NCR Atleos Corporation (NATL) Earnings Call Transcript & Summary

All right. It's about 1:00. So why don't we get started here? So for those who don't know me, my name is Chuck Nabhan, I cover the payments and fintech space here at Stephens. I want to thank everybody listening online and in the audience for joining us today and making the trip. And on behalf of Stephens, I want to thank the team from NCR Atleos for joining us today as well. Thank you, gentlemen.

Yes. Thank you, Chuck. Appreciate it.

So we have the CFO and the COO of the company here.

Thanks.

Stuart, and Paul. So gentlemen, thanks again. It's been a very eventful 2 years leading up to where we are today. And for those that aren't familiar with the NCR Atleos story and the NCR story, they were spun off recently from NCR. The business is comprised of the legacy self-service banking assets as well as the payments and network assets. The spin was completed on October 16. So you are now trading as a stand-alone public company. So congrats on completing the spin.

Could you just briefly recap the rationale behind it and the mechanics behind the transaction?

Yes. Maybe I'll go first, Paul Campbell here, CFO. I think when we were a conglomerate as NCR, we were -- we had 5 segments. I think the segments weren't very conducive to each other. We had retail segment, we had digital banking, we had hospitality, we had payments and networks and with self-service banking. And I think the -- for analysts to cover us, very few analysts cover a business that covers all those segments, they tend to be a bit more focused. So we finally got a conglomerate valuation when we went to the market. We found when we talked to analysts that they found our model very complex to build for them. And we felt we'd be more focused and more able to deliver as an independent company. When we look at the business that's spun off in Atleos, we're the self-service banking business and the network business. And these are 2 businesses that are -- they're very, very linked to each other. And sometimes it's the self-service banking business can help bring in the network business and network business can bring in the self-service banking business. So we feel that the market valuation of our company when we're so specific, we get a clear message out there. We feel that the multiple will obtain will be better. We also feel that our results will be better because we're very focused. When it comes to capital allocation and things, we're very focused on the ATM business. Stuart, anything?

We'll drill into those areas. That's a great starting point. But just in terms of the businesses and markets you operate in as well as those opportunities and just opportunity to create shareholder value as a stand-alone entity. Could you touch on that as well as some of the 2027 financial targets you recently provided?

Yes. I'll touch on the space in the market. So we're in roughly 140 countries. So broad geographic reach. We sell to banks and retailers. That's really the people where our products go to. And we really think of the market really as our retail network. So those are ATMs we own and operate inside of Walgreens or a Target or a CVS really focused on high-end retail networks where we can build utility infrastructure that banks can take advantage of. And then, of course, our traditional business, we've been selling ATMs and branch infrastructure into banks for decades. So we have long-standing relationships with these guys. We deliver service there. And that's a great part of our business. Those 2 are very complementary and that they leverage the same manufacturing assets, they leverage the same service assets, and they leverage the same platform around what it takes to own, operate, manage, put cash in, do software for everything we do for our own network of 80,000 ATMs, the same services we can now deliver into our banking customers. So really excited about that dynamic leverage that we gain from the scale of owning that network. Can you talk about the '27?

Yes. So '27 targets, our plan to grow isn't around gaining significant market share. It isn't around there being more ATMs in the market, isn't about right there being more transactions done by cash, it's about us taking more of the share. So we think of the network business Stuart talked about, it's more about putting more transactions through the existing installed base. So we're targeting. We're getting more types of transactions and more subscribers to our Allpoint network to drive more users as well driving the transactions we do. In self-service banking, it's more about taking -- we've got an installed base of around 600,000 units. It's taking more of those installed base units and converting them to ATM as a Service. So it's driving us to run the network for the banks. We can do it cheaper than the banks, and we can do it at scale. We have 80,000 units of our own, we already run the network, so we can do that at scale. So when we move our growth platforms to doing more than what we've got today, we leverage scale and we drive our margins up.

