition-related amortization of intangibles, and $97 million in IT separation, consulting, audit, legal, and incremental retention costs related to the Company’s Spin-off from Voyix. 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 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 9.6% in 2023 to 10.3% in 2024, due to differences in cost allocations, separation cost dis-synergies and employee-benefit related costs described above.

Research and Development Expenses

Research and development expenses were $66 million in 2024, compared to $77 million in 2023. As a percentage of revenue, research and development costs decreased to 1.5% in 2024 compared to 1.8% in 2023 due to separation-related costs incurred in the prior year period and 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. In 2024, research and development expenses included $2 million of stock-based compensation expense and $3 million of transformation and restructuring costs. In 2023, research and development expenses included $5 million of stock-based compensation expense and $3 million of costs related to the Company’s separation from Voyix. Adjusted research and development expenses as a percentage of revenue (non-GAAP) decreased from 1.6% in 2023 to 1.4% in 2024 due to the differences in cost allocations discussed above.

Loss on Extinguishment of Debt

On October 17, 2024, Atleos entered into an Amended Credit Agreement and completed financing transactions that included the refinancing of the Term Loan B Facility. In connection with the transactions, Atleos recorded a loss on extinguishment of debt of $20 million in 2024, including the write-off of discount and deferred financing fees of $13 million and a cash redemption premium of $7 million. Refer to Note 5, “Debt Obligations”, for further details on the financing transactions.

Interest Expense and Related Party Interest Expense, Net

Interest expense was $309 million in 2024, compared to $77 million in 2023. The significant increase in interest expense in 2024 is due to a full year of interest incurred on external debt. Interest expense is primarily related to the Company’s senior secured notes and borrowings under the Company’s senior secured credit facility entered into on September 27, 2023 and amended on October 17, 2024. Refer to Note 5, “Debt Obligations”, for further details regarding the issuance of debt.

Related party interest expense, net was $13 million in 2023. Related party interest expense, net is primarily related to certain related party borrowings during the period prior to the Separation.

Other (Expense) Income, net

Other (expense) income, net was income of $19 million in 2024 and expense of $74 million in 2023, with the components reflected in the following table:

Employee benefit plans within Other (expense) income, net includes the components of pension, postemployment and postretirement expense, other than service cost, as well as actuarial gains and losses from the annual pension mark-to-market adjustment. In 2024, there was a net actuarial gain of $38 million compared to a net actuarial loss of $27 million in 2023. The net actuarial gain in 2024 was primarily due to an increase in discount rates in measuring the benefit obligations as well as the favorable impact from an update to the mortality tables, partially offset by the impact of the increase in inflation rates. The net actuarial loss in 2023 was primarily due to a decrease in discount rates in measuring the benefit obligation, partially offset by the impact of economic improvements on the value of plan assets.

The Company incurred bank-related fees of $15 million and $14 million in 2024 and 2023, respectively, related to certain structuring and commitment fees as a result of the financing transactions entered into in connection with the Separation and the Amended Credit Agreement in 2024. Bank-related fees also includes fees incurred under the trade receivable facility entered into on October 16, 2023.

Voyix environmental indemnification expense represents Atleos’ indemnification of certain costs shared with Voyix, related to investigatory and remedial activities, and related litigation, at facilities formerly owned or operated by Voyix to comply, or determine compliance, with environmental laws. Refer to Note 10, “Commitments and Contingencies”, for further details on the Shared Environmental Matters.

Income Taxes

Our effective tax rate was 34% in 2024 and 223% in 2023. In 2024, our tax rate benefited from $17 million Foreign Derived Intangible Income deduction and $17 million provision to return adjustments, of which $11 million is classified as U.S. tax impact on foreign income. Additionally, our tax rate was impacted by increasing the valuation allowance on U.S. interest expense disallowance carryforward by $31 million. In 2023, the Company completed certain internal restructuring transactions in connection with the Spin-off, resulting in a net of $120 million discrete tax expenses.

While we are subject to numerous federal, state and foreign tax audits, we believe that appropriate reserves exist for issues that might arise from these audits. Should these audits be settled, the resulting tax effect could impact the tax provision and cash flows in future periods. During 2025, the Company may resolve certain tax matters in foreign jurisdictions that could have an impact on the effective tax rate in 2025.

We regularly review our deferred tax assets for recoverability and establish a valuation allowance if it is more likely than not that some portion or all of a deferred tax asset will not be realized. The determination as to whether a deferred tax asset will be realized is made on a jurisdictional basis and is based on the evaluation of positive and negative evidence. This evidence includes historical taxable income/loss, projected future taxable income, the expected timing of the reversal of existing temporary differences and the implementation of tax planning strategies.

Revenue and Adjusted EBITDA by Segment

The Company manages and reports its businesses in the following segments: Self-Service Banking, Network and Technology & Telecommunications (T&T). Segments are measured for profitability by the Company’s chief operating decision maker (CODM) based on revenue and segment Adjusted EBITDA. Refer to the section above entitled “Non-GAAP Financial Measures and Use of Certain Terms” for our definition of Adjusted EBITDA and the reconciliation of Net income (loss) attributable to Atleos (GAAP) to Adjusted EBITDA (non-GAAP).

The following table shows our segment revenue and Adjusted EBITDA for the years ended December 31, the relative percentage that those amounts represent to revenue, and the change in those amounts year-over-year.

(1)The percentage of revenue is calculated for each line item divided by total revenue, except for Adjusted EBITDA, which are divided by the related component of revenue.

(2)Other immaterial business operations, including commerce-related operations in countries that Voyix exited that are aligned to Atleos, that do not represent a reportable segment. For periods after the Separation, Other also includes revenues from commercial agreements with Voyix.

(3)Other adjustment reflects the revenue attributable to the Company’s operations in Russia that were excluded from management’s measure of revenue due to our announcement in Q1 of 2022 to suspend sales to Russia and anticipated orderly wind down of our operations in the country.

Segment Revenue

For the year ended December 31, 2024 compared to the year ended December 31, 2023

Self-Service Banking revenue increased 4% for the year ended December 31, 2024 compared to the prior year period. For the year ended December 31, 2024, ATMaaS revenue increased $41 million, software-related revenue increased approximately $79 million, hardware maintenance and installation revenue increased $19 million, and ATM hardware revenue decreased $25 million compared to the prior year period. Revenue results for the period were primarily due to the shift from non-recurring revenues to recurring ATMaaS 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 $22 million for the year ended December 31, 2024 compared to the prior year period. Software and services revenue as a percent of total Self-Service Banking segment revenue were 72% and 70% in the twelve months ended December 31, 2024 and 2023, respectively.

Network revenue increased 1% for the year ended December 31, 2024 compared to the prior year period. The increase in revenue was due to an approximately $39 million increase in transaction processing services revenue primarily driven by an increase in higher value ATM transactions and a $5 million increase in other software-related revenue. These revenue improvements were partially offset by reductions related to a decrease in Bitcoin related-related revenue of approximately $26 million primarily due to a decrease in transaction volumes, as well as reductions in transaction processing services revenues due to the planned removal of underperforming machines from our network managed unit fleet and store closures at our retail partners.

T&T revenue decreased 1% for the year ended December 31, 2024 compared to the prior year period due to a decrease in hardware maintenance and installation revenue partially offset by one-time hardware sales.

Segment Adjusted EBITDA

For the year ended December 31, 2024 compared to the year ended December 31, 2023

Self-Service Banking Adjusted EBITDA increased 2% for the year ended December 31, 2024 compared to the prior year period due to an increase in revenue. The contribution of favorable ATMaaS revenue margins as well as an increase in other higher margin recurring revenue streams and cost optimization initiatives were offset by dis-synergies causing higher employee benefit-related costs, the impact of one-time hardware sales shifting to ATMaaS arrangements that are amortized over the contract period, and the delayed transfer of legal entities described above.

Network Adjusted EBITDA increased by 7% for the year ended December 31, 2024 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 $11 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.

T&T Adjusted EBITDA increased 6% for the year ended December 31, 2024 compared to the prior year period due to cost optimization initiatives and one-time hardware sales.