Got it. So you touched on a couple of areas of value creation. I want to back up a couple of years. You mentioned Allpoint, that came through an acquisition called Cardtronics. Cardtronics also broadened your service offering in the ATM space as well. So could you maybe tell us about that acquisition. I think it's very relevant today because without it, you could argue that Atleos wouldn't have the go-to-market and value proposition to its customers that it has today.

Yes. I think so as we look at ATM as a Service, which is essentially, we walk into your bank, and you hand us the keys to your network and we run everything soup to nuts, door-to-door. As NCR before the Cardtronics acquisition, we would walk in and say, we can operate all of this for you and they would ask us, how many do you operate today, and we would say about 0, right? So that's a pretty challenging conversation. As Cardtronics, we owned and operated 80,000 machines. So it gave us that operator credibility. We know what it takes to keep a machine running every day. We know the importance of the availability of the device. And we know all of the things that a bank needs to do to operate it. So it really gave us that credential that's helped us accelerate our ATM as a Service journey. We've got about 70 deals done now in the last 18 months. The pipeline is incredibly robust. And it's that credibility to walk in a bank that differentiates us from our competitors. None of our competitors own an ATM network. And that part of it gives us that end-to-end capability. So we can walk in with confidence that we can deliver. It's a trust-based relationship. The self-service devices in a bank, are their most important assets from 24/7 capability to deliver to their customers. They're generally ranked second behind digital banking assets in terms of a customer's reason for choosing a primary financial institutions. So really getting that operator capability from Cardtronics and that base of ATMs that we can now offer as a utility banking infrastructure to our bank partners has changed really our sales motion and how we talk to banks about retail distribution, what we do for them.

I think also, Stuart, it goes the other way as well that with the self-service banking infrastructure, we do servicing in 60 countries, when we acquired Cardtronics, we did it in 9. So now with the scale that we've got in countries where it's cash-centric economies, we've got and we've added Greece and Portugal in 2023. So we've now gone up. And we've still got -- we're looking at all the cash-based economies and looking that we can pull in the network business into areas where we're successful in the self-service banking business.

Why would a bank look to outsource it's ATM capabilities and consolidate vendors. I want to touch on that because I think it's relevant because usage of cash, which is definitely a relevant topic, gets a fair bit of attention. But I think what's lost on a lot of investors are is the value proposition of that ATM as a Service offering as well as Allpoint because I think it really fits what's going on in the banking industry from -- given the increased emphasis on efficiency and cost containment.

Yes. I mean you hit it right there. So the #1 reason is to reduce costs. So nobody is signing an ATM as a Service deal, unless we can reduce their total operating cost, right? So in our sales motion, a big part of that is helping financial institutions understand the cost of operating their current ATM fleet. Many of them -- most of them have been doing it for decades by themselves, so buy an ATM from us or somebody else and then run everything else themselves inside the 4 walls. So helping them understand their true costs. And we know it there because we own and operate our own much larger fleet, we can sort of model for them. These are the costs that you -- that it takes today and in an outsourced engagement, we aim to reduce that by about 20%. And that's a meaningful number to a lot of financial institutions in terms of their costs. The banks are on the move. So when you talk about cash, we see a real sort of paradigm shift of large banks reducing branch footprints and small to midsized branch, actively increasing branch footprints or moving. So I use PNC as a great example. They're a customer of ours, Pittsburgh Bank, trying to get into Texas and other regions where they traditionally haven't had business, and they use our utility infrastructure in Allpoint, the machines we have to drive their -- to be able to service those cardholders before they can build branches, right? They can't build fast enough. They don't really want to build branches, but they want to make sure they can continue to service the lending business, the mortgage business, all of the businesses out there. And so they use our infrastructure to do that. They're also changing the complexity of the branch. If you live in New York, you've seen this, it's sort of moving around the country in different areas, where they're moving to a cafe or a concierge-style branch. So a traditional branch that we've all walked into for decades, 2 tellers, one ATM in the lobby and 1 in the drive-up, right, depending on where you are, really eliminating new tellers. They call them cashless branches, 3 self-service devices, so increasing the density of self-serve and then 1 or 2 drive-ups depending if they're in a mall or where they are. And so that self-service density is also propelling our value proposition in terms of if you have a kid like mine, who doesn't want to ever talk to anyone and wants to do everything in a self-serve environment, that generation really prefers to self-serve.

Got it. And you touched on competition and your peers a little bit, but I want to double-click on that topic because the ATM as a Service offering, particularly its breadth is quite differentiated. So could you maybe talk about who you compete against specifically and how your product set matches up with those peers?

Sure. I said before, before we acquired Cardtronics, we were -- we couldn't walk into a bank with confidence and say, we can take everything you do and do it ourselves because we didn't do most of it, right? We sold great hardware. We sold -- we've had great software, great people running around fixing them when they happen, but we didn't know anything else or do anything else. Our competitors, Diebold, everybody knows Diebold, they've had their challenges. Brink's have a bunch of guys in trucks running around delivering money to ATMs every day and would like to do other things at the ATM and potentially try to manage them on their behalf, Fiserv and FIS, great relationships with banks provide all their core infrastructure. Also like to sell anything they can sell to a bank. Those are primarily our competitors. Euronet [indiscernible], a very strong competitor, also an operator so they've got a mentality closer to ours. What differentiates us really is that we are a manufacturer, right? So hardware is less than 20% of our revenue. But we have -- we can manufacture that asset for serviceability and so we can drive efficiency into the service channel. The service channel is our largest revenue line item, delivering service, and that's where we -- as we migrate to ATM as a Service that revenue climbs. We own all of that stack top to bottom. So our competitors more often than that, almost all the time have to stitch together and subcontract out specific services in the stack. The only thing we don't do is deliver cash, right? So we partner with Brink's and Loomis and Armaguard, all of those guys to deliver the cash, but we do everything else. When a Brink's wins a deal, they have to buy an ATM from somebody, quite often us, right? They have to get service from somebody and parts from somebody quite often us, we're not the same. Those are great customers of ours and great partners of ours who we see now trying to compete with us.

Got it. What are some of the KPIs investors could look at to gauge the progress of the ATM as a Service initiative? And as it progresses, what will the revenue composition look like between hardware, software services versus today?

Yes. So I think the KPIs we're looking at initially is going to be the recurring revenue mix. So you've seen that's gone from we go back a few years, it was less than 50%. In the quarter, we just published it at 72% of our revenue was recurring. So that's really showing we're moving up the value chain there on the recurring revenue piece. Hardware is now less than 20%. We expect that to be less than 10% when we get to 2027. What we'll see is that more of our revenue will collapse into the ATM as a Service. So even if it was -- when it was upfront hardware sale, that will become part of the ATM as a Service line, and you'll see those lines will be cannibalized as we get to a single offering, which is ATM as a Service. So that will be a significant mix as you go forward. You asked about KPIs. So initially, we're looking at the current revenue mix and the number of ATM as a Service units. Once that gets to scale, we will start looking at an ARPU measure too because the scale is so small currently around 18,000 over 600,000 base is too small for an ARPU. I think it could move in ways that were different than our results. So I think just the absolute volume, the trend on that and then the recurring revenue mix. On the self-service banking. On the network piece, the KPIs we're looking at is, we're looking at the ARPU, the average revenue per unit, and we're showing the number of units. We're not preponing that the number of units should grow. We're trying to maximize the amount of revenue in the existing base to maximize profit. So we want the ARPU to grow steadily and consistently on a quarterly basis. And the number of units is just to help calculate the math on the revenue, but not necessarily trying to grow that metric.

What are the underlying assumptions around industry ATMs outstanding associated with that 120,000 target?

So if you look at RBR, I think they call themselves RBT now after some acquisitions, they're really -- they essentially espoused that the number of ATMs is probably flat to 1% going over the course of the period. We see that very clearly in most of our markets. Some of our markets are down a little bit. Some of our markets are up a little bit. In the U.S., as I said, we see large banks closing branches while small- and medium-sized banks are growing branches. And so our actual footprint has stayed fairly consistent through all of that change.

Got it. And I think it's important just to put a finer point on that. The revenue growth is coming from the ARPU uplift. So you're essentially targeting mid-single-digit growth in an environment where ATMs outstanding are flat to down. Is that a fair way to characterize it?

Yes. Absolutely.

Yes. That's a combination of our existing footprint of machines that we own and operate in Walgreens and whatnot. Our Allpoint network transactions if you look at -- we just published the third quarter, transactions on the Allpoint network were up 12% year-over-year, and that's really that bank migration. 80% of -- roughly 80% of cash transactions today still happen in branches and we partner with our banks to move those transactions over to our retail network. So that utility banking infrastructure, really absorbing off of the branch, that's the growth that we're seeing, and we continue to expect to see.

Got it. Perhaps moving to financials. So you just filed Q3 results. Could you walk us through some of the highlights and takeaways as well as any read-throughs we could glean heading into Q4?

Yes. Chuck, it was a pretty messy quarter. A lot of the heavy lift on the spin happened in Q3. So you think of the context, it's 140-old company. We had 200 legal entities around the world to be split in between the 2 entities. We created 36 new legal entities crossing 72 countries. So it was messy. You can see, if you look at our GAAP results, our tax rate is like 167%. So a lot of transactions that happened on a GAAP basis that were -- they were messy. If you go to our non-GAAP measures though, it's a really fantastic quarter. You saw self-service banking grew 4% and the network grew 7%. That's on the higher end of our growth projections. We're seeing self-service banking is kind of 1 to 3 and network is in around the 7%. So very good quarter there. Most or all of it coming from recurring revenue, recurring revenue up to nearly 72% from -- we're thinking about 68% this year. So really good progress. And if you look at profit self-service banking up from a very tough compare last year because of all the supply chain issues, but up 23% and in the network despite headwinds from interest up 14%. So really, I would say the operationally a fantastic quarter despite all the distractions from the spin.

Got it. Can you talk about the recurring revenue headwind from the ATM as a Service transition?

No, the recurring revenue will have a tailwind from that because you'll take revenues that were onetime like hardware and installation services.

Revenue, rather, I guess, as you saw some...

Okay. So yes. So the total revenue headwind. Yes, the -- you're going to take revenue from hardware and transaction services that would naturally happen upfront. And then you'll take that and you'll bundle it into the ATM as a Service, and you'll take it ratably over 7 years. So we're anticipating about $100 million headwind in this -- in 2024 for the impact of that transaction. But what you do is you take -- it's not just a case of taking that revenue spreading out through the next 7 years. When we go ATM as a Service, we get 2.5x the total revenue stack that we normally get. So it's going to take us about 2 years of headwind and then it becomes a tailwind. And we see in self-service banking, a kind of 1% to 3% growth in the early years without compound as you get to 2026 and 2027 once the tailwind of the 2.5x recurring revenue for -- and that helps with our recurring revenue as well. You're taking -- that's what drives hardware down from 20% of our total down to less than 10%. When you've got a 90% recurring revenue business, your predictability is amazing.

Got it. I want to spend some time talking about the capital structure and debt, then we can move on to capital allocation from there. Just as a starting point, could you give us a snapshot of what the capital structure looks like today post spin as well as what you're targeting for leverage over the next few years?

Yes. So we took on about $2.9 billion of debt at rates we don't love. So -- we were hoping for different rates than we got. But we got the debt secured, we spun that was the primary objective. So because of the price of that debt, the near-term goal is to bring the debt down. So we're at a leverage of about 3.7 as we spin and then we're going to try and get down to 3 as quickly as we can. So about $3.9 billion. It's split between Term Loan A, Term Loan B and about $1.3 billion in bonds.

Okay. Can you talk about the free cash flow generation capabilities of the business and how we should think about conversion going forward?

Yes. So the -- we're expecting the -- this being a bit capital intensive in this business because of the hardware assets, we're working on mechanisms to finance the hardware assets off. But if you take away the growth CapEx in 2027, I think we published a bridge of the CapEx. We're going to have from EBITDA to the normal free cash flow excluding the growth CapEx, is about 60% conversion, which is great. If you've taken the $300 million that we have in growth CapEx, it brings it down to 30, but we'll find ways to finance off that $300 million of growth CapEx. The other thing is that almost all of that $300 million of growth CapEx is relating to future revenue streams. There's not much any revenue from that. So we're going to work our way through our model given the price of the debt that we've got. We're going to look to try and find ways to minimize the amount of capital that we've got to do.

What does that CapEx look like as a percentage of revenue or sales?

It's about 8% in 2027.

Got it. Okay. So upon reaching -- well, you've talked about instituting a dividend in the near term, we could touch on that. But just looking further ahead upon reaching your -- your leverage targets, could you talk about your capital allocation priorities over the medium to long term?

Yes. So the dividend is important. I think we want to appeal to multiple investors that like that they need to have a dividend in their portfolio. It's not material from a cash flow perspective. We're talking about 35% to start with our free cash flow. And then we'll look -- once we get further out and get the leverage down, we'll make decisions about the capital allocation then. Near term, it's basically debt. We've got no plans for any material M&A. We've got no imminent plans for stock buybacks. Obviously, that depends what happens with stock. But in the near term, first 2 years, it's really a modest, but meaningful dividend and then pay down debt. And then when we get to end of '25 into '26, we can look at what's the best way to allocate our capital. So is there any M&A out there that's important. Is there any -- is it right for stock buybacks for us? Or is it right, maybe we put more into dividend.

Got it. So you announced an investor update call for December 5. What could we expect you to cover on that call?

Yes. So we'll definitely go deep into the results. So we published a 10-Q, mainly the statutory information we had to provide. We were -- it was a quite a messy close for us. So we just made it through the 10-Q. So we didn't really publish much in terms of the non-GAAP stuff and that was really time-based that we just got it no more. So we're going to publish more of our KPIs along with the Investor Day deck. We're going to get a bit more detail on what happened in results, some key wins, some key market things. Also, as we've been going through the spin, we want to be very transparent with investors, and we kind of did Investors Day. We got a hope with do a lot of meetings like this. We had a lot of feedback. Let me publish another 8-K with an updated deck that clarified a lot of the questions that we did and we're going to do the same. We're going to look at the questions we've had since the last 8-K and augment the deck with information we've been asked for, but I haven't provided yet and we'll put that to the deck and go through on the call.

Well, this may be touching on a few of those topics. But could you maybe talk about some of the separation-related costs as well as the synergies we should expect out of the business going forward. I'm not sure what you've disclosed already, but I think from a modeling perspective, that would be helpful for investors.

Yes. So for the separation cost, the onetime costs, we're working through that now. So it's -- we had a lot of expensive advisers who enjoy charging us a lot of money, a lot of expensive banker fee. So we're working through that now. So if I think through go forward that we disclosed, I think in Atleos side $45 million to $50 million of the synergies. We'll look -- but we said we'd resolved them in a year with cost out in other areas of the business. As we're looking to those, we're looking to avoid adding a lot of those. So we're seeing opportunities. I think the $45 million to $50 million we disclosed then would be on the high side. And that's an ongoing cost for the synergies.

Are there efficiencies to be gained? Or are you able to offset some of those incremental costs through optimization initiatives, whether it's on the manufacturing side or on the service side or on the back office side?

Yes, absolutely. All of the above. So we have a like a GE equipment process of going through looking at cost reductions, looking programmatically where we can save costs on the -- and that's been in place on the services side and the manufacturing side for some time. We're looking to augment that. But also, Stuart recently kicked off a process. We're doing that across all of our business now. So in Stuart, COO organization we've got -- what's the team called?

An unnamed team.

An unnamed or to be named team. But we're looking at costs across the board. Even from a finance perspective, my team are pulling initiatives together to reduce the finance cost. So every function has a goal to reduce costs next year, and we're going to work those through. I think there's a lot of opportunity in our cost structure. Our previous mother company maybe wasn't as cost centric as we could have been.

Just one more question and open it up to the audience. But in terms of your relationship with Voyix going forward, are there any commercial agreements? Or can you maybe talk about that relationship going forward?

Yes, we have -- so obviously, you have to work with a lot of people you don't like. We think these are people we work with that we like. So we're neighbors now in the building. We have commercial agreements to help to resell each other's solution. So we are in many more countries than they are. So in those countries where they're not present, and we have the capabilities to support them. We'll resell some of their products for them. We have some TSAs around supporting their solutions and vice versa in different regions where we have more coverage and a really easy example is we have -- we had a shared field service footprint, and we're now in the process of separating that field service footprint. We have TSAs to make sure that in a small city where maybe there were 2 folks that service both the self-checkout and the ATM that until we have sort of added more folks to that city so that we have ATM people and self-service -- sort of self-checkout people that we cover each other. So very cordial relationship, at least at this point.

Yes. So we're friendly with them, but the -- we are arm's length. Everything we do is dealt with by -- we're bound by contracts. So it's -- it is a contractual relationship. So they were part of the family. Now they are a partner on a contractual basis.

Good. Well, they said they like you guys earlier. So that's good.

I didn't quite say that. But you know...

All right. At this point, I'm just going to open it up to questions. I have a few more if there's nothing in the audience, but if anybody has anything.

Just a quick question. Just on the [ 9 30 ] balance sheet [indiscernible]?

Yes, there'll be a lot because the [ 9 30 ] balance...

In terms of the net balance, I am sorry to interrupt.

Yes, because the debt in the Q was only the debt we took on. So when we closed the debt we took the debt into escrow. So I think we've probably got $2.1 billion on the balance sheet when we took the escrow. We didn't take the Term Loan A into escrow. So it'll go from $2.1 billion roughly to $2.9 billion.

[indiscernible].

No. There may be some notes that talk about the debt, but in the balance sheet, it should just be 2.1.

And then the second question, we talked about the synergies of the -- probably $50 million of synergies. Is that debt against the [indiscernible] or contributor?

No. So that is net. That's the net dissynergy. I wouldn't classify the Voyix revenue as a dissynergy. We're going to report the -- all the dissynergy is going to sit in our payments in network -- our network business and our self-service banking business and corporate. All the relationship with Voyix is going to be in a segment called other. You've probably seen our Qs there, it's there today. So all that will be -- there will be 2 pieces in the other. There's some historical Voyix revenues aligning to our legal entities, it's going to wind down and then the relationship we -- we actually manufacture for them as well. So their self-checkout built in India is done by us. So that will be in the other segment. We -- that's roughly about $200 million of revenue per year in the other segment, but it's only a pass-through margin of 5% or 6%. So we'll always talk to our segment results. We're not going to use that in any way to show growth. It's -- to us, that's just kind of...

[indiscernible] Q3.

There's nothing in for Q3 because we were combined companies, so that would be intercompany in Q3. So there's nothing yet, but starting Q4, starting the 17th of October, anything we do for them would be a revenue transaction.

Your brother company got the Digital Insight assets. So same customer base or is it a different buyer or...

Yes. When we bought Digital Insight, we sort of had an assumption that we would leverage our sales cycle, we would be selling to banks, they sell to banks. Really we ended up separating -- almost entirely, we've been separate for several years now in terms of they have a completely different sales team, a completely different development team, a completely different product team. And we found that the people in the bank were completely different. So in the banking space, we were traditionally selling to the head of the retail bank and they were selling to the Head of Digital. And those guys were so far apart that we very infrequently, we're able to leverage hey, you're buying this from us, please buy this from us, those relationships. And so their capital intensity in terms of their -- almost an entire SaaS software product. So the amount of money that they need to invest in the type of investor that they attract is what we felt it was much different than we're sort of a value-based steady eddy, show some great growth in the out years as we mature ATM as a Service. They're more of a growthy software stock.

So I could get away from financials for a bit. I wanted to talk about the demand environment for ATMs. And specifically, where we are in the ATM refresh cycle? And how investors should think about the lifespan of ATMs as well as the growing complexity of ATMs and how that sort of lends itself for demand for more complex software and service solutions?

Sure. So most banks refresh their ATMs on a sort of 5- to 7-year cycle. That's a combination of both technology change over that time. So as you mentioned, we can do more complex transactions. We can do video teller. We can do TAP, we can interface with the mobile device directly. So technology change drives some of that, useful life of the machine drives some of that. Is like a motor vehicle, right? And so the refresh cycle is typically 5 to 7 years. We had a very large refresh cycle in 2018, 2019 around the Windows 7 Intel chip sort of thing. And so most banks refreshed, right, there was a kind of a big peak for ATM manufacturers. And it's always challenging as a manufacturer in any business to scale up and scale back down around a peak, right? So we're now sort of 5 or 6 years from that refresh cycle. We're starting the next refresh cycle, but there isn't a cliff like there was in 2018 and 2019. That's much better for us because we can more predictably manufacture our devices and more predictably have those conversations. So we're in there, we think the next 3 or 4 years is kind of the next refresh cycle from the Windows 7 migration. And those are the great -- our best opportunities for an ATM as a Service conversation is when a bank is refreshing their estate. They are going to do something and now we have an opportunity to talk about their current cost structure. We can have a conversation different from any of our competitors where if you have 100 ATMs seven years ago, I walked in and sold you 100 ATMs. Now I'm going to talk to you and say, "Maybe you need 70 ATMs and join the Allpoint network and start pushing some of those cash transactions that are low value and expensive for you on a branch out to my retail network. I've got brand names. You can tell you your customers, they can go to any Walgreens and have the exact same safe, secure, well-led environment transaction and you don't need to come into the branch. So if you're at the bank of Georgia Tech, and you have 20 branches and you join Allpoint, you have global coverage now in terms of where your customers work and play. You can move into other geographies. You can service your students when they're at their summer home, which may not be in George Tech. So that proposition is a different selling motion for us, and that refresh cycle coming along really helps us engage in those conversations.

Got it. And that's a good segue because I did want to touch on Allpoint a little bit. My understanding is the bulk of the growth comes from adding new institutions to the Allpoint network, which adds new transactions onto a single machine, but is there potential for location growth within Allpoint as well?

Yes. I mean we -- right now, we're within Allpoint -- ATMs are within 5 miles of 85% of the U.S. population. So we feel pretty good about our footprint. We have some holes here and there that we might like to cover, but we don't see doubling the network is not one of our ambitions. Having financial institutions join is important. So as we -- so we have about 1,100 financial institutions in there. There's about 4,000 in the U.S. So we've got a large sort of addressable market of gaining more transaction sets. But more importantly, partnering with banks and neo banks to actively promote the network and drive their customers. And then I'll give you for example, one of our great partners on the issuing side is Chime, one of the largest neo banks in the U.S. or the largest neo bank in the U.S. They have no physical infrastructure, right? So we are their physical infrastructure. Their demographic lines up very well with Circle K, who is one of our great retail partners. And so we've -- so they naturally already are able to use those Circle K machines because they're part of the Allpoint network. But what we did is put them together and have them start cross-promoting each other. So we have Chime pay us to put their brand on Circle K machines. So now Chime has what looks like physical infrastructure. You go to a Circle K machine, it will look like a Chime ATM, right? And Circle K is cross-promoting Chime by -- if you're a Chime cardholder, you use that ATM, you'll get a coupon at the bottom of your receipt for a free coffee or a donut or whatever. So they're actively promoting each other's products, driving more Chime cardholders into the store. That's great for Chime. They have a good service footprint. They get that brand name recognition and they can say, go to any Circle K, they don't have to say, go to the Bob's store on 20th Street, right? And for Circle K, every door swing is important to them as EVs sort of change the nature of a fuel distributors sort of next 10 years, right? They're really focused on getting people inside that location.

That's great. And if we could touch on the cost structure of Allpoint as well and how the addition of transactions is really lends itself to the leverageability of that business?

Sure. Yes. So if you think Allpoint is largely a sum cost to us, right? So we've got those machines sitting there on a scale-based network. So every transaction adds a little more revenue than the transaction before because our cost to deliver it, it reduces based on the scale of operating that network and so it's a huge leverage play. You'll see -- I think I said we had 12% year-over-year growth, and we continue to see that sort of, I'll say, warming to utility infrastructures by the banks, right? Being more comfortable sending their cardholders to do everyday transactions at locations that may not be their branches. We think of ourselves as sort of Switzerland. You're not sending your customer to another bank's branch or another bank's ATM where they're going to get an ad on the screen to get $600 to move their checking account. We give them sort of a safe space inside that location to do utility banking where they're not going to be cross promoted by somebody else.

Got it. Any other questions in the audience?

Just going back to the ATM as a Service strategy. I think you said you've 80,000 units now, as you target that 120,000 user count. What are some of the clients or banks that you're targeting that are some of those low-hanging fruit that you're going and maybe sell the strategy? And then who are some of those clients that may take some time to adopt and agree to the -- adopt ATM as a Service?

Yes. I mean, so to be very clear, we don't expect any of the big guys to adopt ATM as a Service, right? They already have scale-based networks. And so in our model, we don't anticipate Wells or Bank of America or JP ever moving, right? Our everybody below them is sort of our target. We originally proposition that this product would be great in the CFI credit union space, and that's proven to be true, but we've seen great traction above that. So we signed Santander in the U.K., 1,400 units. That's going -- we're actually rolling it out as we speak, 50 units will get converted today, tomorrow, every day until we're done. And when they see that work, they're actively looking at every other country they operate in and seeing how they can leverage that model with us, right? And so global institutions are great customers for us because their scale is not like a Bank of America. They are more like 1,500 here, 1,500 here, 1,500 here. So our model works very well for them. Low-hanging fruit is basically everyone we get to have a conversation with. ATM as a Service has sort of become a thing in the market now. So our competitors are all using that term, that vernacular. There -- we don't believe they're offering as nearly as competitive of ours, but -- that also helps -- it's a thing now, right? It's not just the Atleos thing. It's something everybody is doing and much like the conversion to SaaS that happened over the last 10 or 15 years when people started talking about selling things out as a subscription that people have never bought before and no one is ever going to do that, now it's the only thing we do, right? We believe that the market will slowly move. But we're very conservative on our projections right out of 600,000 machines, we say over the plan period, we'll get 120,000 of them. So roughly 20% will migrate in that period.

Got it. So sort of as a closing question, I know you -- you and your team have been on the road quite a bit over the past couple of months and had a number of conversations with the investment community. Based on those conversations, what do you think are the most misunderstood aspects of the Atleos business?

Well, Paul and I were part of the conglomerate. So we were certainly misunderstood as a conglomerate. In our business, it's really the death of cash and the death of ATMs, right? Most of the folks in this room probably are not heavy cash users. But in most of our regions, we have a ton of cash preferred folks. In the U.S., certainly large under banked, unbanked population that is part of the base. The importance of ATMs and the self-service devices is not necessarily linked to that cash proposition, it's linked more to banks migrating how they do services. They don't want you at the teller, cashing a check, asking for cash anymore. In fact, they're going to tellerless branches in many cases, right? And so that puts more dependency on that self-service device in both increasing its capability set, right, and increasing its reliability because it's now the only access point to deliver those services. So I think those are the 2 things that are sort of most misunderstood in terms of yes, there is still a healthy and vibrant cash ecosystem. And yes, ATMs are still important.

Got it. Well, gentlemen, I really appreciate you joining us today. And on behalf of the Stephens -- on behalf of Stephens, I want to thank everybody in the audience and everybody that's listening online. Thank you very much.

Thanks, Chuck.

Thanks for having us.